Item 1A. Risk Factors
ITEM 1A. Risk Factors
Except as set forth below, there have been no material changes to the risk factors disclosed in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 26, 2025.
We have significant existing indebtedness, which may limit our ability to expand or pursue our business strategy; and if we are unable to meet our debt obligations as they come due, including our obligations to repurchase or settle conversions of the 2031 Convertible Notes, our financial position could be materially and adversely affected.
As of March 27, 2026, we had approximately $19.4 million principal amount of indebtedness for borrowed money outstanding under our credit agreement, gross of unamortized debt costs of $1.0 million, and $600.0 million aggregate principal amount of indebtedness outstanding under our convertible notes issued in March 2026 (the “2031 Convertible Notes”).
Our indebtedness could have significant adverse consequences, including: requiring us to dedicate a substantial portion of our cash flows from operations to debt service payments, reducing the cash available for working capital, capital expenditures, acquisitions, and other general corporate purposes; increasing our vulnerability to adverse economic and industry conditions; limiting our flexibility to plan for, or react to, changes in our business; and impairing our ability to obtain additional financing on favorable terms, if at all.
Our credit agreement also contains covenants that restrict our ability to take certain actions, including incurring additional debt, providing guarantees, creating liens, making certain investments, engaging in transactions with affiliates, and engaging in certain mergers and acquisitions. We are also required to comply with certain financial covenants. Failure to comply with these covenants could result in the acceleration of our outstanding indebtedness, which could materially and adversely affect our financial condition.
In addition, holders of the 2031 Convertible Notes may require us to repurchase their notes for cash upon the occurrence of certain fundamental changes. In addition, all conversions of the 2031 Convertible Notes will be settled partially or entirely in cash. We may not have sufficient cash available, or be able to obtain financing, at the time we are required to repurchase the notes or settle any conversions. Our failure to repurchase notes or pay cash amounts due upon conversion when required will constitute a default under the indenture governing the 2031 Convertible Notes. We may not have sufficient funds to satisfy all amounts due under our existing credit agreement and the 2031 Convertible Notes simultaneously.
A default under the indenture governing our 2031 Convertible Notes would result in a default under our credit agreement, and a default under our credit agreement would result in a default under the indenture governing our 2031 Convertible Notes, which may result in that indebtedness becoming immediately payable in full.
The capped call transactions may affect the value of our common stock.
In connection with the pricing of the 2031 Convertible Notes, we entered into privately negotiated capped call transactions with certain financial institutions (the “Option Counterparties”). The capped call transactions are expected generally to reduce potential dilution to our common stock upon any conversion of the 2031 Convertible Notes and/or offset any potential cash payments we are required to make in excess of the principal amount of converted notes, subject to a cap.
In connection with establishing their initial hedges of the capped call transactions, the option counterparties were expected to enter into various derivative transactions with respect to our common stock and/or purchase shares of our common stock concurrently with or shortly after the pricing of the 2031 Convertible Notes. This activity could have increased, or reduced the size of any decrease in, the market price of our common stock at that time.
In addition, the Option Counterparties may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock in secondary market transactions following the pricing of the 2031 Convertible Notes and prior to their maturity, and are likely to do so during the relevant valuation period under the capped call transactions and following any early conversion or repurchase of notes by us. This activity could cause or avoid an increase or a decrease in the market price of our common stock.
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In addition, if any such capped call transactions fail to become effective, the option counterparties or their respective affiliates may unwind their hedge positions with respect to our common stock, which could adversely affect the value of our common stock.
The conditional conversion feature of our 2031 Convertible Notes, if triggered, may adversely affect our financial condition and operating results.
Before December 16, 2030, holders of the 2031 Convertible Notes will have the right to convert their notes only upon the occurrence of certain specified conditions. Many of these conditions are beyond our control. If one or more of these conditions is satisfied and holders elect to convert their notes, we will be required to settle conversions partially or entirely in cash. We may not have sufficient liquidity to satisfy any such conversion obligation at the time it arises, which could have a material adverse effect on our financial condition.
In addition, if any of the conditions to the convertibility of the 2031 Convertible Notes is satisfied, we may be required under applicable accounting standards to reclassify the liability carrying value of the notes as a current, rather than long-term, liability on our consolidated balance sheet. This reclassification could be required even if no holders ultimately convert their notes and could materially reduce our reported working capital, which may adversely affect how investors, analysts, and lenders evaluate our financial condition and liquidity.
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