What changed in this filing

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Item 1. Financial Statements

2023-11-07 compared with 2023-08-08 · 151 added, 85 removed, 442 unchanged (35% of the section changed)

10 unchanged sentences

(in thousands, except share and per share data)

September 30,

Current assets:

26 unchanged sentences

Preferred stock, $ 0.0001 par value;

100,000,000 shares authorized as of both July 1, 2023 and December 31, 2022;

no shares issued and outstanding as of both July 1, 2023 and December 31, 2022

100,000,000 shares authorized as of both September 30, 2023 and December 31, 2022;

no shares issued and outstanding as of both September 30, 2023 and December 31, 2022

Common stock, $ 0.0001 par value;

900,000,000 shares authorized as of July 1, 2023 and December 31, 2022;

114,734,756 and 114,667,975 shares issued and outstanding , as of July 1, 2023 and December 31, 2022, respectively

900,000,000 shares authorized as of September 30, 2023 and December 31, 2022;

114,755,945 and 114,667,975 shares issued and outstanding , as of September 30, 2023 and December 31, 2022, respectively

Additional paid-in capital

8 unchanged sentences

Fiscal Quarter Ended

Two Fiscal Quarters Ended

Three Fiscal Quarters Ended

September 30, 2023

October 1, 2022

September 30, 2023

October 1, 2022

Cost of sales

2 unchanged sentences

Income from operations

Other expense (income):

Other expense:

Interest expense, net

Loss on extinguishment of debt

Other (income) expense, net

Other expense, net

Total other expense, net

Earnings from equity method investment

Income (loss) before income taxes

Income before income taxes

Income tax expense

7 unchanged sentences

Fiscal Quarter Ended

Two Fiscal Quarters Ended

Three Fiscal Quarters Ended

September 30, 2023

October 1, 2022

September 30, 2023

October 1, 2022

Net income (loss)

26 unchanged sentences

Balances at July 2, 2022

Foreign currency translation adjustments

Retirement of restricted stock

Stock-based compensation expense

Balances at October 1, 2022

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

14 unchanged sentences

Balances at July 1, 2023

Foreign currency translation adjustments

Retirement of restricted stock

Issuance of common stock upon release of restricted stock units

Stock-based compensation expense

Balances at September 30, 2023

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Two Fiscal Quarters Ended

Three Fiscal Quarters Ended

September 30,

Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Net (loss) income

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization

8 unchanged sentences

Earnings from equity method investment

Distributions received from equity method investment

Changes in operating assets and liabilities:

5 unchanged sentences

Other long-term liabilities

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Cash flows from investing activities :

11 unchanged sentences

Repayments of finance lease obligations

Repurchases and retirements of common stock

Repurchase and retirement of common stock

Net cash (used in) provided by financing activities

17 unchanged sentences

Latham offers a portfolio of pools and related products, including in-ground swimming pools, pool liners, and pool covers.

On December 18, 2018, Latham Investment Holdings, LP (“Parent”), an investment fund managed by affiliates of Pamplona Capital Management (the “Sponsor”), Wynnchurch Capital, L.P.

On December 18, 2018, Latham Investment Holdings, LP, an investment fund managed by affiliates of Pamplona Capital Management (the “Sponsor”), Wynnchurch Capital, L.P.

and management acquired all of the outstanding equity interests of Latham Topco., Inc., a newly incorporated entity in the State of Delaware.

9 unchanged sentences

The unaudited condensed consolidated balance sheet at December 31, 2022 was derived from audited financial statements but does not include all disclosures required by GAAP.

The accompanying unaudited condensed consolidated financial statements as of July 1, 2023 and for the fiscal and two fiscal quarters ended July 1, 2023 and July 2, 2022 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements.

The accompanying unaudited condensed consolidated financial statements as of September 30, 2023 and for the fiscal and three fiscal quarters ended September 30, 2023 and October 1, 2022 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements.

Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.

1 unchanged sentence

In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of these condensed consolidated financial statements, have been included.

