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Note 10 - Fair Value Measurements | 6 Months Ended
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Jul. 02, 2023
Notes to Financial Statements |
Fair Value Disclosures [Text Block] |
10. | FAIR VALUE MEASUREMENTS
The Company’s financial liabilities subject to fair value measurement on a recurring basis and the level of inputs used for such measurements were as follows:
|  | Fair Value Measured on July 2, 2023 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate collar |  | $ | — |  |  | $ | 2,068 |  |  | $ | — |  |  | $ | 2,068 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Warrant liability (Public) |  | $ | 4,994 |  |  | $ | — |  |  | $ | — |  |  | $ | 4,994 |
Warrant liability (Private) |  |  | — |  |  |  | — |  |  |  | 2,731 |  |  |  | 2,731 |
Earn-out liability |  |  | — |  |  |  | — |  |  |  | 2,565 |  |  |  | 2,565 |
Total fair value liabilities |  | $ | 4,994 |  |  | $ | — |  |  | $ | 5,296 |  |  | $ | 10,290 |
|  | Fair Value Measured on December 31, 2022 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Warrant liability (Public) |  | $ | 2,691 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,691 |
Warrant liability (Private) |  |  | — |  |  |  | — |  |  |  | 1,581 |  |  |  | 1,581 |
Earn-out liability |  |  | — |  |  |  | — |  |  |  | 1,176 |  |  |  | 1,176 |
Total fair value liabilities |  | $ | 2,691 |  |  | $ | — |  |  | $ | 2,757 |  |  | $ | 5,448 |
As of July 2, 2023, the Company's derivative liabilities for its Private and Public Warrants, earn-out liability, and derivative asset for its Collar are measured at fair value on a recurring basis (see Note 8, “Common Stock Warrants and Earn-Out Liability,” and Note 9, "Derivative Instruments," for more details). The fair values of the private warrants and earn-out liability are determined based on significant inputs not observable in the market (Level 3). The valuation of the Level 3 liabilities uses assumptions and estimates the Company believes would be made by a market participant in making the same valuation. The Company assesses these assumptions and estimates on an on-going basis as additional data impacting the assumptions and estimates are obtained. The Company uses a Monte Carlo simulation model to estimate the fair value of its Private Warrants and earn-out liability. The fair value of the Collar, which is included in other noncurrent assets on the condensed consolidated balance sheet, is determined based on models that reflect the contractual terms of the derivative, yield curves, and the credit quality of the counterparties. Inputs are generally observable and do not contain a high level of subjectivity (Level 2). The fair value of the Public Warrants is determined using publicly traded prices (Level 1). Changes in the fair value of the derivative liabilities related to Warrants and the earn-out liability are recognized as non-operating expense in the condensed consolidated statements of comprehensive income. Changes in the fair value of the Collar is recognized as an adjustment to interest expense in the condensed consolidated statements of comprehensive income. The fair value of Private Warrants was estimated as of the measurement date using the Monte Carlo simulation model with the following assumptions:
|  | July 2, 2023 |  |  | December 31, 2022 |
Valuation date price |  | $ | 4.09 |  |  | $ | 2.12 |
Strike price |  | $ | 11.50 |  |  | $ | 11.50 |
Remaining life (in years) |  |  | 3.04 |  |  |  | 3.54 |
Expected dividend |  | $ | — |  |  | $ | — |
Risk-free interest rate |  |  | 4.36 | % |  |  | 4.06 | %
Price threshold |  | $ | 18.00 |  |  | $ | 18.00 |
The fair value of the earn-out liability was estimated as of the measurement date using the Monte Carlo simulation model with the following assumptions:
|  | July 2, 2023 |  |  | December 31, 2022 |
Valuation date price |  | $ | 4.09 |  |  | $ | 2.12 |
Expected term (in years) |  |  | 5.04 |  |  |  | 5.54 |
Expected volatility |  |  | 61.26 | % |  |  | 70.33 | %
Risk-free interest rate |  |  | 4.01 | % |  |  | 3.88 | %
Price hurdle |  | $ | 15.00 |  |  | $ | 15.00 |
As of July 2, 2023 and December 31, 2022, the Company has accounts receivable, accounts payable and accrued expenses for which the carrying value approximates fair value due to the short-term nature of these instruments. The carrying value of the Company’s long-term debt approximates fair value as the rates used approximate the market rates currently available to the Company. Fair value measurements used in the impairment reviews of goodwill and intangible assets are Level 3 measurements. The reconciliation of changes in Level 3 liabilities during the 26-week periods ended July 2, 2023 and July 3, 2022 is as follows:
|  | Private Warrants |  |  | Earn-Out Liability |  |  | Total |
Balance at December 31, 2021 |  | $ | 21,793 |  |  | $ | 26,596 |  |  | $ | 48,389 |
Liabilities reclassed to equity |  |  | — |  |  |  | (14,689 | ) |  |  | (14,689 | )
Gains included in earnings |  |  | (7,653 | ) |  |  | (1,853 | ) |  |  | (9,506 | )
Balance at July 3, 2022 |  | $ | 14,140 |  |  | $ | 10,054 |  |  | $ | 24,194 |
Balance at December 31, 2022 |  | $ | 1,581 |  |  | $ | 1,176 |  |  | $ | 2,757 |
Losses included in earnings |  |  | 1,150 |  |  |  | 1,389 |  |  |  | 2,539 |
Balance at July 2, 2023 |  | $ | 2,731 |  |  | $ | 2,565 |  |  | $ | 5,296 |

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
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