Company: UTZ
Filing Date: 2025-02-20
Form Type: 10-K
Source: 0001739566-25-000053
Chunk: 101

Company: Utz Brands, Inc.
Filing Date: 2025-02-20
Form: 10-K
Item: Item 7A
Chunk 101
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to certain commodity, interest rate, and credit risks as part of our ongoing business operations. We may use derivative financial instruments, where appropriate, to manage some of these risks related to interest rates. We do not use derivatives for trading purposes.

Commodity Risk

We purchase certain raw materials that are subject to price volatility caused by weather, market conditions, growing and harvesting conditions, governmental actions and other factors beyond our control. Our most significant raw material requirements include potatoes, oil, flour, wheat, corn, cheese, spices, and seasonings. We also purchase packaging materials that are subject to price volatility. In the normal course of business, in order to mitigate the risks of volatility in commodity markets to which we are exposed, we enter into forward purchase agreements with certain suppliers based on market prices, forward price projections and expected usage levels. A 1% increase in the price of the commodities used within our products and packaging would result in a reduction of our gross profit of approximately $6.0 million.

Interest Rate Risk

Our variable-rate debt obligations incur interest at floating rates based on changes in the SOFR rate. To manage exposure to changing interest rates, we selectively enter into interest rate swap agreements to maintain a desired proportion of fixed to variable-rate debt. These interest rate swap agreements fixed a portion of the interest rate at a predictable level. Interest expense would have been $21.0 million higher without these swaps during the fiscal year ended December 29, 2024. Including the effect of the interest rate swap agreements, the weighted average interest rate was 5.1% and 6.7%, respectively, as of December 29, 2024 and December 31, 2023. A 1% increase in the SOFR rate would have resulted in an additional $2.0 million of interest expense during the fiscal year 2024 based on the unhedged portion of debt.

Credit Risk

We are exposed to credit risks related to our accounts and notes receivable. We perform ongoing credit evaluations of our customers to minimize the potential exposure. We experienced no material credit losses during the fiscal years of 2024 or 2023. During the fiscal years ended December 29, 2024 and December 31, 2023, net bad debt expense was $0.7 million and $1.2 million, respectively. Our reserve for potential future bad debt was $3.