The Company’s results of operations for the fiscal quarter and two fiscal quarters ended July 1, 2023 are not necessarily indicative of the results of operations that may be expected for the fiscal year ending December 31, 2023.

The Company’s results of operations for the fiscal quarter and three fiscal quarters ended September 30, 2023 are not necessarily indicative of the results of operations that may be expected for the fiscal year ending December 31, 2023.

Use of Estimates

23 unchanged sentences

ASU 2019-05 provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis.

For public entities that are SEC filers, excluding entities eligible to be smaller reporting companies, ASU 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years.

For all other entities, ASU 2016-13 is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years.

For public entities that are SEC filers, excluding entities eligible to be smaller reporting companies, ASU 2016-13 was effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years.

For all other entities, ASU 2016-13 was effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years.

The adoption of this standard on January 1, 2023 did not have a material impact on the Company’s condensed consolidated financial statements.

1 unchanged sentence

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which amends ASC 805 by requiring acquiring entities to apply ASC 606 to recognize and measure contract assets and contract liabilities in a business combination.

For public entities, ASU 2021-08 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2022.

For public entities, ASU 2021-08 was effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2022.

For all other entities, ASU 2021-08 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2023.

The amendments should be applied prospectively to business combinations occurring on or after the effective date of the amendments, with early adoption permitted.

The adoption of this standard on January 1, 2023 did not have a material impact on the Company’s condensed consolidated financial statements.

The Company adopted this standard early on January 1, 2023 and it did not have a material impact on the Company’s condensed consolidated financial statements.

FAIR VALUE MEASUREMENTS

12 unchanged sentences

market approach, income approach or cost approach.

There were no transfers between fair value measurement levels during the two fiscal quarters ended July 1, 2023 or July 2, 2022.

There were no transfers between fair value measurement levels during the three fiscal quarters ended September 30, 2023 or October 1, 2022.

Assets and liabilities measured at fair value on a nonrecurring basis

7 unchanged sentences

The following table sets forth the carrying amount and fair value of its term loan (in thousands):

September 30, 2023

December 31, 2022

2 unchanged sentences

The fair value is estimated by comparing (i) the present value of all future monthly fixed rate payments versus (ii) the variable payments based on the forward SOFR curve.

As of July 1, 2023 and December 31, 2022, the net fair value of the Company’s interest rate swaps was an asset balance of $ 0.6 million and $ 3.5 million, respectively, which were recorded within other assets on the condensed consolidated balance sheets.

As of September 30, 2023 and December 31, 2022, the net fair value of the Company’s interest rate swaps was an asset balance of $ 1.7 million and $ 3.5 million, respectively, which were recorded within other assets on the condensed consolidated balance sheets.

GOODWILL AND INTANGIBLE ASSETS, NET

The carrying amount of goodwill as of July 1, 2023 and as of December 31, 2022 was $ 131.2 million and $ 131.4 million, respectively.

The change in the carrying value during the two fiscal quarters ended July 1, 2023 was solely because of fluctuations in foreign currency exchange rates.

The carrying amount of goodwill as of September 30, 2023 and as of December 31, 2022 was $ 130.9 million and $ 131.4 million, respectively.

The change in the carrying value during the three fiscal quarters ended September 30, 2023 was solely because of fluctuations in foreign currency exchange rates.

Based on the results of the qualitative assessment performed for the Company’s one reporting unit, the Company determined that goodwill was not impaired at October 2, 2022.

As a result of a decline in the Company’s stock price, the Company plans to perform a quantitative assessment for the 2023 annual test as of October 1, 2023, which may result in a non-cash impairment charge during the fiscal quarter ended December 31, 2023.

Intangible Assets

Intangible assets, net as of July 1, 2023 consisted of the following (in thousands):

Intangible assets, net as of September 30, 2023 consisted of the following (in thousands):

September 30, 2023

Trade names and trademarks

4 unchanged sentences

Non-competition agreements

The Company recognized $ 6.6 million and $ 13.3 million of amortization expense related to intangible assets during the fiscal quarter and two fiscal quarters ended July 1, 2023.

