Fair Value Measurement

12 Months Ended

Dec. 29, 2023

Fair Value of Financial Instruments — The fair values and related carrying values of financial instruments that are not required to be remeasured at fair value on the consolidated statements of operations were as follows:


	As of December 29, 2023				As of December 30, 2022
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Liabilities
Term Loan	$	456,863	$	444,299	$	461,513	$	421,130
Incremental Term Loan	$	54,450	$	54,450	$	55,000	$	51,700

The fair value of long-term debt was established using current market rates for similar instruments traded in secondary markets representing Level 2 inputs. The fair value of the Revolving Credit Facility approximates carrying value as the related interest rates approximate the Company’s incremental borrowing rate for similar obligations. Additionally, cash and cash equivalents, accounts receivable, net, prepaid expenses, accounts payable, and accrued liabilities are classified as Level 1 and the carrying value of these assets and liabilities approximates the fair value due to the short-term nature of these financial instruments.

Notes Receivable — During the year ended December 30, 2022, the Company acquired Clare, which had an outstanding unsecured loan with the Company. The Company recorded a $5,872 loss on the settlement of the unsecured loan from Clare which is included in selling, general, and administrative expenses on the Company’s consolidated statement of operations. At the acquisition date, the Company settled the notes receivable for $1,400 as part of the transaction. See Note 3 for more information regarding the Clare acquisition.

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis — On October 26, 2022, the Company entered into an interest rate cap agreement, on the LIBOR (subsequently transitioned to SOFR) component of interest. The interest rate cap was effective December 31, 2022. The interest rate cap agreement does not qualify for hedge accounting treatment and, accordingly, the Company records the fair value of the agreements as an asset or liability and the change in fair value as income or expense during the period in which the change occurs. The fair value of the interest rate cap is determined using widely accepted valuation techniques based on its maturity and observable market-based inputs, including interest rate curves. This measurement is considered a Level 2 measurement. The interest rate cap had a fair value of $4,597 as of December 29, 2023 and $2,563 as of December 30, 2022 and is recorded in other liabilities on the Company’s consolidated balance sheet. The change in fair value was recognized as a component of other expense (income), net, in the consolidated statements of operations and was $2,034 and $2,563 of expense for the years ended December 29, 2023 and December 30, 2022, respectively. As there was an other-than-insignificant financing element present at inception of the interest rate cap agreement, proceeds from periodic settlements of the interest rate cap were reflected as a financing activity on the Company’s consolidated statements of cash flows.

The Company utilizes a Monte Carlo simulation in an option pricing framework, where a range of possible scenarios are simulated, to determine the fair value of the CVRs. Any future increase in the fair value of the CVR obligations, based on an increased likelihood that the underlying milestones will be achieved, and the associated payment or payments will therefore become due and payable, will result in a charge to selling, general, and administrative expenses in the period in which the increase is determined. Similarly, any future decrease in the fair value of the CVR obligations will result in a reduction in selling, general, and administrative expenses. CVR liabilities are categorized as other liabilities in the accompanying consolidated balance sheets and are classified as Level 3.

Fair value at

December 29, 2023

Valuation Technique

Unobservable

Input

Volatility

Contingent Value Rights

$1,400

Monte Carlo

Volatility

50 and 55%

Changes in the CVRs for the years ended December 29, 2023, December 30, 2022, and December 31, 2021 were as follows:


CVR fair value – December 25, 2020	$	4,000
Fair value adjustments	4,900
CVR fair value – December 31, 2021	8,900
Fair value adjustments	(7,200)
CVR fair value – December 30, 2022	1,700
Fair value adjustments	(300)
CVR fair value – December 29, 2023	$	1,400

There were no transfers into or out of Level 3 during the years ended December 29, 2023 or December 30, 2022.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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