Utz Brands(UTZ) - 2023 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements Presents Utz Brands, Inc.'s unaudited consolidated financial statements for Q3 2022 and 2021, including balance sheets, income, equity, and cash flows Consolidated Balance Sheets Summarizes the Company's financial position, detailing assets, liabilities, and equity as of October 2, 2022, and January 2, 2022 | ASSETS (in thousands) | October 2, 2022 | January 2, 2022 | | :---------------------- | :-------------- | :-------------- | | Total current assets | $347,154 | $277,904 | | Total non-current assets| $2,472,280 | $2,438,442 | | Total assets | $2,819,434 | $2,716,346 | | LIABILITIES AND EQUITY (in thousands) | October 2, 2022 | January 2, 2022 | | :---------------------- | :-------------- | :-------------- | | Total current liabilities | $206,807 | $188,020 | | Total non-current liabilities | $1,149,129 | $1,093,653 | | Total liabilities | $1,355,936 | $1,281,673 | | Total equity | $1,463,498 | $1,434,673 | | Total liabilities and equity | $2,819,434 | $2,716,346 | - Total assets increased by $103.088 million (3.79%) from January 2, 2022, to October 2, 2022, primarily driven by increases in current assets and property, plant and equipment, net[17] - Total liabilities increased by $74.263 million (5.79%) over the same period, mainly due to higher current and non-current term debt and revolving credit facility balances[17] Consolidated Statements of Operations and Comprehensive Income Details the Company's financial performance, including net sales, gross profit, and net income (loss) for the reported periods | (in thousands, except share information) | Thirteen weeks ended Oct 2, 2022 | Thirteen weeks ended Oct 3, 2021 | Thirty-nine weeks ended Oct 2, 2022 | Thirty-nine weeks ended Oct 3, 2021 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :---------------------------------- | :---------------------------------- | | Net sales | $362,818 | $312,680 | $1,053,732 | $879,781 | | Gross profit | $118,273 | $102,627 | $333,609 | $293,428 | | Income (loss) from operations | $15,005 | $2,875 | $(2,190) | $16,543 | | Net income (loss) | $1,485 | $31,350 | $(27,868) | $24,180 | | Net (loss) income attributable to controlling interest | $(888) | $33,252 | $(15,279) | $28,302 | | Basic EPS | $(0.01) | $0.43 | $(0.19) | $0.36 | | Diluted EPS | $(0.01) | $0.40 | $(0.19) | $0.34 | - Net sales increased by 16.0% for the thirteen weeks and 19.8% for the thirty-nine weeks ended October 2, 2022, compared to the prior year periods, primarily due to favorable price/mix and acquisitions[22][138][148] - The Company reported a net loss attributable to controlling interest of $(0.888) million for the thirteen weeks and $(15.279) million for the thirty-nine weeks ended October 2, 2022, a significant decline from net income in the prior year periods, largely due to a loss on remeasurement of warrant liability and increased interest expense[22][146][155] Consolidated Statements of Equity Outlines changes in the Company's equity, including total stockholders' equity and noncontrolling interest | (in thousands) | Balance at January 2, 2022 | Balance at October 2, 2022 | | :------------- | :------------------------- | :------------------------- | | Total stockholders' equity | $679,705 | $709,164 | | Noncontrolling interest | $754,968 | $754,334 | | Total equity | $1,434,673 | $1,463,498 | - Total equity increased by $28.825 million from January 2, 2022, to October 2, 2022, primarily driven by an increase in additional paid-in capital and accumulated other comprehensive income, partially offset by an accumulated deficit[24] Consolidated Statements of Cash Flows Presents the Company's cash inflows and outflows from operating, investing, and financing activities | (in thousands) | Thirty-nine weeks ended Oct 2, 2022 | Thirty-nine weeks ended Oct 3, 2021 | | :------------- | :---------------------------------- | :---------------------------------- | | Net cash provided by operating activities | $8,071 | $4,282 | | Net cash used in investing activities | $(52,940) | $(78,081) | | Net cash provided by financing activities | $54,776 | $52,929 | | Net increase (decrease) in cash and cash equivalents | $9,907 | $(20,870) | | Cash and cash equivalents