The Company recognized $ 7.2 million and $ 14.3 million of amortization expense related to intangible assets during the fiscal quarter and two fiscal quarters ended July 2, 2022.

The Company recognized $ 6.6 million and $ 19.9 million of amortization expense related to intangible assets during the fiscal quarter and three fiscal quarters ended September 30, 2023.

The Company recognized $ 7.2 million and $ 21.5 million of amortization expense related to intangible assets during the fiscal quarter and three fiscal quarters ended October 1, 2022.

Intangible assets, net as of December 31, 2022 consisted of the following (in thousands):

11 unchanged sentences

Inventories, net consisted of the following (in thousands):

September 30, 2023

December 31, 2022

3 unchanged sentences

The components of the Company’s outstanding long-term debt obligations consisted of the following (in thousands):

September 30, 2023

December 31, 2022

Revolving Credit Facility

Unamortized discount and debt issuance costs

12 unchanged sentences

A commitment fee accrues on any unused portion of the commitments under the Revolving Credit Facility.

The commitment fee is due and payable quarterly in arrears and is, initially, 0.375 % per annum and will, thereafter, accrue at a rate per annum ranging from 0.25 % to 0.50 %, depending on the First Lien Net Leverage Ratio (as defined in the Credit Agreement, the “First Lien Net Leverage Ratio”).

The commitment fee is due and payable quarterly in arrears, and initially was 0.375 % per annum and thereafter accrues at a rate per annum ranging from 0.25 % to 0.50 %, depending on the First Lien Net Leverage Ratio (as defined in the Credit Agreement, the “First Lien Net Leverage Ratio”).

Borrowings under the Revolving Credit Facility are due at maturity.

3 unchanged sentences

There are also negative covenants, including certain restrictions on the Company’s and its subsidiaries’ ability to incur additional indebtedness, create liens, make investments, consolidate, or merge with other entities, enter into transactions with affiliates, make prepayments with respect to certain indebtedness, make dividend payments, loans, or advances to the Company, declare dividends and make restricted payments and other distributions.

As of July 1, 2023, there were no outstanding borrowings on the Revolving Credit Facility and $ 75.0 million was available for future borrowing.

As of September 30, 2023, there were no outstanding borrowings on the Revolving Credit Facility and $ 75.0 million was available for future borrowing.

The Term Loan matures on February 23, 2029.

2 unchanged sentences

The Credit Agreement contains customary mandatory prepayment provisions, including requirements to make mandatory prepayments with 50 % of any excess cash flow and with 100 % of the net cash proceeds from the incurrence of indebtedness not otherwise permitted to be incurred by the covenants, asset sales, and casualty and condemnation events, in each case, subject to customary exceptions.

The Company recorded $ 6.1 million of debt issuance costs and $ 4.9 million of debt discount related to the Term Loan as a direct reduction to the carrying amount of long-term debt on the condensed consolidated balance sheet as of the applicable period.

Outstanding borrowings as of July 1, 2023 were $ 312.0 million, net of discount and debt issuance costs of $ 8.9 million.

Outstanding borrowings as of September 30, 2023 were $ 301.6 million, net of unamortized discount and debt issuance costs of $ 8.5 million.

In connection with the Term Loan, the Company is subject to various negative, reporting, financial, and other covenants, including maintaining specific liquidity measurements.

As of July 1, 2023, the unamortized debt issuance costs and discount on the Term Loan were $ 5.0 million and $ 3.9 million, respectively.

The effective interest rate was 10.23 % at July 1, 2023, including the impact of the Company’s interest rate swaps.

As of July 1, 2023, the Company was in compliance with all financial covenants under the Credit Agreement.

As of September 30, 2023, the unamortized debt issuance costs and discount on the Term Loan were $ 4.7 million and $ 3.8 million, respectively.

The effective interest rate was 10.26 % at September 30, 2023, including the impact of the Company’s interest rate swaps.

As of September 30, 2023, the Company was in compliance with all financial covenants under the Credit Agreement.

