Note 15 - Employee Benefit Plans

12 Months Ended

Jan. 01, 2017

Notes to Financial Statements

Pension and Other Postretirement Benefits Disclosure [Text Block]

NOTE

15

–

EMPLOYEE BENEFIT PLANS

Defined Contribution and Deferred Compensation Plans

The Company has a

401(k)

retirement investment plan

(“401(k)

Plan”), which is open to all otherwise eligible U.S. employees with at least

six

months of service. The

401(k)

Plan calls for Company matching contributions on a sliding scale based on the level of the employee’s contribution. The Company

may,

at its discretion, make additional contributions to the

401(k)

Plan based on the attainment of certain performance targets by its subsidiaries. The Company’s matching contributions are funded bi-monthly and totaled approximately

$3.1

million,

$2.9

million and

$2.7

million for the years

2016,

2015

and

2014,

respectively.

No

discretionary contributions were made in

2016,

2015

or

2014.

Under the Company’s nonqualified savings plans (“NSPs”), the Company provides eligible employees the opportunity to enter into agreements for the deferral of a specified percentage of their compensation, as defined in the NSPs. The NSPs call for Company matching contributions on a sliding scale based on the level of the employee’s contribution. The obligations of the Company under such agreements to pay the deferred compensation in the future in accordance with the terms of the NSPs are unsecured general obligations of the Company. Participants have no right, interest or claim in the assets of the Company, except as unsecured general creditors. The Company has established a rabbi trust to hold, invest and reinvest deferrals and contributions under the NSPs. If a change in control of the Company occurs, as defined in the NSPs, the Company will contribute an amount to the rabbi trust sufficient to pay the obligation owed to each participant. Deferred compensation in connection with the NSPs totaled

$28.3

million at

January

1,

2017.

The Company invests the deferrals in insurance instruments with readily determinable cash surrender values. The value of the insurance instruments was

$25.3

million as of

January

1,

2017.

Foreign Defined Benefit Plans

The Company has trusteed defined benefit retirement plans which cover many of its European employees. The benefits are generally based on years of service and the employee’s average monthly compensation. Pension expense was

$1.2

million,

$2.1

million and

$0.1

million for the years

2016,

2015

and

2014,

respectively. Plan assets are primarily invested in equity and fixed income securities. The Company uses a year-end measurement date for the plans. As of

January

1,

2017,

for the European plans, the Company had a net liability recorded of

$19.4

million, an amount equal to their underfunded status, and has recorded in Other Comprehensive Income an amount equal to

$48.9

million (net of taxes) related to the future amounts to be recorded in net post-retirement benefit costs.

The tables presented below set forth the funded status of the Company’s significant foreign defined benefit plans and required disclosures in accordance with applicable accounting standards

	FISCAL YEAR
	2016			2015
	(in thousands)
Change in benefit obligation
Benefit obligation, beginning of year	$	243,717		$	275,762
Service cost		1,032			1,061
Interest cost		6,580			8,384
Benefits and expenses paid		(8,551	)		(10,004	)
Actuarial loss (gain)		73,600			(13,591	)
Member contributions		225			239
Currency translation adjustment		(38,790	)		(18,134	)
Benefit obligation, end of year	$	277,813		$	243,717

	FISCAL YEAR
	2016			2015
	(in thousands)
Change in plan assets
Plan assets, beginning of year	$	239,281		$	261,026
Actual return on assets		59,364			753
Company contributions		4,990			5,001
Benefits paid		(8,551	)		(10,004	)
Currency translation adjustment		(36,719	)		(17,496	)
Plan assets, end of year	$	258,365		$	239,280
Reconciliation to balance sheet
Funded status benefit asset/(liability)	$	(19,448	)	$	(4,437	)
Net amount recognized	$	(19,448	)	$	(4,437	)
Amounts recognized in accumulated other comprehensive income (after tax)
Unrecognized actuarial loss	$	49,547		$	39,411
Unamortized prior service costs		(311	)		(347	)
Total amount recognized	$	49,236		$	39,064

The above disclosure represents the aggregation of information related to the Company’s

two

defined benefit plans which cover many of its European employees. As of

January

1,

2017

and

January

3,

2016,

one

of these plans, which primarily covers certain employees in the United Kingdom (the “UK Plan”), had an accumulated benefit obligation in excess of the plan assets. The other plan, which covers certain employees in Europe (the “Europe Plan”), had assets in excess of the accumulated benefit obligation. The following table summarizes this information as of

January

1,

2017

and

January

3,

2016.