at end of period | $51,805 | $25,961 | - Net cash provided by operating activities increased to $8.071 million for the thirty-nine weeks ended October 2, 2022, from $4.282 million in the prior year, driven by improved net working capital management, despite a larger cash outflow for inventory build[28][165] - Net cash used in investing activities decreased to $52.940 million from $78.081 million, primarily due to lower acquisition spending in 2022 compared to 2021, offset by significant property and equipment purchases[28][165] - Net cash provided by financing activities increased to $54.776 million, mainly from increased line of credit borrowings, equipment loans, and proceeds from share issuance, offsetting debt repayments and dividend payments[28][165] Notes to the Consolidated Financial Statements Provides detailed explanations and disclosures supporting the consolidated financial statements 1. Operations and Summary of Significant Accounting Policies Describes the Company's business operations and outlines the key accounting policies applied in preparing the financial statements - The Company, through its subsidiary Utz Quality Foods, LLC, is a premier producer, marketer, and distributor of salty snack products since 1921, selling a full line of items across most regions of the United States[33] - The Company adopted ASU No. 2020-04, Reference Rate Reform (Topic 848), in September 2022, modifying contracts from LIBOR to Term SOFR Screen Rate (SOFR) for its revolving credit facility, Term Loan B, and interest rate hedge, with no material impact on debt or hedge instruments[55] - The Company is evaluating ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), effective for fiscal years beginning after December 15, 2022, which requires measuring impairment of financial instruments based on expected losses[56] 2. Acquisitions Details the Company's acquisition activities, including purchase prices and their impact on financial reporting - In 2021, Utz Brands, Inc. completed three significant acquisitions: Vitner's ($25.2 million), Festida Foods ($40.3 million), and RW Garcia ($57.9 million)[57][58][59] - The RW Garcia acquisition included a manufacturing facility for an additional $6.0 million, and its purchase price allocation was not finalized as of October 2, 2022[59][60] 3. Inventories Provides a breakdown of the Company's inventory components and their valuation | (in thousands) | As of October 2, 2022 | As of January 2, 2022 | | :------------- | :-------------------- | :-------------------- | | Finished goods | $60,282 | $43,533 | | Raw materials | $39,457 | $29,428 | | Maintenance parts | $7,643 | $6,556 | | Total inventories | $107,382 | $79,517 | - Total inventories increased by $27.865 million (35.04%) from January 2, 2022, to October 2, 2022, primarily driven by increases in finished goods and raw materials[61] 4. Property, Plant and Equipment, Net Details the Company's fixed assets, including gross amounts, accumulated depreciation, and net book value | (in thousands) | As of October 2, 2022 | As of January 2, 2022 | | :------------- | :-------------------- | :-------------------- | | Total gross property, plant and equipment | $422,645 | $359,055 | | Less: accumulated depreciation | $(88,737) | $(55,248) | | Property, plant and equipment, net | $333,908 | $303,807 | - Net property, plant and equipment increased by $30.101 million (9.91%) from January 2, 2022, to October 2, 2022, largely due to the purchase of a new snack food manufacturing facility in Kings Mountain, North Carolina for $38.4 million in April 2022[62] - Depreciation expense for the thirty-nine weeks ended October 2, 2022, was $37.1 million, up from $31.8 million in the prior year period[63] - The Company recorded $2.7 million in impairment related to property and equipment damaged by a natural disaster and received $3.9 million in insurance proceeds for property damage and $4.0 million for business interruption insurance, reducing cost of goods sold[64] 5. Goodwill and Intangible Assets, Net Reports the Company's goodwill and intangible assets, including amortizable and non-amortizable categories | (in thousands) | As of October 2, 2022 | As of January 2, 2022 | | :------------- | :-------------------- | :-------------------- | | Goodwill | $915,295 | $915,438 | | Amortizable assets, net | $668,460 | $698,820 | | Not subject to amortization | $441,342 | $443,689 | | Intangible assets, net | $1,109,802 | $1,142,509 | - Goodwill remained relatively stable, with a slight adjustment of $(0.143) million related to the RW Garcia acquisition[65] - Intangible assets, net, decreased by $32.707 million, primarily due to accumulated amortization and a $2.0 million impairment expense related to the termination of master distribution rights in Q1 2022[66] - Amortization expense for intangibles was $28.3 million for the thirty-nine weeks ended October 2, 2022, compared to $27.3 million in the prior year period[67] 6. Notes Receivable Details the Company's notes receivable, primarily from independent operators (IOs) | (in thousands) | As of October 2, 2022 | As of January 2, 2022 | | :------------- | :-------------------- | :-------------------- | | Notes receivable from IOs | $23,300 | $27,200 | | Other notes receivable | $200 | $200 | | Total notes receivable | $23,500 | $27,400 | - Notes receivable from independent operators (IOs) decreased from $27.2 million to $23.3 million, reflecting the ongoing program to sell Company-managed DSD distribution routes to IOs[68] 7. Accrued Expenses and Other Provides a breakdown of current and non-current accrued expenses and other liabilities | (in thousands) | As of October 2, 2022 | As of January 2, 2022 | | :------------- | :-------------------- | :-------------------- | | Current accrued expenses and other | $76,447 | $71,280 | | Non-current accrued expenses and other | $64,687 | $55,838 | | Total accrued expenses and other | $141,134 | $127,118 | - Current accrued expenses increased by $5.167 million, driven by higher accrued compensation and benefits and accrued dividends and distributions, partially offset by a decrease in acquisition tax consideration and short-term interest rate hedge liability[69] - Non-current accrued expenses increased by $8.849 million, primarily due to higher right-of-use liability and Tax Receivable Agreement liability[69] 8. Long-Term Debt Details the Company's long-term debt obligations, including term loans, equipment loans, and credit facilities | Debt (in thousands) | October 2, 2022 | January 2, 2022 | | :------------------ | :-------------- | :-------------- | | Term Loan B | $781,273 | $787,236 | | Equipment loans | $53,068 | $26,655 | | ABL facility | $76,390 | $36,000 | | Total long-term debt| $902,359 | $841,962 | | Long term portion of term debt and financing obligations | $887,270 | $830,548 | - Total long-term debt increased by $60.397 million from January 2, 2022, to October 2, 2022, primarily due to increased equipment loans and ABL facility borrowings[76] - The ABL facility credit limit was increased to $175.0 million and its interest rate benchmark was replaced from LIBOR to SOFR in September 2022[70] - Subsequent to October 2, 2022, the Company entered into an $88.1 million Real Estate Term Loan, secured by real estate assets, using part of the proceeds to pay off the ABL facility[75][116] 9. Derivative Financial Instruments and Purchase Commitments Discusses the Company's use of derivative instruments for hedging and outlines significant purchase commitments - The Company uses interest rate swap contracts to hedge against interest rate fluctuations, with a notional amount of $500 million maturing on September 30, 2026, and the swap was amended in September 2022 to reflect the LIBOR to SOFR transition[84] | (in thousands) | Fair value of warrant liabilities | | :------------- | :-------------------------------- | | As of January 2, 2022 | $46,224 | | Gain on remeasurement | $(7,704) | | As of July 3, 2022 | $38,520 | | Loss on remeasurement | $3,672 | | As of October 2, 2022 | $42,192 | - Purchase commitments for key ingredients totaled $65.7 million as of October 2, 2022, used to economically hedge commodity input prices[86] 10. Fair Value Measurements Provides information on the fair value of financial instruments, categorized by valuation inputs | (in thousands) | October 2, 2022 (Total) | January 2, 2022 (Total) | | :------------- | :---------------------- | :---------------------- | | Assets: | | | | Cash and cash equivalents | $51,805 | $41,898 | | Interest rate swaps | $48,135 | $2,208 | | Total assets | $99,940 | $44,106 | | Liabilities: | | | | Commodity contracts | $558 | $54 | | Private placement warrants | $42,192 | $46,224 | | Debt | $902,359 | $841,962 | | Total liabilities | $945,109 | $892,840 | - The fair value of interest rate swaps significantly increased from $2.208 million (asset) to $48.135 million (asset) from January 2, 2022, to October 2, 2022, reflecting market changes[90] - Private placement warrant liabilities decreased from $46.224 million to $42.192 million over the same period[90] 11. Contingencies Discloses potential liabilities arising from legal matters and guarantees related to independent operators - The Company is involved in various litigation matters, but management does not expect them to have a material adverse effect on financial condition or results of operations[91] - The Company partially guarantees loans made to Independent Operators (IOs) by Cadence Bank and Bank of America for route purchases, with outstanding guaranteed balances of $1.6 million and $31.4 million, respectively, as of October 2, 2022[93][94] - Loans guaranteed by M&T Bank for IO route purchases totaled $3.8 million as of October 2, 2022, and are included in the Company's Consolidated Balance Sheets[95] 12. Accumulated Other Comprehensive Income Reports the components of accumulated other comprehensive income, including unrealized gains and losses | (in thousands) | Balance as of January 2, 2022 | Balance as of October 2, 2022 | | :------------- | :---------------------------- | :---------------------------- | | Total accumulated other comprehensive income | $3,715 | $54,190 | | Less balance attributable to noncontrolling interest | N/A | $21,570 | | Balance attributable to controlling interest | N/A | $32,620 | - Total accumulated other comprehensive income increased significantly from $3.7 million to $54.2 million from January 2, 2022, to October 2, 2022, solely due to unrealized gains from derivative financial instruments accounted for as cash flow hedges[96] 13. Supplementary Cash Flow Information Provides additional details on cash flows, including cash paid for interest and income taxes | (in thousands) | Thirty-nine weeks ended Oct 2, 2022 | Thirty-nine weeks ended Oct 3, 2021 | | :------------- | :---------------------------------- | :---------------------------------- | | Cash paid for interest | $29,682 | $23,519 | | Refunds related to income taxes | $4,630 | $182 |\ | Payments for income taxes | $5,463 | $3,332 | - Cash paid for interest increased by $6.163 million for the thirty-nine weeks ended October 2, 2022, compared to the prior year, reflecting higher debt levels and rising interest rates[97] 14. Income Taxes Details the Company's income tax expense or benefit, effective tax rates, and deferred tax assets and liabilities | (in millions) | Thirteen weeks ended Oct 2, 2022 | Thirteen weeks ended Oct 3, 2021 | Thirty-nine weeks ended Oct 2, 2022 | Thirty-nine weeks ended Oct 3, 2021 | | :------------ | :------------------------------- | :------------------------------- | :---------------------------------- | :---------------------------------- | | Income tax (benefit) expense | $(1.6) | $0.8 | $(1.7) | $2.3 | - The Company recorded an income tax benefit of $(1.6) million for the thirteen weeks and $(1.7) million for the thirty-nine weeks ended October 2, 2022, compared to income tax expense in the prior year periods[99] - Effective tax rates were 1450.0% and 5.7% for the thirteen and thirty-nine weeks ended October 2, 2022, respectively, significantly impacted by the partnership structure of UBH, state taxes, and warrant liabilities[99] - A valuation allowance has been recorded against certain deferred tax assets due to uncertainty regarding future realization, particularly concerning net operating losses and deductible book/tax differences[100] 15. Warrants Provides information on outstanding warrants and the impact of their remeasurement on financial results - As of October 2, 2022, there were 7,200,000 Private Placement Warrants outstanding, which are accounted for as derivative liabilities[106][108] - The remeasurement of warrant liability resulted in a loss of $(3.7) million for the thirteen weeks ended