Derivative Instruments

12 Months Ended

Dec. 29, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

DERIVATIVE INSTRUMENTS

Interest Rate Risk Management

In the third quarter of 2017 and the first quarter of 2019, the Company entered into interest rate swap transactions in notional amounts of $100 million and $150 million, respectively, to fix the variable interest rate on a portion of its term loan borrowing in order to manage a portion of its exposure to interest rate fluctuations. The Company’s objective and strategy with respect to this interest rate swap is to protect the Company against adverse fluctuations in interest rates by reducing its exposure to variability to cash flows relating to interest payments on a portion of its outstanding debt. The Company is meeting its objective by hedging the risk of changes in its cash flows (interest payments) attributable to changes in LIBOR, the designated benchmark interest rate being hedged (the “hedged risk”), on an amount of the Company’s debt principal equal to the outstanding swap notional amounts.

Cash Flow Interest Rate Swap

Both of the interest rate swaps described above are designated and qualify as cash flow hedges of forecasted interest payments. The Company reports the changes in fair value of the swaps as a component of other comprehensive income (or other comprehensive loss). The aggregate notional amount of the swaps as of December 29, 2019 was $250 million.

Forward Contracts

Our nora operations, from time to time, are party to currency forward contracts designed to hedge the cash flow risk of intercompany sales from the manufacturing facility in Europe to the Americas.  The Company’s objective and strategy with respect to these currency forward contracts is to protect the Company against adverse fluctuations in currency rates by reducing its exposure to variability in cash flows related to receipt of payment on intercompany sales.  The Company is meeting its objective by hedging the risk of changes in its cash flows (intercompany payments for inventory) attributable to changes in the U.S. dollar/Euro exchange rate (the “hedged risk”). Changes in fair value attributable to components other than exchange rates will be excluded from the assessment of effectiveness and amortized to earnings on a straight-line basis.  Changes in fair value related to the effective portion of these contracts will be reflected as a component of other comprehensive income (or other comprehensive loss). As of December 29, 2019, all foreign currency forward contracts have expired.

The table below sets forth the fair value of derivative instruments as of December 29, 2019 (in thousands):

	Asset Derivatives as of December 29, 2019			Liability Derivatives as of December 29, 2019
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivative instruments designated as hedging instruments:
Foreign currency contracts	Other current assets	$	—	Accrued expenses	$	—
Interest rate swap contract	Other current assets	—		Accrued expenses	5,801
		$	—		$	5,801

The table below sets forth the fair value of derivative instruments as of December 30, 2018 (in thousands):

	Asset Derivatives as of December 30, 2018			Liability Derivatives as of December 30, 2018
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivative instruments designated as hedging instruments:
Foreign currency contracts	Other current assets	$	651	Other current liabilities	$	—
Interest rate swap contract	Other current assets	1,794		Other current liabilities	—
		$	2,445		$	—

There was no significant impact to earnings from the changes in fair value of derivatives designated as cash flow hedges or from amounts excluded from the assessment of hedge effectiveness during 2019. We expect that approximately $1.6 million related to cash flow hedges will be reclassified from accumulated other comprehensive income as an increase to interest expense in the next 12 months.

The following table summarizes the impact that changes in the fair value of derivatives designated as cash flow hedges and included in the assessment of hedge effectiveness had on accumulated other comprehensive income, net of tax (in thousands):

	Fiscal Year			Fiscal Year			Fiscal Year
	2019			2018			2017
	(in thousands)
Foreign currency contracts gain (loss)	$	468		$	(468	)	$	—
Interest rate swap contracts (loss) gain	(5,957		)	890			904
(Loss) gain recognized in accumulated other comprehensive income	$	(5,489	)	$	422		$	904

The following table summarizes the gains and losses reclassified from accumulated other comprehensive income into earnings during 2019 (in thousands):

		Fiscal Year
	Statement of Operations Location	2019
		(in thousands)
Foreign currency contracts (loss)	Cost of sales	$	(450	)
Interest rate swap contracts gain	Interest expense	151
Total		$	(299	)