Interest Rate Risk

2 unchanged sentences

The swap had an effective date of May 18, 2020 and a termination date of May 18, 2023.

In February of 2022, the Company amended its interest rate swap to change the index rate from LIBOR to SOFR in connection with the entry into the Credit Agreement.

In February 2022, the Company amended its interest rate swap to change the index rate from LIBOR to SOFR in connection with the entry into the Credit Agreement.

Under the terms of the amended swap, the Company fixed its SOFR borrowing rate at 0.496 % on a notional amount of $ 200.0 million.

8 unchanged sentences

The obligations under the Credit Agreement are guaranteed by certain wholly owned subsidiaries (the “Guarantors”) of the Company as defined in the security agreement.

The obligations under the Credit Agreement are secured by substantially all of the

Guarantors’ tangible and intangible assets, including their accounts receivables, equipment, intellectual property, inventory, cash and cash equivalents, deposit accounts, and security accounts.

The obligations under the Credit Agreement are secured by substantially all of the Guarantors’ tangible and intangible assets, including their accounts receivables, equipment, intellectual property, inventory, cash and

cash equivalents, deposit accounts, and security accounts.

The Credit Agreement also restricts payments and other distributions unless certain conditions are met, which could restrict the Company’s ability to pay dividends.

1 unchanged sentence

The warranty reserve activity consisted of the following (in thousands):

Two Fiscal Quarters Ended

Three Fiscal Quarters Ended

September 30, 2023

October 1, 2022

Balance at the beginning of the fiscal year

14 unchanged sentences

A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

The components of lease expense for the fiscal quarters ended July 1, 2023 and July 2, 2022 were as follows (in thousands):

The components of lease expense for the fiscal quarters ended September 30, 2023 and October 1, 2022 were as follows (in thousands):

Fiscal Quarter Ended

Two Fiscal Quarters Ended

Three Fiscal Quarters Ended

September 30, 2023

October 1, 2022

September 30, 2023

October 1, 2022

Operating lease expense

4 unchanged sentences

Total lease expense

Operating and finance lease right-of-use assets and lease-related liabilities as of July 1, 2023 and December 31, 2022 were as follows (in thousands):

Operating and finance lease right-of-use assets and lease-related liabilities as of September 30, 2023 and December 31, 2022 were as follows (in thousands):

September 30, 2023

December 31, 2022

15 unchanged sentences

Total lease liabilities

The table below presents supplemental information related to leases as of July 1, 2023 and December 31, 2022:

The table below presents supplemental information related to leases as of September 30, 2023 and December 31, 2022:

September 30, 2023

December 31, 2022

6 unchanged sentences

The table below presents supplemental information related to the cash flows for operating leases recorded on the condensed consolidated statements of cash flows (in thousands):

Two Fiscal Quarters Ended

Three Fiscal Quarters Ended

September 30, 2023

October 1, 2022

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows for operating leases

The following table summarizes maturities of operating lease liabilities as of July 1, 2023 (in thousands):

The following table summarizes maturities of operating lease liabilities as of September 30, 2023 (in thousands):

Operating Leases

5 unchanged sentences

Fiscal Quarter Ended

Two Fiscal Quarters Ended

Three Fiscal Quarters Ended

September 30, 2023

October 1, 2022

September 30, 2023

October 1, 2022

In-ground Swimming Pools

The effective income tax rate for the fiscal and two fiscal quarters ended July 1, 2023 was 46.1 % and ( 29.2 )%, respectively, compared to 71.9 % and 91.8 % for the fiscal and two fiscal quarters ended July 2, 2022, respectively.

The effective income tax rate for the fiscal and three fiscal quarters ended September 30, 2023 was 52.1 % and 140.7 %, respectively, compared to 43.4 % and 65.6 % for the fiscal and three fiscal quarters ended October 1, 2022, respectively.

The differences between the U.S.

federal statutory income tax rate and the Company’s effective income tax rates for the fiscal quarter ended July 1, 2023 and the fiscal quarter ended July 2, 2022 were primarily attributable to the discrete impacts of stock-based compensation expense for which there is no associated tax benefit.

