Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2023

Summary of Significant Accounting Policies

A detailed description of the Company's significant accounting policies can be found in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 1, 2023 (the “2022 10-K”). There have been no material changes in the Company’s significant accounting policies from those that were disclosed in the 2022 10-K, except as noted below.

Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the condensed consolidated financial statements include all adjustments necessary, which are of a normal and recurring nature, for the fair presentation of the Company’s financial position and of the results of operations and cash flows for the periods presented. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2023 or for any other interim period or for any other future fiscal year. These condensed consolidated financial statements should be read in conjunction with the Company's audited financial statements and notes thereto included in the 2022 10-K. The condensed consolidated balance sheet as of December 31, 2022 has been derived from the audited financial statements at that date.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated.

Management’s Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are based on

current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results could differ from those estimates and such differences may be material to the financial statements.

Foreign Currency

Foreign currency translation gain (loss), net of tax, reported as cumulative translation adjustment through “Other comprehensive loss” was $0.3 million and $(1.7) million in the three months ended September 30, 2023 and October 1, 2022, respectively. Net realized and unrealized foreign currency transaction losses included in “Other, net” were $(2.5) million and $(3.9) million in the three months ended September 30, 2023 and October 1, 2022, respectively.

Foreign currency translation gain (loss), net of tax, reported as cumulative translation adjustment through “Other comprehensive loss” was $0.1 million and $(4.7) million in the nine months ended September 30, 2023 and October 1, 2022, respectively. Net realized and unrealized foreign currency transaction losses included in “Other, net” were $(3.3) million and $(10.5) million in the nine months ended September 30, 2023 and October 1, 2022, respectively.

Fair Value of Financial Instruments

The Company had no financial instruments measured at fair value on a recurring basis at September 30, 2023 and December 31, 2022.

There were no transfers of financial assets or liabilities into or out of Level 1, Level 2 or Level 3 in the three and nine months ended September 30, 2023.

Restricted Cash

Restricted cash includes cash held as collateral for stand-alone letter of credit agreements related to normal business transactions. The agreements require the Company to maintain specified amounts of cash as collateral in segregated accounts to support the letters of credit issued thereunder. The Company had $15.3 million in restricted cash as of September 30, 2023, which was comprised of $12.6 million to secure the letter of credit to support the development and leasing of the Company’s Campus Headquarters (as defined in Note 4) recorded in “Restricted cash, non-current” and $2.7 million to secure a letter of credit associated with a new third party contract manufacturer in Europe recorded in “Restricted cash, current” in the condensed consolidated balance sheet. See Note 10.

Revenue Recognition

At the end of each accounting period, the Company recognizes a contra asset to accounts receivable for estimated sales discounts that have been incurred but not paid which totaled $4.5 million and $4.6 million as of September 30, 2023 and December 31, 2022, respectively. The offsetting charge is recorded as a reduction of revenues in the same period when the expense is incurred.

Presentation of Net Revenues by Channel

The following table presents the Company’s net revenues by channel:


	Three Months Ended				Nine Months Ended
(in thousands)	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
U.S.:
Retail	$	30,518	$	46,177	$	123,167	$	193,298
Foodservice	12,535		15,994		39,974		54,876
U.S. net revenues	43,053		62,171		163,141		248,174
International:
Retail	14,153		10,195		48,437		50,024
Foodservice	18,106		10,134		58,119		40,797
International net revenues	32,259		20,329		106,556		90,821
Net revenues	$	75,312	$	82,500	$	269,697	$	338,995

One distributor accounted for approximately 12% of the Company’s gross revenues in the three months ended September 30, 2023; and one customer accounted for approximately 11% of the Company’s gross revenues in the three months ended October 1, 2022. One distributor accounted for approximately 12% of the Company’s gross revenues in the nine months ended September 30, 2023; and one distributor accounted for approximately 11% of the Company’s gross revenues in the nine months ended October 1, 2022. No other customer or distributor accounted for more than 10% of the Company’s gross revenues in the three and nine months ended September 30, 2023 and October 1, 2022.

Investment in Joint Venture

The Company uses the equity method of accounting to record transactions associated with its joint venture when the Company shares in joint control of the investee. Investment in joint venture is not consolidated but is recorded in “Investment in unconsolidated joint venture” in the Company’s condensed consolidated balance sheets. The Company recognizes its portion of the investee’s results in “Equity in losses of unconsolidated joint venture” in its condensed consolidated statements of operations. The Company eliminates its proportionate interest in any intra-entity profits or losses in the inventory of the investee at the end of the reporting period and recognizes its portion of the profit and losses when realized by the investee.

Shipping and Handling Costs

Outbound shipping and handling costs included in selling, general and administrative (“SG&A”) expenses in the three months ended September 30, 2023 and October 1, 2022 were $2.8 million and $3.3 million, respectively. Outbound shipping and handling costs included in SG&A expenses in the nine months ended September 30, 2023 and October 1, 2022 were $8.8 million and $13.5 million, respectively.

Change in Accounting Estimate

During the first quarter of 2023, the Company completed a reassessment of the useful lives of its large manufacturing equipment and research and development equipment, and determined that the Company should increase the estimated useful lives for certain of its equipment from a range of 5 to 10 years to a uniform 10 years. This reassessment was accounted for as a change in accounting estimate and was made on a prospective basis effective January 1, 2023. See Note 6.

Recently Adopted Accounting Pronouncements

None.