Sale of accounts receivable

9 Months Ended

Sep. 28, 2024

Transfers and Servicing of Financial Assets [Abstract]

Sale of accounts receivable

Sale of accounts receivable

The Company has a program in which a discrete group of customers are allowed to extend their payment terms in exchange for the elimination of early payment discounts (Extended Terms Program).

The Company has a monetization agreement with an unaffiliated financial institution specifically designed to factor trade receivables with certain customers that participate in the Extended Terms Program. Under this monetization arrangement, from time to time, the Company sells these customers’ trade receivables at a discount on a non-recourse basis. A portion of the cash proceeds is subject to certain restrictions. Transfers under these agreements are accounted for as sales of receivables resulting in the receivables being de-recognized from the Unaudited Consolidated Balance Sheets. The monetization program provides for the continuing sale of certain receivables on a revolving basis until terminated by either party; however, the maximum receivables that may be sold at any time is approximately $350 million. 

For all periods prior to the Spin-Off, the Company participated in Kellanova's monetization program and received an allocation of the recorded net loss on sale of receivables, based on the proportion of monetized receivables.

The Company has no retained interest in the receivables sold; however, the Company does have collection and administrative responsibilities for the receivables sold. The Company has not recorded any servicing assets or liabilities as of September 28, 2024 and December 30, 2023 for these agreements, as the fair value of these servicing arrangements as well as the fees earned were not material to the financial statements.

Accounts receivable sold of $320 million and $266 million remained outstanding under these arrangements as of September 28, 2024 and December 30, 2023, respectively. The proceeds from these sales of receivables are included in Net cash provided by (used in) operating activities in the Unaudited Consolidated Statement of Cash Flows in the period of sale. The recorded net loss on sale of receivables was $5 million and $14 million for the quarter and year-to-date period ended September 28, 2024, respectively, and $3 million and $11 million for the quarter and year-to-date period ended September 30, 2023, respectively. The recorded loss is included in Other income (expense), net ("OIE") in the Unaudited Consolidated Statement of Income.

A portion of cash received related to the accounts receivable monetization program is restricted as part of the Extended Terms collateralization agreement. As of September 28, 2024 and December 30, 2023, the amount of restricted cash was $16 million and $13 million, respectively, and is included in Cash and cash equivalents in the Unaudited Consolidated Balance Sheets.