	END OF FISCAL YEAR
	2016		2015
	(in thousands)
UK Plan
Projected Benefit Obligation	$	171,172	$	168,178
Accumulated Benefit Obligation		171,172		168,178
Plan Assets		153,132		167,360
Europe Plan
Projected Benefit Obligation	$	106,641	$	75,539
Accumulated Benefit Obligation		103,242		71,005
Plan Assets		105,233		71,920

	FISCAL YEAR
	2016			2015			2014
	(in thousands)
Components of net periodic benefit cost
Service cost	$	1,032		$	1,061		$	705
Interest cost		6,580			8,384			10,563
Expected return on plan assets		(7,553	)		(8,764	)		(11,904	)
Amortization of prior service cost		33			33			19
Recognized net actuarial (gains)/losses		1076			1,359			648
Net periodic benefit cost	$	1,168		$	2,073		$	31

The Company reconciles the components of net periodic pension expense by comparing the beginning balance of assets and the beginning projected obligation against the assumptions of asset return and interest costs. Any significant differences will be explained. There were no such differences in

2016.

The increase in projected benefit obligation and plan assets in the Europe plan was primarily as a result of a decision by the company to include in the

2016

valuation an additional indexation benefit to plan participants. This additional benefit was a result of favorable asset returns in the past

four

years and the anticipation that such returns would continue in the future. As a result included in the projected benefit obligation was an indexation benefit of

$32.2

million. This additional benefit is not a guarantee to plan participants but the histories of asset performance suggest it will be given to participants and as a result has been included. If asset performance in the future is below management expectations this indexation benefit will be removed. As this indexation benefit is fully financed by excess asset returns the indexation amount has also been included as a plan asset, as without the additional returns there will be no indexation. As a result plan assets increased by the amount of the indexation in

2016.

This amount is included in return on plan assets in the table above depicting the increase in asset values. This indexation benefit has been included in plan assets and characterized as a “Level

3”

asset for classification purposes.

For

2017,

it is estimated that approximately

$1.3

million of expenses related to the amortization of unrecognized items will be included in the net periodic benefit cost. During

2016,

other comprehensive income was impacted by approximately

$21.1

million comprised of actuarial loss of approximately

$21.8

million and amortization of

$0.7

million.

	FISCAL YEAR
	2016			2015			2014
Weighted average assumptions used to determine net periodic benefit cost
Discount rate		2.7	%		3.0	%		4.0	%
Expected return on plan assets		3.1	%		4.0	%		4.2	%
Rate of compensation		2.0	%		2.0	%		2.0	%
Weighted average assumptions used to determine benefit obligations
Discount rate		2.3	%		3.4	%		3.2	%
Rate of compensation		2.0	%		2.0	%		2.0	%

The expected long-term rate of return on plan assets assumption is based on weighted average expected returns for each asset class. Expected returns reflect a combination of historical performance analysis and the forward-looking views of the financial markets, and include input from actuaries, investment service firms and investment managers.

The Company’s foreign defined benefit plans’ fair value of plan assets were in excess of the accumulated benefit obligations. The projected benefit obligations, accumulated benefit obligations and fair value of these plans are as follows:

	FISCAL YEAR
	2016		2015
	(in thousands)
Projected benefit obligation	$	277,813	$	243,717
Accumulated benefit obligations		274,414		239,183
Fair value of plan assets		258,365		239,280

The investment objectives of the foreign defined benefit plans are to maximize the return on the investments without exceeding the limits of the prudent pension fund investment, to ensure that the assets would be sufficient to exceed minimum funding requirements, and to achieve a favorable return against the performance expectation based on historic and projected rates of return over the short term. The goal is to optimize the long-term return on plan assets at a moderate level of risk, by balancing higher-returning assets, such as equity securities, with less volatile assets, such as fixed income securities. The assets are managed by professional investment firms and performance is evaluated periodically against specific benchmarks. The plans’ net assets did not include the Company’s own stock at

January

1,

2017

or

January

3,

2016.

