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Fair Value of Financial Instruments
 12 Months Ended
Dec. 28, 2024
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments

Note 18. Fair Value of Financial Instruments

The carrying value of cash and cash equivalents and accounts receivable approximates fair value because of the short-term maturity of the instruments. Notes receivable are entered into in connection with the purchase of distribution rights by IDPs. These notes receivable are recorded in the Consolidated Balance Sheets at carrying value, which represents the closest approximation of fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As a result, the appropriate interest rate that should be used to estimate the fair value of the distribution rights notes is the prevailing market rate at which similar loans would be made to IDPs with similar credit ratings and for the same maturities. However, the company financed approximately 2,600 and 3,000 IDPs’ distribution rights as of December 28, 2024 and December 30, 2023, respectively, all with varied financial histories and credit risks. Considering the diversity of credit risks among the IDPs, the company has no method to accurately determine a market interest rate to apply to the notes. The distribution rights are generally financed for up to ten years and the distribution rights notes are collateralized by the IDPs’ distribution rights. The company maintains a wholly-owned subsidiary to assist in financing the distribution rights purchase activities if requested by new IDPs, using the distribution rights and certain associated assets as collateral. These notes receivable earn interest at a fixed rate.

At December 28, 2024 and December 30, 2023, respectively, the carrying value of the distribution rights notes receivable was as follows (amounts in thousands):

 

 

 

December 28, 2024

 

 

December 30, 2023

 

Distribution rights notes receivable

 

$

128,199

 

 

$

133,335

 

Current portion recorded in accounts and
   notes receivable, net

 

 

(20,117

)

 

 

(9,764

)

Long-term portion of distribution rights
   notes receivable

 

$

108,082

 

 

$

123,571

 

 

During the third quarter of Fiscal 2023, the company recorded a reserve of $14.9 million for the distributor notes receivable related to a legal settlement. The amount of reserve for the distributor notes receivable as of December 28, 2024 and December 30, 2023 was $2.4 million and $14.8 million, respectively. See Note 24, Commitments and Contingencies, for additional information.

The fair value of the company’s variable rate debt at December 28, 2024 approximates the recorded value. The fair value of the company’s notes, as discussed in Note 16, Debt and Other Commitments, are estimated using yields obtained from independent pricing sources for similar types of borrowing arrangements and are considered a Level 2 valuation. The fair value of the notes are presented in the table below (amounts in thousands, except level classification):

 

 

 

Carrying Value

 

 

Fair Value

 

 

Level

2031 notes

 

$

495,452

 

 

$

422,541

 

 

2

2026 notes

 

$

398,992

 

 

$

389,559

 

 

2

 

For fair value disclosure information about our derivative assets and liabilities see Note 12, Derivative Financial Instruments. For fair value disclosure information about our pension plan net assets see Note 22, Postretirement Plans.