October 2, 2022, compared to a gain of $36.3 million in the prior year period[109] 16. Equity Details the Company's equity structure, including Class A and Class V Common Stock shares outstanding | (shares) | As of October 2, 2022 | As of January 2, 2022 | | :------- | :-------------------- | :-------------------- | | Class A Common Stock issued and outstanding | 80,812,835 | 77,644,645 |\ | Class V Common Stock issued and outstanding | 59,349,000 | 59,349,000 | - The number of Class A Common Stock shares issued and outstanding increased by 3,168,190 shares from January 2, 2022, to October 2, 2022[110] - Class V Common Stock shares remained constant at 59,349,000, held by Continuing Members and exchangeable for Class A Common Stock[111] 17. Earnings (Loss) Per Share Reports basic and diluted earnings (loss) per share for Class A Common Stock | (in dollars) | Thirteen weeks ended Oct 2, 2022 | Thirty-nine weeks ended Oct 2, 2022 | | :----------- | :------------------------------- | :---------------------------------- | | Basic EPS | $(0.01) | $(0.19) | | Diluted EPS | $(0.01) | $(0.19) | | (in dollars) | Thirteen weeks ended Oct 3, 2021 | Thirty-nine weeks ended Oct 3, 2021 | | :----------- | :------------------------------- | :---------------------------------- | | Basic EPS | $0.43 | $0.36 | | Diluted EPS | $0.40 | $0.34 | - Basic and diluted EPS for Class A Common Stock were $(0.01) and $(0.19) for the thirteen and thirty-nine weeks ended October 2, 2022, respectively, indicating a loss per share compared to positive EPS in the prior year periods[114][115] - Anti-dilutive securities, including warrants, RSUs, and PSUs, totaling 2,337,218 for the thirteen weeks and 1,887,507 for the thirty-nine weeks ended October 2, 2022, were excluded from diluted EPS calculations due to the Company's net loss[114] 18. Subsequent Events Discloses significant events that occurred after the balance sheet date but before the financial statements were issued - On October 12, 2022, the Company secured an $88.1 million Real Estate Term Loan, collateralized by real estate assets, with a ten-year maturity and annual principal amortization of approximately $3.5 million[116] - Proceeds from the Real Estate Term Loan were used to pay off the ABL facility, and an interest rate swap was entered into to fix the effective interest rate at approximately 6%[116] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Utz Brands, Inc.'s Q3 2022 financial condition and operations, including developments, acquisitions, costs, and non-GAAP metrics Overview Provides a general introduction to Utz Brands, Inc.'s business, market position, and product portfolio - Utz Brands, Inc. is a leading U.S. manufacturer of branded salty snacks, founded in 1921, with a portfolio including Utz®, ON THE BORDER®, Zapp's®, and others, distributed nationally[119] - The Company is the second-largest producer of branded salty snacks in its core geographies based on 2021 retail sales[119] Key Developments and Trends Highlights significant industry trends, operational developments, and their potential impact on the Company's performance - The U.S. salty snacks category is attractive and growing, with retail sales increasing approximately 15.4% over the 52 weeks ended October 2, 2022, benefiting from resilient consumer demand and favorable competitive dynamics[121][122] - The Company's operating costs, including raw materials, labor, and distribution, are managed through cost-saving initiatives, sourcing, hedging, and pricing actions, with gross input cost inflation expected to be in the mid to high-teens in fiscal year 2022[124][133] - The weighted average interest rate for the thirty-nine weeks ended October 2, 2022, was 4.3%, up from 3.5% in the prior year, with the Company using interest rate swaps to manage exposure to variable rates and transitioning from LIBOR to SOFR[127][128] - The COVID-19 pandemic led to increased demand for at-home dining, which the Company effectively serviced by increasing production and distribution, gaining new and repeat customers[129] Recent Developments and Significant Items Affecting Comparability Discusses recent acquisitions, rising costs, and strategic initiatives impacting the comparability of financial results - Utz