The Company’s actual weighted average asset allocations for

2016

and

2015,

and the targeted asset allocation for

2017,

of the foreign defined benefit plans by asset category, are as follows:

	FISCAL YEAR
	2017			2016			2015
	Target Allocation			Percentage of Plan Assets at Year End
Asset Category:
Equity Securities	40%	-	50%		43	%		49	%
Debt and Debt Securities	35%	-	45%		36	%		41	%
Other	10	-	20%		21	%		10	%
		100%			100	%		100	%

Fair Value Measurements of Plan Assets

Accounting standards establish a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure estimated fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level

1

measurements) and the lowest priority to unobservable inputs (level

3

measurements). The

three

levels of the fair value hierarchy under applicable accounting standards are described below:

Level 1	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2	Inputs to the valuation methodology include:
		●     quoted prices for similar assets in active markets;
		●     quoted prices for identical or similar assets in inactive markets;
		●     inputs other than quoted prices that are observable for the asset; and
		●     inputs that are derived principally or corroborated by observable data by correlation or other means.
Level 3	Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The following table sets forth by level within the fair value hierarchy the foreign defined benefit plans’ assets at fair value, as of

January

1,

2017

and

January

3,

2016.

As required by accounting standards, assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	Pension Plan Assets by Category as of January 1, 2017
	Europe Plan		UK Plan		Total
			(in thousands)
Level 1	$	73,042	$	80,048	$	153,090
Level 2		0		50,364		50,364
Level 3		32,191		22,720		54,911
Total	$	105,233	$	153,132	$	258,365

	Pension Plan Assets by Category as of January 3, 2016
	Europe Plan		UK Plan		Total
			(in thousands)
Level 1	$	71,920	$	93,846	$	165,766
Level 2		0		59,228		59,228
Level 3		0		14,286		14,286
Total	$	71,920	$	167,360	$	239,280

The tables below detail the foreign defined benefit plans’ assets by asset allocation and fair value hierarchy:

	2016
	Level 1		Level 2		Level 3
			(in thousands)
Asset Class
Equity Securities	$	110,738	$	0	$	0
Debt and Debt Securities		37,175		36,378		19,224
Other (including cash)		5,177		13,986		35,687
	$	153,090	$	50,364	$	54,911

	2015
	Level 1		Level 2		Level 3
			(in thousands)
Asset Class
Equity Securities	$	117,889	$	0	$	0
Debt and Debt Securities		45,953		41,725		9,576
Other (including cash)		1,924		17,503		4,710
	$	165,766	$	59,228	$	14,286

With the exception of the

$32.2

million indexation asset in

2016,

the assets identified as level

3

above in

2016

and

2015

relate to insured annuities and direct lending assets held by the UK Plan. The fair value of these assets was calculated using the present value of the future cash flows due under the insurance annuities and for the direct lending assets the value is based on the asset value from the latest available valuation with adjustments for any drawdowns and distribution payments made between the valuation date and the reporting date. The table below indicates the change in value related to these level 

3

assets during

2016:

	2016
	(in thousands)
Balance of level 3 assets, beginning of year	$	14,286
Interest cost		492
Benefits paid		(606	)
Assets transferred in to Level 3		11,988
Actuarial gain (loss)		32,429
Translation adjustment		(3,678	)
Ending Balance of level 3 assets	$	54,911

Actuarial gain (loss) includes the indexation asset of

$32.2

million as discussed above.

During

2017,

the Company expects to contribute

$3.0

million to the plan trust. It is anticipated that future benefit payments for the foreign defined benefit plans will be as follows:

FISCAL YEAR			EXPECTED PAYMENTS
			(in thousands)
2017			$	7,907
2018				8,134
2019				8,323
2020				8,532
2021				8,653
2022	-	2026		43,723

Domestic Defined Benefit Plan

The Company maintains a domestic nonqualified salary continuation plan (“SCP”), which is designed to induce selected officers of the Company to remain in the employ of the Company by providing them with retirement, disability and death benefits in addition to those which they

may

receive under the Company’s other retirement plans and benefit programs. The SCP entitles participants to: (i) retirement benefits upon normal retirement at age

65

(or early retirement as early as age

55)

after completing at least

15

years of service with the Company (unless otherwise provided in the SCP), payable for the remainder of their lives (or, if elected by a participant, a reduced benefit is payable for the remainder of the participant’s life and any surviving spouse’s life) and in no event less than

10

years under the death benefit feature; (ii) disability benefits payable for the period of any total disability; and (iii) death benefits payable to the designated beneficiary of the participant for a period of up to

10

years. Benefits are determined according to

one

of

three

formulas contained in the SCP, and the SCP is administered by the Compensation Committee of the Company’s Board of Directors, which has full discretion in choosing participants and the benefit formula applicable to each. The Company’s obligations under the SCP are currently unfunded (although the Company uses insurance instruments to hedge its exposure thereunder). The Company is required to contribute the present value of its obligations thereunder to an irrevocable grantor trust in the event of a change in control as defined in the SCP. The Company uses a year-end measurement date for the domestic SCP.

The tables presented below set forth the required disclosures in accordance with applicable accounting standards, and amounts recognized in the consolidated financial statements related to the domestic SCP.

	FISCAL YEAR
	2016			2015
	(in thousands)
Change in benefit obligation
Benefit obligation, beginning of year	$	25,860		$	24,016
Service cost		440			594
Interest cost		1,269			1,113
Benefits paid		(1,012	)		(847	)
Actuarial loss (gain)		3,143			984
Benefit obligation, end of year	$	29,700		$	25,860

The amounts recognized in the consolidated balance sheets are as follows:

	2016		2015
	(in thousands)
Current liabilities	$	1,890	$	1,009
Non-current liabilities		27,810		24,850
		29,700	$	25,859

The components of the amounts in accumulated other comprehensive income, after tax, are as follows:

	2016		2015
	(in thousands)
Unrecognized actuarial loss	$	5,626	$	4,226

The accumulated benefit obligation related to the SCP was

$29.7

million and

$23.6

million as of

January

1,

2017

and

January

3,

2016,

respectively. The SCP is currently unfunded; as such, the benefit obligations disclosed are also the benefit obligations in excess of the plan assets. The Company uses insurance instruments to help limit its exposure under the SCP.

	2016			2015			2014
	(in thousands, except for assumptions)
Assumptions used to determine net periodic benefit cost
Discount rate		4.25	%		4.0	%		4.5	%
Rate of compensation		4.0	%		4.0	%		4.0	%
Assumptions used to determine benefit obligations
Discount rate		3.85	%		4.25	%		4.0	%
Rate of compensation		4.0	%		4.0	%		4.0	%
Components of net periodic benefit cost
Service cost	$	440		$	594		$	500
Interest cost		1,269			1,113			1,072
Amortizations		811			522			291
Net periodic benefit cost	$	2,520		$	2,229		$	1,863

The changes in other comprehensive income during

2016

related to this Plan were approximately

$1.4

million, after tax, primarily comprised of a net loss during the period of

$1.9

million and amortization of loss of

$0.5

million.

For

2017,

the Company estimates that approximately

$0.4

million of expenses related to the amortization of unrecognized items will be included in net periodic benefit cost for the SCP.

During

2016,

the Company contributed

$1.0

million in the form of direct benefit payments for its domestic SCP. It is anticipated that future benefit payments for the SCP will be as follows:

FISCAL YEAR			EXPECTED PAYMENTS
			(in thousands)
2017			$	1,890
2018				2,029
2019				2,029
2020				2,029
2021				2,029
2022	-	2026		9,859