ARK RESTAURANTS CORP 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations This section and other parts of this Quarterly Report on Form 10-Q ("Form 10-Q") contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"), which are subject to known and unknown risks, uncertainties and other important factors that may cause actual results to be materially different from the statements made herein. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial position, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to any historical or current facts. These statements may include words such as "aim," "anticipate," "believe," "estimate," "expect," "forecast," "future," "intend," "outlook," "potential," "project," "projection," "plan," "seek," "may," "could," "would," "will," "should," "can," "can have," "likely," the negatives thereof and other similar expressions. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. The following discussion and analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended October 1, 2022 and the consolidated condensed financial statements and notes thereto included in Part I, Item 1 of this Form 10-Q. All information presented herein is based on our fiscal calendar. Unless otherwise stated, references to particular years, quarters, months or periods refer to our fiscal years and the associated quarters, months and periods of those fiscal years. COVID-19 Pandemic and Inflation Recent global events, including the COVID-19 pandemic ("COVID-19"), have adversely affected global economies, disrupted global supply chains and labor force participation and created significant volatility and disruption of financial markets. As a result, we experienced significant and variable disruptions to our business as federal, state and local restrictions were mandated, among other remedial measures, to mitigate the spread of the COVID-19 virus. While restrictions on the type of permitted operating model and occupancy capacity may continue to change, during fiscal 2022 all of our restaurants operated with no restrictions, other than in New York City where customers were required to show proof of vaccination through November 1, 2022. In addition to the associated impacts of COVID-19, our operating results have been impacted by geopolitical and other macroeconomic factors, leading to increased commodity and wage inflation and other increased costs. The ongoing effects of COVID-19 and its variants, along with other geopolitical and macroeconomic events, could lead to further government mandates, including but not limited to capacity restrictions, shifts in consumer behavior, wage inflation, staffing challenges, product and services cost inflation and disruptions in our supply chain. If these factors significantly impact our cash flow in the future, we may again implement mitigation actions such as suspending dividends, increasing borrowings or modifying our operating strategies. Some of these measures may have an adverse impact on our business, including possible impairments of assets. Overview As of July 1, 2023, the Company owned and operated 17 restaurants and bars, 16 fast food concepts and catering operations, exclusively in the United States, that have similar economic characteristics, nature of products and service, class of customer and distribution methods. The Company believes it meets the criteria for aggregating its operating components into a single operating segment in accordance with applicable accounting guidance. Accounting Period Our fiscal year ends on the Saturday nearest September 30. We report fiscal years under a 52/53-week format. This reporting method is used by many companies in the hospitality industry and is meant to improve year-to-year comparisons of operating results. Under this method certain years will contain 53 weeks. The periods ended July 1, 2023 and July 2, 2022 each included 13 and 39 weeks. Seasonality The Company has substantial fixed costs that do not decline proportionally with sales. Although our business is highly seasonal, our broader geographical reach as a result of recent acquisitions mitigates some of the risk. For instance, the second quarter of our fiscal year, consisting of the non-holiday portion of the cold weather season in New York and Washington, D.C. (January, February and March), is the poorest performing quarter; however, in recent years this has been partially offset by our locations in Florida as they experience increased results in the winter months. We generally achieve our best results during the warm weather, attributable to our extensive outdoor dining availability, particularly at Bryant Park in New York and Sequoia in Washington, D.C. (our largest restaurants) and our outdoor cafes. However, even during summer months these facilities can be adversely - 21 - affected by unusually cool or rainy weather conditions. Our facilities in Las Vegas are indoor and generally operate on a more consistent basis throughout the year. Results of Operations The Company’s operating income for the 13 weeks ended July 1, 2023 decreased -32.9% as compared to the same period of the prior year primarily as a result of the decreases in same-store sales as discussed below and continued increases in labor costs in connection with record low unemployment, partially offset by some easing in commodity prices. The Company’s operating income for the 39 weeks ended July 1, 2023 decreased -30.5% as compared to the same period of the prior year primarily as a result of increased labor costs in connection with record low unemployment and the temporary closure of Gallagher's Steakhouse in Las Vegas, NV for renovation, partially offset by increases in revenues from our event business in New York City and Washington, DC combined with some easing in commodity prices. The following table summarizes the significant components of the Company’s operating results for the 13- and 39-week periods ended July 1, 2023 and July 2, 2022: 13 Weeks Ended Variance 39 Weeks Ended Variance July 1, 2023 July 2, 2022 $ % July 1, 2023 July 2, 2022 $ % (in thousands) (in thousands) REVENUES: Food and beverage sales $ 49,807 $ 52,069 $ (2,262) -4.3 % $ 137,259 $ 134,127 $ 3,132 2.3 % Other revenue 1,244 1,149 95 8.3 % 3,134 2,662 472 17.7 % Total revenues 51,051 53,218 (2,167) -4.1 % 140,393 136,789 3,604 2.6 % COSTS AND EXPENSES: Food and beverage cost of sales 13,241 14,740 (1,499) -10.2 % 37,472 39,536 (2,064) -5.2 % Payroll expenses 17,194 16,205 989 6.1 % 49,027 43,926 5,101 11.6 % Occupancy expenses 6,151 5,966 185 3.1 % 17,589 15,814 1,775 11.2 % Other operating costs and expenses 6,274 5,996 278 4.6 % 17,557 15,974 1,583 9.9 % General and administrative expenses 3,495 3,872 (377) -9.7 % 9,655 9,854 (199) -2.0 % Depreciation and amortization 1,059 1,018 41 4.0 % 3,230 3,245 (15) -0.5 % Total costs and expenses 47,414 47,797 (383) -0.8 % 134,530 128,349 6,181 4.8 % OPERATING INCOME $ 3,637 $ 5,421 $ (1,784) -32.9 % $ 5,863 $ 8,440 $ (2,577) -30.5 % Revenues During the 13 weeks ended July 1, 2023, revenues decreased -4.1% as compared to revenues for the 13 weeks ended July 2, 2022, primarily as a result of the changes in same-store sales discussed below. During the 39 weeks ended July 1, 2023, revenues increased 2.6% as compared to revenues for the 39 weeks ended July 2, 2022. This increase resulted primarily from the changes in same-store sales discussed below as well as the impact of the substantial closure of Gallagher's Steakhouse at the New York-New York Hotel and Casino in Las Vegas, NV for renovation for the period from February 5, 2023 through April 27, 2023 as required by our lease. Revenues related to Gallagher's Steakhouse for the period of closure were $1,068,000 as compared to $3,056,000 for the comparable prior period, of which $354,000 as compared to $730,000 related to the 13-week periods ended July 1, 2023 and July 2, 2022, respectively. - 22 - Food and Beverage Same-Store Sales On a Company-wide basis, same-store sales decreased -4.8% during the 13 weeks ended July 1, 2023 as compared to the same period of last year as follows: 13 Weeks Ended Variance July 1, 2023 July 2, 2022 $ % (in thousands) Las Vegas $ 13,202 $ 14,117 $ (915) -6.5 % New York 12,117 11,669 448 3.8 % Washington, DC 3,773 4,021 (248) -6.2 % Atlantic City, NJ 798 957 (159) -16.6 % Alabama 5,184 5,231 (47) -0.9 % Florida 13,743 15,259 (1,516) -9.9 % Same-store sales 48,817 51,254 $ (2,437) -4.8 % Other 990 815 Food and beverage sales $ 49,807 $ 52,069 Same-store sales in Las Vegas decreased -6.5% primarily as a result of the negative impact of the temporary closure of Gallagher's Steakhouse for renovation on February 5, 2023 (which reopened on April 28, 2023). Same-store sales in New York increased 3.8% driven primarily by strong revenues from our event business. Same-store sales in Washington, DC decreased -6.2% as a result of lower headcounts partially offset by targeted menu price increases. Same-store sales in Atlantic City decreased -16.6% as a result of lower customer traffic at the property where we are located. Same-store sales in Alabama decreased -0.9% primarily as a result of slightly lower customer headcounts. Same-store sales in Florida decreased -9.9% primarily as a result of lower headcounts as compared to the comparable prior period which benefited from outsized volumes as a result of the population increase in Southeast Florida. On a Company-wide basis, same-store sales increased 1.7% during the 39 weeks ended July 1, 2023 as compared to the same period of last year as follows: 39 Weeks Ended Variance July 1, 2023 July 2, 2022 $ % (in thousands) Las Vegas $ 41,407 $ 40,838 $ 569 1.4 % New York 27,610 23,581 4,029 17.1 % Washington, DC 8,101 7,555 546 7.2 % Atlantic City, NJ 2,142 