Benzinga | May 4, 2021 05:05PM EDT

Utz Brands, Inc. Comments on Recent SEC Statement Related to Warrants Issued by Special Purpose Acquisition Companies

Utz Brands, Inc. (NYSE:UTZ), a leading U.S. manufacturer, marketer and distributor of high-quality, branded snacking products, today announced in a Current Report on Form 8-K, that as a result of recently issued guidance provided by the staff of the Securities and Exchange Commission on April 12, 2021 for all SPAC-related companies regarding the classification of their warrants for accounting and reporting purposes (the "Statement"), it will restate its previously issued fiscal year 2020 consolidated financial statements and third fiscal quarter 2020 unaudited consolidated financial statements.

The restatement pertains to the accounting treatment for public warrants, forward purchase warrants and private placement warrants (collectively, the "Warrants") that were outstanding at the time of the business combination between Collier Creek Holdings and Utz Brands Holdings, LLC on August 28, 2020 (the "Business Combination"). Consistent with market practice among SPACs, we had been accounting for the Warrants as equity under a fixed accounting model. However, consistent with the SEC's recently issued Statement, we intend to restate historical financial statements such that the Warrants are accounted for as liabilities and marked-to-market each reporting period (the "restatement"). In general, under the mark-to-market accounting model, as the stock price of our Class A Common Stock increases, the warrant liability increases, and we recognize additional non-operating, non-cash expense in our income statement -- with the opposite when the stock price of our Class A Common Stock declines. We do not anticipate the restatement to impact our previously communicated non-GAAP operating metrics for fiscal years 2020 (actual) or 2021 (guidance), including Adjusted EBITDA.

As a result of the restatement and the increase in the stock price of our Class A Common Stock over the applicable period, we expect to recognize incremental fiscal year 2020 non-operating expense between $90 million to $100 million. There will be no impact to our previously reported net cash flow or Adjusted EBITDA. These estimates are subject to change as management completes the restatement, and our independent registered public accounting firm has not audited or reviewed these estimates. As a result, the expected financial impact described above is preliminary and subject to change.

The following provides additional detail regarding how we currently anticipate the restatement will impact our various financial statements:

* Opening Balance Sheet Impact: As of the date of the Business Combination (August 28, 2020), the fair value of the Warrants will be reflected as warrant liabilities in our balance sheet with a corresponding offset within equity of the accounting successor.

* Income Statement Impact: Subsequent to the close of the Business Combination, any change in the fair value of the Warrants is recognized in our income statement below operating profit as "Change in fair value of warrant liabilities" with a corresponding amount recognized in our balance sheet. In our case, this is recognized as warrant liabilities in our balance sheet.

* Balance Sheet Impact: As is noted above, the change in the balance of the warrant liabilities on our balance sheet is impacted by the fair value changes of the Warrants. When Warrants are exercised, the fair value of the liability is reclassified within equity. The cash received for the exercise of Warrants is reflected in cash and cash equivalents, and the corresponding offset is also reflected in equity.

* Cash Flow Impact: The impact of the changes in fair value of the Warrants has no impact on net cash provided by (used for) operating activities. The cash received for the exercise of Warrants is reflected in cash flows from financing activities.

* Statement of Equity Impact: The impact to the equity portion of the balance sheet as of the opening balance sheet is highlighted above. Subsequent exercises of the Warrants result in a reduction of our warrant liabilities with a corresponding increase to equity.

Finally, as of today, we have approximately 7.2 million private placement warrants outstanding, which represents approximately one-third of the warrants originally issued, as all public warrants and forward purchase warrants have since been exercised or redeemed.