The Inflation Reduction Act ("IRA") is effective beginning in 2023.

federal statutory income tax rate and the Company's effective income tax rates for the fiscal quarter ended September 30, 2023 and the fiscal quarter ended October 1, 2022 were primarily attributable to the discrete impacts of stock-based compensation expense for which there is no associated tax benefit.

On October 15, 2023, the statute of limitations expired with respect to the Company’s 2019 U.S.

Federal income tax return for which the Company has a liability related to uncertain tax positions recorded.

As a result of the expiration of the statute of limitations, the Company will release the uncertain tax position liability with a corresponding net tax benefit of $ 7.5 million (a gross tax benefit of $ 10.7 million from the liability release offset by tax expense of $ 3.2 million from establishing a valuation allowance on an associated deferred tax asset) during the fourth fiscal quarter of 2023.

The Inflation Reduction Act ("IRA") was effective beginning in 2023.

Key provisions from the IRA include the implementation of a 15% corporate alternative minimum tax for corporations with book income in excess of $1 billion, an excise tax on the fair market value of stock buybacks (offset by the fair market value of stock issued in the same tax year), and significant tax incentives for energy and climate initiatives.

Enactment of the new law has not impacted the Company’s financial condition, results of operations or cash flows for the period ended July 1, 2023 and the Company does not expect a material impact on our future results at this time.

Enactment of the new law has not impacted the Company’s financial condition, results of operations or cash flows for the period ended September 30, 2023 and the Company does not expect a material impact on our future results at this time.

The Company will continue to monitor any impacts of further guidance on the IRA as released and assess any impacts as applicable.

8 unchanged sentences

The Company is not obligated to repurchase any of its shares of its common stock under the Repurchase Program and the timing and amount of any repurchases will depend on market conditions, the Company’s stock price, alternative uses of capital, the terms of the Company’s debt instruments, and other factors.

As of July 1, 2023, approximately $ 77.0 million remained available for share repurchases pursuant to the Repurchase Program.

The Company did not repurchase any shares of its common stock during the fiscal quarter ended July 1, 2023.

As of September 30, 2023, $ 77.0 million remained available for share repurchases pursuant to the Repurchase Program.

The Company did not repurchase any shares of its common stock during the fiscal quarter ended September 30, 2023.

The Company accounts for the excess of the repurchase price over the par value of shares acquired as a reduction to additional paid-in capital.

11 unchanged sentences

Fiscal Quarter Ended

Two Fiscal Quarters Ended

Three Fiscal Quarters Ended

September 30, 2023

October 1, 2022

September 30, 2023

October 1, 2022

Cost of sales

Selling, general, and administrative

As of July 1, 2023, total unrecognized stock-based compensation expense related to all unvested stock-based awards was $ 14.4 million, which is expected to be recognized over a weighted-average period of 1.5 years.

As of September 30, 2023, total unrecognized stock-based compensation expense related to all unvested stock-based awards was $ 11.2 million, which is expected to be recognized over a weighted-average period of 1.3 years.

The following table sets forth the significant assumptions used in the Black-Scholes option-pricing model on a weighted-average basis to determine the fair value of stock option awards granted:

Two Fiscal Quarters Ended

Three Fiscal Quarters Ended

October 1, 2022

Risk-free interest rate

2 unchanged sentences

Expected dividend yield

No stock options were granted under this plan during the fiscal quarter ended July 1, 2023.

No stock options were granted under this plan during the fiscal quarter ended September 30, 2023.

