XML 31 R17.htm IDEA: XBRL DOCUMENT

Fair Value Measurements

12 Months Ended

Jan. 01, 2022

FAIR VALUE MEASUREMENTS

Certain assets and liabilities are carried at fair value under GAAP, under which fair value is a market-based measurement, not an entity-specific measurement. The Company’s fair value measurements are based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, fair value accounting standards establish a fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

•Level 1—observable inputs, such as quoted prices in active markets

•Level 2—observable inputs other than those included in Level 1, such as quoted prices for similar assets and liabilities in active or inactive markets that are observable either directly or indirectly, or other inputs that are observable or can be corroborated by observable market data

•Level 3—unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions

Any transfers of assets or liabilities between Level 1, Level 2, and Level 3 of the fair value hierarchy will be recognized as of the end of the reporting period in which the transfer occurs. There were no transfers between fair value levels in any of the periods presented below.

The Company’s assets and liabilities measured at fair value on a recurring basis as of January 1, 2022 and January 2, 2021, aggregated by the level in the fair value hierarchy within which those measurements fall, were as follows:


	January 1, 2022
	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	99	$	—	$	—	$	99

	January 2, 2021
	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	696	$	—	$	—	$	696
Liabilities
Interest rate swaps	$	—	$	5	$	—	$	5

There were no significant assets or liabilities on the Company's Consolidated Balance Sheets measured at fair value on a nonrecurring basis, except as further disclosed in Note 9, Goodwill and Other Intangibles.

Recurring Fair Value Measurements

Money Market Funds

Money market funds include highly liquid investments with an original maturity of three or fewer months. These funds are valued using quoted market prices in active markets and are classified under Level 1 within the fair value hierarchy.

Derivative Financial Instruments

The Company has in the past, and may in the future, use interest rate swaps, designated as cash flow hedges, to manage its exposure to interest rate movements in connection with its variable-rate debt. As of January 1, 2022, the Company had no outstanding interest rate swap agreements.

As of January 2, 2021, the fair value of the Company’s interest rate swaps liability from certain previously entered into four-year interest rate swap agreements, which collectively had a notional value of $550 million, was $5 million, as reflected in its Consolidated Balance Sheet in accrued expenses and other current liabilities. The Company recorded these interest rate swaps at

fair value based on projections of cash flows and future interest rates. The determination of fair value included the consideration of any credit valuation adjustments necessary, to reflect the creditworthiness of the respective counterparties and the Company.

These interest rate swap agreements expired on July 31, 2021. Through the term of the swap agreements, the Company paid an aggregate effective rate of 3.45% on the notional amount of the Initial Term Loan Facility covered by the interest rate swap agreements, comprised of a rate of 1.70% plus a spread of 1.75% (see Note 11, Debt).

Gains and losses on the interest rate swaps are initially recorded in accumulated other comprehensive loss and reclassified to interest expense during the period in which the hedged transaction affects income. The following table presents the effect of the Company’s interest rate swaps in its Consolidated Statements of Comprehensive Income for the fiscal years ended January 1, 2022, January 2, 2021, and December 28, 2019:


Derivatives in Cash Flow Hedging Relationships	Amount of (Loss) Gain Recognized in Accumulated Other Comprehensive Loss, net of tax		Location of Amounts Reclassified from Accumulated Other Comprehensive Loss	Amount of (Gain) Loss Reclassified from Accumulated Other Comprehensive Loss to Income, net of tax
For the fiscal year ended January 1, 2022
Interest rate swaps	$	—	Interest expense—net	$	5
For the fiscal year ended January 2, 2021
Interest rate swaps	$	(8)	Interest expense—net	$	5
For the fiscal year ended December 28, 2019
Interest rate swaps	$	(10)	Interest expense—net	$	(5)

Other Fair Value Measurements

The carrying value of cash, accounts receivable, vendor receivables, cash overdraft liability and accounts payable approximate their fair values due to their short-term maturities.

The fair value of the Company’s total debt approximated $5.1 billion, compared to its carrying value of $5.0 billion as of January 1, 2022. The fair value of the Company’s total debt approximated $5.8 billion compared to its carrying value of $5.7 billion as of January 2, 2021.

The fair value of the Company’s 4.625% unsecured senior notes due June 1, 2030 (the “Unsecured Senior Notes due 2030”) was $0.5 billion as of January 1, 2022. As discussed in Note 11, Debt, the proceeds from the Unsecured Senior Notes due 2030, along with proceeds from issuance of the 2021 Incremental Term Loan Facility (as further described in Note 11, Debt) and cash on hand were used to repay all of the then outstanding borrowings under the Initial Term Loan Facility (as further described in Note 11, Debt). The fair value of the Company’s 4.75% unsecured senior notes due February 15, 2029 (the “Unsecured Senior Notes due 2029”) was $0.9 billion as of January 1, 2022. As discussed in Note 11, Debt, the proceeds from the Unsecured Senior Notes due 2029 were used to redeem the Company’s 5.875% unsecured senior notes due 2024 (the “Unsecured Senior Notes due 2024”) and other outstanding Company debt. The fair value of the unsecured Senior Notes due 2024 was $0.6 billion as of January 2, 2021. The fair value of the Company’s 6.25% senior secured notes due April 15, 2025 (the “Secured Notes”) was $1.0 billion and $1.1 billion as of January 1, 2022 and January 2, 2021, respectively. The Fair value of the Secured Notes, the Unsecured Senior Notes due 2030, the Unsecured Senior Notes due 2029 and the Unsecured Senior Notes due 2024 is based upon their closing market prices on the respective dates. The fair value of the Secured Notes, the Unsecured Senior Notes due 2030, the Unsecured Senior Notes due 2029 and the Unsecured Senior Notes due 2024 is classified under Level 2 of the fair value hierarchy. The fair value of the balance of the Company’s debt is primarily classified under Level 3 of the fair value hierarchy, with fair value estimated based upon a combination of the cash outflows expected under these debt facilities, interest rates that are currently available to the Company for debt with similar terms, and estimates of the Company’s overall credit risk.