Fair Value Measurements |
6 Months Ended | ||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 26, 2025 | |||||||||||||||||||||||||||||||||||||
| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||
| Fair Value Measurements | Fair Value Measurements As of June 26, 2025 and December 26, 2024, the Company had certain financial assets and liabilities on its Condensed Consolidated Balance Sheets that were required to be measured at fair value on a recurring or non-recurring basis. The estimated fair values of financial assets and liabilities such as cash and cash equivalents, receivables, prepaid expenses and other current assets, other assets, accounts payable, and accrued expenses and other current liabilities approximate their respective carrying values as reported within the Condensed Consolidated Balance Sheets. See Note 3, “Debt” for discussion of the fair value of the Company’s debt.
Contingent Earn-out Liabilities
As of June 26, 2025, the Company’s contingent earn-out liability had an aggregate estimated fair value of $0.8 million, which is included in accrued expenses and other current liabilities within the Condensed Consolidated Balance Sheets. The contingent earn-out liability is classified as Level 3 within the fair value hierarchy due to the use of unobservable inputs that are significant to the valuation.
The table below summarizes changes in contingent earn-out liabilities during the twenty-six weeks ended June 26, 2025:
The $0.4 million decrease in the fair value of the contingent earn-out liability during the twenty-six weeks ended June 26, 2025 was recognized as a benefit in general and administrative expense within the Condensed Consolidated Statements of Operations and Comprehensive Income.
Interest Rate Cap Contract
Changes in interest rates impact the Company’s results of operations. In an effort to manage exposure to this risk, the Company enters into derivative contracts and may adjust its derivative portfolio as market conditions change.
As of June 26, 2025, the Company’s outstanding interest rate cap contract was designated as a cash flow hedge. The contract has a notional value of $150.0 million and effectively caps SOFR-based interest payments on a portion of the Company’s Term Loan Facility at 5.50% beginning in May 2024 and will continue until the interest rate cap contract expires in April 2026. The effective portion of the gain or loss on effective cash flow hedges is reported as a component of accumulated other comprehensive income (“AOCI”) and reclassified into earnings in the same period in which the hedged transaction affects earnings. The effective portion of the derivative represents the change in fair value of the hedge that offsets the change in fair value of the hedged item. To the extent the change in the fair value of the hedge does not perfectly offset the change in the fair value of the hedged item, the ineffective portion of the hedge is immediately recognized in earnings.
The Company’s outstanding interest rate cap contract as of June 26, 2025 and December 26, 2024 was valued primarily using Level 2 inputs based on data readily observable in public markets. The Company’s interest rate cap contract was negotiated with counterparties without going through a public exchange. Accordingly, the Company’s fair value assessment for the derivative contract gave consideration to the risk of counterparty default as well as the Company’s own credit risk. As of June 26, 2025, the fair value of the interest rate cap was less than $0.1 million and is included in prepaid expenses and other current assets within the Condensed Consolidated Balance Sheets. As of December 26, 2024, the fair value of the interest rate cap was $0.1 million, of which less than $0.1 million is included in prepaid expenses and other current assets and less than $0.1 million is included in other assets within the Condensed Consolidated Balance Sheets.
No interest income was reclassified from AOCI into earnings related to the interest rate cap contract during both the thirteen and twenty-six weeks ended June 26, 2025. During the thirteen and twenty-six weeks ended June 27, 2024, the Company reclassified $0.5 million and $1.9 million, respectively, of interest income from AOCI into earnings related to the interest rate cap contracts.
|
||||||||||||||||||||||||||||||||||||