Fair Value Measurement and Interest Rate Swaps |
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| Fair Value Disclosures and Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Measurement and Interest Rate Swaps | Fair Value Measurement and Interest Rate Swaps Fair value is defined as an exit price, representing an amount that would be received to sell an asset or the amount paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The inputs used to measure fair value are prioritized into the following three-tiered value hierarchy: •Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities. •Level 2: Unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active or inputs, other than quoted prices in active markets, which are observable either directly or indirectly. •Level 3: Unobservable inputs for which there is little or no market data. The hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The classification of fair value measurement within the hierarchy is based upon the lowest level of input that is significant to the measurement. The Company’s financial instruments consist of Cash and cash equivalents, Accounts receivable, interest rate swap contracts, long-term debt, and Redeemable non-controlling interest. The variable interest rate on the long-term debt is reflective of current market borrowing rates. As such, the Company has determined that the carrying value of these financial instruments approximates fair value. Interest Rate Swaps The Company is subject to interest rate risk with regard to existing and future issuances of debt. The Company has, in the past, utilized interest rate swap contracts to reduce its exposure to fluctuations in variable interest rates for interest payments on existing debt. Prior to the termination of interest rate swaps 7, 8, and 9 upon maturity on March 23, 2025, the Company was party to interest rate swap contracts to convert the variable interest rate to a fixed interest rate on the borrowings under the term loans. The Company recognized any differences between the variable interest rate payments and the fixed interest rate settlements with the swap counterparties as adjustments to interest expense over the life of the swaps. The Company had designated these swaps as cash flow hedges and recorded the estimated fair value of the swaps to Accumulated other comprehensive income (loss) (“AOCI”) on its Consolidated Balance Sheets. On March 23, 2021, the Company restructured the interest rate swap positions of its forward-starting interest rate swaps 4, 5, and 6 to extend the terms to maturity using a strategy referred to as a “blend and extend” in order to continue to manage its exposure to interest rate risk on borrowings under the term loans. Refer to “Note 9. Long-Term Debt” for additional information regarding the Company’s term loans. As a result of these transactions, all existing agreements for forward-starting interest rate swaps 4, 5, and 6 at that time were amended and restructured as new agreements designated by the Company as interest rate swaps 7, 8, and 9 with the same counterparties. Each of the liability positions of the forward-starting interest rate swaps were blended into the amended interest rate swap agreements and the term of the hedged positions were extended to mature on March 23, 2025. Due to the size of the initial net investment amounts resulting from the termination values of the forward-starting interest rate swaps that were rolled into the interest rate swap arrangements, interest rate swaps 7, 8, and 9 were determined to be hybrid debt instruments containing embedded at-market interest rate swap derivatives. As a result, the Company bifurcated the derivative instruments from the debt host instruments for accounting purposes. Refer to “Note 9. Long-Term Debt” for additional information regarding the Company’s hybrid debt instruments. The following table provides additional details related to the swap contracts, which were terminated upon maturity:
The Company recognized the unrealized gains or unrealized losses for interest rate swap contracts as either assets or liabilities at fair value on its Consolidated Balance Sheets. The interest rate swap contracts were subject to master netting arrangements. The Company had elected not to offset the fair value of assets with the fair value of liabilities related to these contracts. The following table summarizes the fair value of the derivative instruments and the respective lines in which they were recorded in the Consolidated Balance Sheets as of June 29, 2025 and December 29, 2024 (in millions):
The Company used significant observable market data or assumptions (Level 2 inputs) that market participants would use in pricing similar assets or liabilities for determining the fair value of the interest rate swap contracts, including assumptions about counterparty risk. The fair value estimates reflected an income approach based on the terms of the interest rate swap contracts and inputs corroborated by observable market data including interest rate curves. The tables below provide details regarding pre-tax amounts in AOCI and gain (loss) reclassified into income for derivatives designated as cash flow hedges for the three and six months ended June 29, 2025 and June 30, 2024 (in millions):
(a) Gain reclassified from AOCI into income is presented within Interest and other non-operating expense, net in the Consolidated Statements of Operations.
(a) Gain reclassified from AOCI into income is presented within Interest and other non-operating expense, net in the Consolidated Statements of Operations. For the three and six months ended June 29, 2025 and June 30, 2024, there was no ineffectiveness recognized in earnings and there was no gain (loss) reclassified from AOCI into income for derivatives not designated as hedging instruments.
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