The following table sets forth the significant assumptions used in the Black-Scholes option-pricing model on a weighted-average basis to determine the fair value of stock appreciation rights awards granted:

Two Fiscal Quarters Ended

Three Fiscal Quarters Ended

September 30, 2023

Risk-free interest rate

3 unchanged sentences

Restricted Stock Awards

The following table represents the Company’s restricted stock awards activity during the two fiscal quarters ended July 1, 2023:

The following table represents the Company’s restricted stock awards activity during the three fiscal quarters ended September 30, 2023:

Average Grant-

2 unchanged sentences

( 1,239,520 )

Outstanding at July 1, 2023

Outstanding at September 30, 2023

Restricted Stock Units

The following table represents the Company’s restricted stock units activity during the two fiscal quarters ended July 1, 2023:

The following table represents the Company’s restricted stock units activity during the three fiscal quarters ended September 30, 2023:

Average Grant-

1 unchanged sentence

Outstanding at January 1, 2023

Outstanding at July 1, 2023

Outstanding at September 30, 2023

Stock Options

The following table represents the Company’s stock option activity during the two fiscal quarters ended July 1, 2023:

The following table represents the Company’s stock option activity during the three fiscal quarters ended September 30, 2023:

Exercise Price

3 unchanged sentences

Outstanding at January 1, 2023

Outstanding at July 1, 2023

Vested and expected to vest at July 1, 2023

Options exercisable at July 1, 2023

Outstanding at September 30, 2023

Vested and expected to vest at September 30, 2023

Options exercisable at September 30, 2023

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock .

3 unchanged sentences

As of April 1, 2023, the Contingent Grants remained subject to stockholder approval of the First Amendment.

2023, following stockholder approval of the First Amendment, the foregoing stock appreciation right awards became effective without condition.

The following table represents the Company’s stock appreciation rights activity during the two fiscal quarters ended July 1, 2023:

On May 2, 2023, following stockholder approval of the First Amendment, the foregoing stock appreciation right awards became effective without condition.

The following table represents the Company’s stock appreciation rights activity during the three fiscal quarters ended September 30, 2023:

Exercise Price

3 unchanged sentences

Outstanding at January 1, 2023

Outstanding at July 1, 2023

Vested and expected to vest at July 1, 2023

Stock appreciation rights exercisable at July 1, 2023

Outstanding at September 30, 2023

Vested and expected to vest at September 30, 2023

Stock appreciation rights exercisable at September 30, 2023

The aggregate intrinsic value of stock appreciation rights is calculated as the difference between the strike price of the stock appreciation rights and the fair value of the Company’s common stock for those stock appreciation rights that had strike prices lower than the fair value of the Company’s common stock.

No stock appreciation rights were granted under this plan during the fiscal quarter ended September 30, 2023.

NET INCOME (LOSS) PER SHARE

Basic and diluted net loss per share attributable to common stockholders was calculated as follows (in thousands, except share and per share data):

Basic and diluted net income (loss) per share attributable to common stockholders was calculated as follows (in thousands, except share and per share data):

Fiscal Quarter Ended

Two Fiscal Quarters Ended

Three Fiscal Quarters Ended

September 30, 2023

October 1, 2022

September 30, 2023

October 1, 2022

Net income (loss) attributable to common stockholders

1 unchanged sentence

Net income (loss) per share attributable to common stockholders:

As of July 1, 2023 and December 31, 2022, 113,452,328 and 112,091,756 shares of common stock were issued and outstanding for accounting purposes, respectively.

As of September 30, 2023 and December 31, 2022, 113,574,696 and 112,091,756 shares of common stock were issued and outstanding for accounting purposes, respectively.

The following table includes the number of shares that may be dilutive common shares in the future that were not included in the computation of diluted net income (loss) per share because the effect was anti-dilutive:

Fiscal Quarter Ended

Two Fiscal Quarters Ended

Three Fiscal Quarters Ended

September 30, 2023

October 1, 2022

September 30, 2023

October 1, 2022

Restricted stock awards

1 unchanged sentence

Stock options

Stock appreciation awards

Stock appreciation rights

RELATED PARTY TRANSACTIONS

BrightAI Services

Starting in 2020, BrightAI has rendered services to the Company, for which the cost was capitalized as internal-use software.

Starting in 2020, BrightAI has rendered services to the Company, for which the cost has been capitalized as internal-use software.

A co-founder of BrightAI Services has served on the Company’s Board of Directors since December 9, 2020.