2,525 (383) -15.2 % Alabama 11,857 11,646 211 1.8 % Florida 43,788 46,549 (2,761) -5.9 % Same-store sales 134,905 132,694 $ 2,211 1.7 % Other 2,354 1,433 Food and beverage sales $ 137,259 $ 134,127 Same-store sales in Las Vegas increased 1.4% primarily as a result of increased customer traffic and targeted menu price increases partially offset by the negative impact of the temporary closure of Gallagher's Steakhouse for renovation on February 5, 2023 (which reopened on April 28, 2023). Same-store sales in New York increased 17.1% driven primarily by strong revenues from our event business and increased customer traffic. Same-store sales in Washington, DC increased 7.2% driven primarily by strong revenues from our event business and targeted menu price increases in the first two quarters, partially offset by lower headcounts in the third quarter. Same-store sales in Atlantic City decreased -15.2% as a result of lower customer traffic at the property where we are located. Same-store sales in Alabama increased 1.8% primarily as a result of increased customer traffic and targeted menu price increases in the first two quarters, partially offset by lower headcounts in the third quarter. Same-store sales in Florida decreased -5.9% primarily as a result of lower headcounts as compared to the comparable prior period which - 23 - benefited from outsized volumes as a result of the population increase in Southeast Florida as a result of the migration of people during the pandemic partially offset by targeted menu price increases. Other food and beverage sales consist of sales related to new restaurants opened or acquired during the applicable period, sales related to properties that were closed and other adjustments and fees. Costs and Expenses Costs and expenses for the 13 and 39 weeks ended July 1, 2023 and July 2, 2022 were as follows (in thousands): 13 Weeks Ended July 1, 2023 % to Total Revenues 13 Weeks Ended July 2, 2022 % to Total Revenues Increase (Decrease) 39 Weeks Ended July 1, 2023 % to Total Revenues 39 Weeks Ended July 2, 2022 % to Total Revenues Increase (Decrease) $ % $ % Food and beverage cost of sales $ 13,241 25.9 % $ 14,740 27.7 % (1,499) -10.2 % $ 37,472 26.7 % $ 39,536 28.9 % (2,064) -5.2 % Payroll expenses 17,194 33.7 % 16,205 30.5 % 989 6.1 % 49,027 34.9 % 43,926 32.1 % 5,101 11.6 % Occupancy expenses 6,151 12.0 % 5,966 11.2 % 185 3.1 % 17,589 12.5 % 15,814 11.6 % 1,775 11.2 % Other operating costs and expenses 6,274 12.3 % 5,996 11.3 % 278 4.6 % 17,557 12.5 % 15,974 11.7 % 1,583 9.9 % General and administrative expenses 3,495 6.8 % 3,872 7.3 % (377) -9.7 % 9,655 6.9 % 9,854 7.2 % (199) -2.0 % Depreciation and amortization 1,059 2.1 % 1,018 1.9 % 41 4.0 % 3,230 2.3 % 3,245 2.4 % (15) -0.5 % Total costs and expenses $ 47,414 $ 47,797 $ (383) $ 134,530 $ 128,349 $ 6,181 Food and beverage costs as a percentage of total revenues for the 13 and 39 weeks ended July 1, 2023 as compared with the same periods of last year decreased as a result of a very strong event business in New York City and Washington, DC, which has higher margins, combined with some easing in commodity prices. Payroll expenses as a percentage of total revenues for the 13 and 39 weeks ended July 1, 2023 increased as compared with the same periods of last year primarily as a result of record low unemployment and ongoing COVID-related labor challenges combined with merit increases and increasing minimum wages in the states where we operate. Occupancy expenses as a percentage of total revenues for the 13 and 39 weeks ended July 1, 2023 increased as compared with the same periods of last year primarily as a result of increases in base rents, percentage rents paid on higher sales in the current period and increases in property and liability insurance premiums. Other operating costs and expenses as a percentage of total revenues for the 13 and 39 weeks ended July 1, 2023 as compared to the same period of last year increased primarily as a result of inflation. General and administrative expenses (which relate solely to the corporate office in New York City) for the 13 and 39 weeks ended July 1, 2023 decreased as compared to the same periods of last year as a result of severance accruals in the prior period partially offset by annual merit increases. Depreciation and amortization expense for the 13 weeks ended July 1, 2023 increased slightly as compared to the same period of last year primarily as a result of the Gallagher's Steakhouse renovation costs being placed into service on April 28, 2023. Depreciation and amortization expense for the 39 weeks ended July 1, 2023 decreased slightly as compared to the same period of last year primarily as a result of the timing of additions in the prior period. Liquidity and Capital Resources Our primary source of capital has been cash provided by operations and, in recent years, bank and other