Derivative Financial Instruments |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 04, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Financial Instruments | 8. DERIVATIVE FINANCIAL INSTRUMENTS The Company’s earnings and cash flows are subject to fluctuations due to changes in interest rates, and the Company seeks to mitigate a portion of this risk by entering into derivative contracts. The derivatives the Company has used are interest rate swaps and interest rate caps. The Company recognizes derivatives as either assets or liabilities at fair value on the interim unaudited consolidated balance sheets and does not designate the derivatives as hedging instruments. Changes in the fair value of derivatives are therefore recorded in earnings throughout the terms of the respective derivatives.
The Company has multiple interest rate cap agreements. The cap agreements with an expiration date of February 28, 2027 (the "2027 Caps") have an aggregate notional amount of $880.0 million and a cap rate of 2.96%. The 2027 Caps provide that the counterparty pays the Company the amount by which SOFR exceeds 2.96%. On April 14, 2026, the Company entered into an additional interest rate cap agreement, effective June 30, 2026 with an expiration date of December 31, 2029 (the "2029 Cap"), for an aggregate notional amount of $520.0 million. The 2029 Cap provides that the counterparty pays the Company the amount by which SOFR exceeds 4.00%. The premium paid for the 2029 Cap was $4.6 million. The fair value of the interest rate cap agreements was $12.0 million at July 4, 2026 and $4.8 million at January 3, 2026. The 2027 Caps are included in other current assets in the interim unaudited consolidated balance sheet at July 4, 2026 and other long term assets in the consolidated balance sheet at January 3, 2026. The 2029 Cap is included in other long term assets in the interim unaudited consolidated balance sheet at July 4, 2026. The Company does not apply hedge accounting to interest rate cap agreements and records all mark-to-market adjustments directly to other income (expense) in the consolidated statements of operations, which are included within cash flows from operating activities in the consolidated statement of cash flows. The proceeds received from cap counterparties under the cap agreements are recognized through cash flows from operating activities in the consolidated statements of cash flows. The Company had two interest rate swap agreements intended to limit its exposure to interest rate risk on its variable rate debt. These swaps expired on June 30, 2026. Since July 1, 2023, the interest rate swap agreements have paid a fixed rate of 2.03% and received the one-month SOFR rate, subject to a 0.50% floor. The aggregate notional amount of the interest rate swaps was $520.0 million at January 3, 2026. The fair value of the interest rate swaps was $3.9 million at January 3, 2026. The fair value of the interest rate swaps was included in other current assets in the consolidated balance sheet at January 3, 2026. The Company did not apply hedge accounting to these agreements and recorded all mark-to-market adjustments directly to other income (expense) in the consolidated statements of operations, which are included within cash flows from operating activities in the consolidated statements of cash flows. The net settlements incurred with swap counterparties under the swap agreements were recognized through cash flows from financing activities in the consolidated statements of cash flows due to an other-than-insignificant financing element on the interest rate swaps.
The following losses and gains from these derivatives not designated as hedging instruments were recognized in the Company’s consolidated statements of operations for the three and six-month periods ended July 4, 2026 and June 28, 2025, respectively (amounts in thousands):
The Company does not utilize financial instruments for trading or other speculative purposes. |
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