Brands completed three acquisitions in 2021: Vitner's ($25.2 million), Festida Foods ($40.3 million), and RW Garcia ($57.9 million plus $6.0 million for a manufacturing facility), expanding its product offering and distribution[130][131][132] - The Company faces rising commodity, fuel, freight, and labor costs, with gross input cost inflation expected in the mid to high-teens for fiscal year 2022, which it aims to offset through pricing actions and efficiency improvements[133] - The multi-year strategy to convert Company-owned DSD routes to the Independent Operator (IO) model is ongoing, with the IO/RSP mix at approximately 91% and 9% respectively as of October 2, 2022, expected to be substantially complete by mid-fiscal year 2023[135] Results of Operations Analyzes the Company's financial performance, including net sales, gross profit, expenses, and net income (loss) | (in thousands) | Thirteen weeks ended Oct 2, 2022 | Thirteen weeks ended Oct 3, 2021 | Thirty-nine weeks ended Oct 2, 2022 | Thirty-nine weeks ended Oct 3, 2021 | | :------------- | :------------------------------- | :------------------------------- | :---------------------------------- | :---------------------------------- | | Net sales | $362,818 | $312,680 | $1,053,732 | $879,781 | | Gross profit | $118,273 | $102,627 | $333,609 | $293,428 | | Gross profit margin | 32.6% | 32.8% | 31.7% | 33.4% | | Selling, distribution, and administrative expenses | $102,445 | $98,709 | $336,718 | $278,850 | | Income (loss) from operations | $15,005 | $2,875 | $(2,190) | $16,543 | | Net income (loss) | $1,485 | $31,350 | $(27,868) | $24,180 | - Net sales increased by 16.0% (thirteen weeks) and 19.8% (thirty-nine weeks) year-over-year, driven by favorable price/mix (14.7% and 12.5% respectively) and acquisitions, despite a 2.1% volume decline in the thirteen-week period due to SKU rationalization[138][148] - Gross profit margin declined to 32.6% (thirteen weeks) and 31.7% (thirty-nine weeks) from 32.8% and 33.4% respectively, primarily due to commodity and wage inflation, and higher depreciation, partially offset by pricing and productivity actions[143][152] - Selling, distribution, and administrative expenses increased by 3.8% (thirteen weeks) and 20.8% (thirty-nine weeks), with the latter including $23.0 million for distributor buyouts and $2.6 million for other contract termination expenses[144][153] - The Company reported a net loss for both the thirteen and thirty-nine weeks ended October 2, 2022, largely due to a loss on remeasurement of warrant liability and increased interest expense[146][155] Non-GAAP Financial Measures Reconciles non-GAAP financial measures like EBITDA and Adjusted EBITDA to their most directly comparable GAAP measures - The Company uses non-GAAP financial measures like EBITDA and Adjusted EBITDA to evaluate operating performance, facilitate historical comparisons, identify trends, and inform strategic decisions[157][160] | (dollars in millions) | Thirteen weeks ended Oct 2, 2022 | Thirteen weeks ended Oct 3, 2021 | Thirty-nine weeks ended Oct 2, 2022 | Thirty-nine weeks ended Oct 3, 2021 | | :-------------------- | :------------------------------- | :------------------------------- | :---------------------------------- | :---------------------------------- | | Net income (loss) | $1.5 | $31.4 | $(27.9) | $24.2 | | EBITDA | $32.9 | $60.0 | $66.9 | $110.3 | | Adjusted EBITDA | $47.7 | $44.8 | $126.4 | $118.5 | | Adjusted EBITDA as a % of Net Sales | 13.1 % | 14.3 % | 12.0 % | 13.5 % | - Adjusted EBITDA increased to $47.7 million for the thirteen weeks and $126.4 million for the thirty-nine weeks ended October 2, 2022, compared to $44.8 million and $118.5 million in the prior year periods, respectively[161] - Adjustments to EBITDA include non-cash items (share-based compensation, warrant liability remeasurement), acquisition and integration costs ($40.8 million for 39 weeks), business transformation initiatives ($13.3 million for 39 weeks), and financing-related costs[159][161][162][164] Liquidity and Capital Resources Assesses the Company's ability to generate and manage cash, including sources and uses of funds | (in thousands) | Thirty-nine weeks ended Oct 2, 2022 | Thirty-nine weeks ended Oct 3, 2021 | | :------------- | :---------------------------------- | :---------------------------------- | | Net cash provided by operating activities | $8,071 | $4,282 | | Net cash used in investing activities | $(52,940) | $(78,081) |\ | Net cash provided by financing activities | $54,776 | $52,929 | - Cash and cash equivalents increased by $9.9 million to $51.8 million as of October 2, 2022, compared to January 2, 2022[165] - Net cash provided by operating activities improved to $8.1 million, driven by better working capital management, while net cash used in investing activities decreased due to lower acquisition spending[165] - Financing activities provided $54.8 million in cash, primarily from increased ABL facility borrowings, equipment loans, and share issuance proceeds[165] - The ABL facility's credit limit was increased to $175.0 million and its interest rate benchmark transitioned from LIBOR to SOFR in September 2022[167] Application of Critical Accounting Policies and Estimates Explains the significant judgments and estimates made by management in applying key accounting policies - The Company's financial statements are prepared under U.S. GAAP, requiring significant management judgments and estimates for areas such as revenue recognition, inventory valuations, useful lives of fixed assets, goodwill and intangible asset impairments, and income taxes[186] - Revenue recognition involves estimating variable consideration like discounts, returns, and trade promotions, with estimates based on historical data and adjusted as actual redemptions occur[187][189] - Goodwill and indefinite-lived intangible assets are tested for impairment at least annually, with the Company determining no significant impact affecting fair value through October 2, 2022, thus not requiring a quantitative impairment test[193][196] - Income taxes are accounted for using the asset and liability method, with deferred tax assets subject to a valuation allowance when future realization is uncertain, particularly due to cumulative losses[197][100] Item 3. Quantitative and Qualitative Disclosures About Market Risk Refers to the Annual Report on Form 10-K for market risk disclosures, noting no material changes since January 2, 2022 - The Company's exposures to market risk have not materially changed since January 2, 2022[202] Item 4. Controls and Procedures Confirms effective disclosure controls and procedures as of October 2, 2022, with no material changes in internal control - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective at a level of reasonable assurance as of October 2, 2022[203] - There were no material changes in the Company's internal control over financial reporting during the most recent fiscal quarter[204] PART II – OTHER INFORMATION Item 1. Legal Proceedings Management believes current legal proceedings will not materially adversely affect the Company's financial condition, operations, or cash flows - Management does not believe any currently pending legal proceedings will have a material adverse effect on the Company's business, prospects, financial condition, cash flows, or results of operations[205] Item 1A. Risk Factors Refers to the Annual Report on Form 10-K for risk factors, noting no material changes since March 3, 2022 - There have been no material changes to the Company's risk factors since the filing of the Annual Report on Form 10-K on March 3, 2022[206] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds to report[207] Item 3. Defaults Upon Senior Securities No defaults upon senior securities to report for the period - No defaults upon senior securities to report[208] Item 4. Mine Safety Disclosures No mine safety disclosures to report for the period - No mine safety disclosures to report[209] Item 5. Other Information No other information to report for the period - No other information to report[210] Item 6. Exhibits Lists all exhibits furnished with the report, including organizational documents, credit agreement amendments, and certifications - The exhibit index includes organizational documents (Certificate of Domestication, Certificate of Incorporation, Bylaws), amendments to credit agreements (ABL Credit Agreement, First Lien Credit Agreement), an offer letter, and certifications from the CEO and CFO[213][214]