In December 2022, the Company executed an additional agreement with BrightAI for the provision of hardware that will run the technology developed by BrightAI and the Company.

During the two fiscal quarters ended July 1, 2023 and the fiscal year ended December 31, 2022, the Company incurred $ 0.8 million and $ 0.2 million, respectively, associated with services performed by BrightAI, which is recorded as construction in progress within property and equipment, net on the condensed consolidated balance sheet as of July 1, 2023.

As of July 1, 2023 and December 31, 2022, the Company had accounts payable related to BrightAI of $ 0.3 million and $ 0.4 million, respectively.

In December 2022, the Company executed an additional agreement with BrightAI for the provision of hardware to run the technology developed by BrightAI and the Company.

During the three fiscal quarters ended September 30, 2023 and the fiscal year ended December 31, 2022, the Company incurred $ 0.8 million and $ 0.2 million, respectively, associated with services performed by BrightAI, which is recorded as construction in progress within property and equipment, net on the condensed consolidated balance sheet as of September 30, 2023.

As of September 30, 2023 and December 31, 2022, the Company had accounts payable related to BrightAI of $ 0.0 million and $ 0.4 million, respectively.

Expense Reimbursement

2 unchanged sentences

The Stockholders’ Agreement requires the Company to reimburse the Sponsor and Wynnchurch Capital, L.P.

the reasonable out-of-pocket costs and expenses in connection with monitoring and overseeing their investment in the Company.

The Company recognized less than $ 0.1 million and $ 0.2 million for the reimbursement of out-of-pocket costs and expenses to Wynnchurch Capital, L.P.

and no amounts for the reimbursement of out-of-pocket costs and expenses to the Sponsor during the fiscal quarter and two fiscal quarters ended July 1, 2023, respectively.

The Company did not reimburse any out-of-pocket costs or expenses to the Sponsor and Wynnchurch Capital, L.P.

during the fiscal quarter and the two fiscal quarters ended July 2, 2022.

As of both July 1, 2023 and December 31, 2022, there was less than $ 0.1 million outstanding amounts payable to the Sponsor and no outstanding amounts payable to Wynnchurch Capital, L.P.

for their reasonable out-of-pocket costs and expenses in connection with monitoring and overseeing their investment in the Company.

The Company recognized no amount and $ 0.2 million for the reimbursement of out-of-pocket costs and expenses to Wynnchurch Capital, L.P.

and no amounts for the reimbursement of out-of-pocket costs and expenses to the Sponsor during the fiscal quarter and three fiscal quarters ended September 30, 2023, respectively.

The Company recognized $ 0.2 million for the reimbursement of out-of-pocket costs and expenses to the Sponsor and $ 0.1 million for the reimbursement of out-of-pocket costs and expenses to the Wynnchurch Capital, L.P.

during the fiscal quarter and the three fiscal quarters ended October 1, 2022.

As of both September 30, 2023 and December 31, 2022, there was less than $ 0.1 million outstanding amounts payable to the Sponsor and no outstanding amounts payable to Wynnchurch Capital, L.P.

RESTRUCTURING COSTS

During the second and third fiscal quarters of 2023, the Company initiated an additional cost reduction plan focused on efforts to improve efficiencies and decrease costs.

The plan involved a reduction in the Company’s workforce as well as closures of various manufacturing facilities.

The Company expects to incur charges for employee severance and related costs, as well as fixed asset and facility related expenses, of approximately $ 2.8 million.

During the quarter ended September 30, 2023, the Company recognized costs related to the plan totaling $ 1.8 million, comprised primarily of $ 1.0 million for severance and related costs and $ 0.8 million relating to the facility closures.

These charges were included in cost of sales and selling, general, and administrative expenses in the condensed consolidated statements of operations.

The remaining costs under the plan of approximately $ 1.0 million are expected to be incurred and recognized in the fourth fiscal quarter of 2023.

The Company had an exit or disposal cost related liability of $ 0.3 million as of September 30, 2023 and no liability as of December 31, 2022.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements