Accounts Receivable and Supplier Finance Programs

6 Months Ended

Jun. 29, 2024

Payables and Accruals [Abstract]

Accounts Receivable and Supplier Finance Programs

Accounts Receivable and Supplier Finance Programs

Sales of Trade Accounts Receivable

The Company has entered into agreements to sell selected trade accounts receivable to financial institutions based on programs sponsored by the Company as well as working capital programs offered by certain of the Company’s customers. As a result of the strong creditworthiness of these customers, the discount taken on most of these programs is less than the marginal borrowing rate on the Company’s variable rate credit facilities. In all agreements, after the sale, the Company does not retain any beneficial interests in the receivables. The applicable financial institution services and collects the accounts receivable directly from the customer for programs offered by the Company’s customers. For programs sponsored by the Company, the Company maintains continued involvement as the servicer to collect the accounts receivable from the customer and remit payment to the financial institutions. Net proceeds of these accounts receivable sale programs are recognized in the Condensed Consolidated Statements of Cash Flows as part of operating cash flows.

The Company sold total trade accounts receivable related to Company sponsored programs of $506,699 and $373,649 during the quarters ended June 29, 2024 and July 1, 2023, respectively, and $867,013 and $718,226 during the six months ended June 29, 2024 and July 1, 2023, respectively, and removed the trade accounts receivable from the Company’s Condensed Consolidated Balance Sheets at the time of sale. As of June 29, 2024, December 30, 2023 and July 1, 2023, $461,896, $297,807 and $330,204, respectively, of the sold trade accounts receivable remain outstanding with the financial institutions as a result of the related servicing obligation. Collections of accounts receivable not yet submitted to the financial institutions are remitted within one week of collection and recognized within the “Accounts payable” line of the Condensed Consolidated Balance Sheets. As these funds are related to the ongoing service agreement and do not serve in a financing capacity, cash flows collected from customers and submitted to the financial institutions are recognized in the Condensed Consolidated Statements of Cash Flows as part of operating cash flows.

The Company recognized total funding fees of $7,647 and $5,178 during the quarters ended June 29, 2024 and July 1, 2023, respectively, and $13,740 and $9,645 during the six months ended June 29, 2024 and July 1, 2023, respectively, for sales of trade accounts receivable to financial institutions and working capital programs in the “Other expenses” line in the Condensed Consolidated Statements of Operations.

Supplier Finance Program Obligations

The Company reviews supplier terms and conditions on an ongoing basis and has negotiated payment term extensions in recent years in connection with its efforts to effectively manage working capital and improve cash flow. Separate from these payment term extension actions noted above, the Company and certain financial institutions facilitate voluntary supplier finance programs that enable participating suppliers the ability to request payment of their invoices from the financial institutions earlier than the terms stated in Company’s payment policy. The Company is not a party to the arrangements between the suppliers and the financial institutions and its obligations to suppliers, including amounts due and scheduled payment dates, are not impacted by the suppliers’ participation in the supplier finance programs. The Company’s payment terms to the financial institutions, including the timing and amount of payments, are based on the original supplier invoices. The Company has no economic interest in a supplier’s decision to participate in the supplier finance programs and has no financial impact in connection with the supplier finance programs. Accordingly, obligations under these programs continue to be trade payables and are not indicative of borrowing arrangements. As of June 29, 2024, December 30, 2023 and July 1, 2023, the amounts due to suppliers participating in supplier finance programs totaled $136,346, $108,499 and $161,123, respectively, which are included in the “Accounts Payable” line of the Condensed Consolidated Balance Sheets.