borrowings to finance specific transactions, acquisitions and large remodeling projects. We utilize cash generated from operations to fund the cost of developing and opening new restaurants and smaller remodeling projects of existing restaurants we own. Consistent with many other restaurant operators, we typically use operating lease arrangements for our restaurants. In recent years we have been able to acquire the underlying real estate at several locations along with the restaurant operation. We believe that our operating lease arrangements provide appropriate leverage of our capital structure in a financially efficient manner. - 24 - As of July 1, 2023, we had a cash and cash equivalents balance of $13,986,000. The Company had a working capital deficit of ($4,081,000) at July 1, 2023 as compared with working capital of $4,210,000 at October 1, 2022. This decrease is primarily the result of the prepayment of a promissory note in the amount of $6,666,000 on March 30, 2023 and the prepayment of three promissory notes in the aggregate amount of $6,046,000 on April 4, 2023. Inflation The country is currently experiencing multi-decade high inflation. Our profitability is dependent on, among other things, our ability to anticipate and react to changes in the cost of food and other raw materials, labor, energy and other supplies and services. While we have not had material disruptions in our supply chain, we have experienced some product shortages and higher costs for many commodities. There has also been a general shortage in the availability of restaurant staff and hourly workers in certain geographic areas in which we operate and has caused increases in the costs of recruiting and compensating such employees. In addition, certain operating and other costs, including health benefits, taxes, insurance, and other outside services, continue to increase with the general level of inflation and may also be subject to other cost and supply fluctuations outside of our control. While we have been able to offset inflation and other changes in the costs of key operating resources by targeted increases in menu prices, coupled with more efficient purchasing practices, there can be no assurance that we will be able to continue to do so in the future. From time to time, competitive conditions will limit our menu pricing flexibility. In addition, macroeconomic conditions that impact consumer discretionary spending for food away from home could make additional menu price increases imprudent. There can be no assurance that all of our future cost increases can be offset by higher menu prices or that higher menu prices will be accepted by our restaurant customers without any resulting changes in their visit frequencies or purchasing patterns. Cash Flows for 39 Weeks Ended July 1, 2023 and July 2, 2022 Net cash provided by operating activities for the 39 weeks ended July 1, 2023 decreased to $6,872,000 as compared to $15,836,000 in the same period of last year. This decrease was primarily attributable to a decrease in consolidated net income and changes in net working capital primarily related to accounts receivable, inventory, accounts payable and accrued expenses. Net cash provided by (used in) investing activities for the 39 weeks ended July 1, 2023 and July 2, 2022 was $2,008,000 and $(1,774,000), respectively, and resulted primarily from purchases of fixed assets at existing restaurants and, in the current period, the proceeds from the maturity of a certificate of deposit. Net cash used in financing activities for the 39 weeks ended July 1, 2023 of $(18,333,000) resulted primarily from principal payments on notes payable of $15,835,000 (including the prepayment of a promissory note in the amount of $6,666,000 on March 30, 2023 and the prepayment of three promissory notes in the aggregate amount of $6,046,000 on April 4, 2023), the payment of dividends in the amount of $1,576,000 and the payment of distributions to non-controlling interests in the amount of $961,000. Net cash used in financing activities for the 39 weeks ended July 2, 2022 of $(6,631,000) resulted primarily from principal payments on notes payable of $5,275,000, the resumption of the payment of dividends in the amount of $444,000 and the payment of distributions to non-controlling interests in the amount of $1,543,000. Recent Restaurant Expansions and Other Developments On April 8, 2022, the Company extended its lease for Gallagher's Steakhouse at the New York-New York Hotel and Casino in Las Vegas, NV through December 31, 2032. In connection with the extension, the Company agreed to spend a minimum of $1,500,000 (all of which has been expended to date) to materially refresh the premises by April 30, 2023 (as extended from September 30, 2022 due to supply chain issues), subject to various extensions as set out in the agreement. Accordingly, the property was substantially closed for renovation on February 5, 2023 and reopened on April 28, 2023. The total cost of the refresh was approximately $1,900,000. On June 24, 2022, the Company extended its lease for America at the New York-New York Hotel and Casino in Las Vegas, NV through December 31, 2033. In connection with the extension, the Company has agreed to spend a minimum of $4,000,000 to materially refresh the premises by December 31, 2024, subject to various extensions as set out in the agreement. No amounts have been expended to date related to this refresh. On July 21, 2022, the Company extended its lease for the Village Eateries at the New York-New York Hotel and Casino in Las Vegas, NV through December 31, 2034. As part of this extension, the Broadway Burger Bar and Grill and Gonzalez y Gonzalez , were carved out of the Village Eateries footprint and the extended date for those two locations is December 31, 2033. In connection with the extension, the Company has agreed to spend a minimum of $3,500,000 to materially refresh all three of these premises by December 31, 2023 (as extended from June 30, 2023). To date approximately $50,000 has been spent on this refresh. - 25 - Each of the above refresh obligations are to be consistent with designs approved by the landlord which shall not be unreasonably withheld. We will continue to pay all rent as required by the leases without abatement during construction. Note that our substantial completion of work set forth in plans approved by the landlord shall constitute our compliance with the requirements of the completion deadlines, regardless of whether or not the amount actually expended in connection therewith is less than the minimum. Our restaurants generally do not achieve substantial increases in revenue from year to year, which we consider to be typical of the restaurant industry. To achieve significant increases in revenue or to replace revenue of restaurants that lose customer favor or which close because of lease expirations or other reasons, we would have to open additional restaurant facilities or expand existing restaurants. There can be no assurance that a restaurant will be successful after it is opened, particularly since in many instances we do not operate our new restaurants under a trade name currently used by us, thereby requiring new restaurants to establish their own identity. We may take advantage of other opportunities we consider to be favorable, when they occur, depending upon the availability of financing and other factors. Recent Restaurant Dispositions and Other Developments On July 5, 2022, the Company terminated its lease for Lucky 7 at the Foxwoods Resort Casino. The closure did not result in a material change to the Company's operations. During the 26 weeks ended April 1, 2023, the Company dissolved the entity which owned Clyde Frazier's Wine and Dine, which was closed in September of 2021. In connection with the dissolution, the Company reclassified the remaining non-controlling interest balance to additional paid-in capital. Credit Facility On March 30, 2023, the Company entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”), with its lender, Bank Hapoalim B.M. (“BHBM”). This facility, which matures on June 1, 2025, replaced our revolving credit facility which was entered into in June 1, 2018. Under the terms of the Credit Agreement: (i) a promissory note under the Prior Credit Agreement in the amount of $6,666,000 was repaid, (ii) BHBM established a new revolving credit facility in the amount of $10,000,000, with a commitment termination date of May 31, 2025, (iii) the Company may use the revolving commitments of BHBM to obtain letters of credit up to a sublimit thereunder of $1,000,000, and (iv) the LIBOR rate option for all borrowings was replaced with the secured overnight financing rate for U.S. Government Securities (“SOFR”). Advances under the Credit Agreement bear interest, at the Company's election at the time of the advance, at either BHBM's prime rate of interest plus a 0.45% spread or SOFR plus a 3.65% spread. In addition, there is a 0.30% per annum fee for any unused portion of the $10,000,000 revolving facility. As of July 1, 2023, no advances were outstanding under the Credit Agreement. As of July 1, 2023, the weighted average interest on the outstanding BHBM notes payable was approximately 8.8%. The replacement of LIBOR with SOFR as a reference rate in our debt agreements did not have a material adverse effect on our financial position or materially affect our interest expense. Borrowings and all other obligations under Credit Agreement, which include the promissory notes as discussed in Note 8 of the consolidated condensed financial statements, are secured by all tangible and intangible personal property (including accounts receivable, inventory, equipment, general intangibles, documents, chattel paper, instruments, letter-of-credit rights, investment property, intellectual property and deposit accounts) and fixtures of the Company. The Credit Facility also requires, among other things, that the Company meet minimum quarterly tangible net worth amounts, maintain a minimum fixed charge coverage ratio and meet minimum annual net income amounts. The Credit Agreement contains customary representations, warranties and affirmative covenants as well as customary negative covenants, subject to negotiated exceptions on liens, relating to other indebtedness, capital expenditures, liens, affiliate transactions, disposal of assets and certain changes in ownership. Paycheck Protection Program Loans During the year ended October 3, 2020, subsidiaries and consolidated VIEs (the “Borrowers”) of the Company received loan proceeds from several banks (the “Lenders”) in the aggregate amount of $14,995,000 (the “PPP Loans”) under the Paycheck Protection Program (the “PPP”) of the CARES Act, which was enacted March 27, 2020. In addition, during the 13 weeks ended April 3, 2021, one of our consolidated VIEs received a second draw PPP Loan in the amount of $111,000. The PPP Loans were evidenced by individual promissory notes of each of the Borrowers (together, the “Notes”) in favor of the Lender, which Notes bore interest at the rate of 1.00% per annum. Funds from the PPP Loans were to be used only for payroll and related costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations that were incurred by a Borrower prior to February 15, 2020 (the “Qualifying Expenses”). Under the terms of the PPP Loans, some or all of - 26 - the amounts thereunder, including accrued interest, were to be forgiven if they were used for Qualifying Expenses as described in and in compliance with the CARES Act. During the 13 weeks ended July 1, 2023 and July 2, 2022, $0 and $1,298,000 of PPP Loans, respectively (including $0 and $46,000 of accrued interest, respectively) were forgiven. During the 39 weeks ended July 1, 2023 and July 2, 2022, $272,000 and $2,420,000 of PPP Loans, respectively, (including $6,000 and $66,000 of accrued interest, respectively) were forgiven. During the 39 weeks ended July 1, 2023 and July 2, 2022, the Company made payments related to the unforgiven portion of PPP Loans in the aggregate amount of $531,000 and $1,571,000, respectively. As of July 1, 2023, no PPP Loans were outstanding; however, the Company is appealing a forgiveness denial in the amount of $280,000. Such loan was repaid as we await the appeal decision. Cash Flow Outlook We are not aware of any trends or events that would materially affect our capital requirements or liquidity. We believe that our existing cash balances, internal cash-generating capabilities, current banking facilities and ability to secure additional financing, if necessary, are sufficient to finance our capital expenditures, debt maturities and other operating activities for at least the next twelve months. Recent Events On August 8, 2023, the Board of Directors declared a quarterly cash dividend of $0.1875 per share to be paid on September 12, 2023 to shareholders of record of each share of the Company's common stock at the close of business on August 31, 2023. Critical Accounting Estimates The preparation of financial statements requires the Company to make estimates and assumptions of future events. In the process of preparing its consolidated condensed financial statements, the Company estimates the appropriate carrying value of certain assets and liabilities, which are not readily apparent from other sources. The critical accounting estimates underlying the Company’s consolidated condensed financial statements include projected cash flows for fixed asset impairments, allowances for potential bad debts on accounts and notes receivable, assumptions regarding discount rates related to lease accounting, the useful lives and recoverability of its long-lived assets, such as property and intangibles, fair values of financial instruments, the realizable value of its tax assets and other matters. Management bases its estimates on certain assumptions, which it believes are reasonable in the circumstances, and actual results could differ from those estimates. Although management does not believe that any change in those assumptions in the near term would have a material effect on the Company’s consolidated condensed financial position or the results of operations, differences in actual results could be material to the consolidated condensed financial statements. The Company’s critical accounting estimates are described in the Company’s MD&A included in Form 10-K for the year ended October 1, 2022. There have been no significant changes to such critical accounting estimates during the third fiscal quarter 2023. - 27 - Item 3. Quantitative and Qualitative Disclosures about Market Risk Not Applicable