Financial Instruments

3 Months Ended

Apr. 04, 2015

Notes To Financial Statements [Abstract]

Financial Instruments

Financial Instruments

ASC 815 “Derivatives and Hedging” requires an entity to recognize all derivatives as either assets or liabilities and measure those instruments at fair value. Derivatives that do not qualify as a hedge must be adjusted to fair value in earnings. If a derivative does qualify as a hedge under ASC 815, changes in the fair value will either be offset against the change in the fair value of the hedged assets, liabilities or firm commitments or recognized in other accumulated comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a hedge's change in fair value will be immediately recognized in earnings.

Foreign Exchange: The company uses foreign currency forward and option contracts with terms of less than one year to hedge its exposure to changes in foreign currency exchange rates. The company’s primary hedging activities are to mitigate its exposure to changes in exchange rates on intercompany and third party trade receivables and payables. The company does not currently enter into derivative financial instruments for speculative purposes. In managing its foreign currency exposures, the company identifies and aggregates naturally occurring offsetting positions and then hedges residual balance sheet exposures. The following table summarizes the forward and option contracts outstanding at April 4, 2015. The fair value of the forward and option contracts was a loss of $0.2 million at the end of the first quarter of 2015.

Sell		Purchase		Maturity
5,600,000	British Pounds	7,666,822	Euro Dollars	July 3, 2015
10,000,000	British Pounds	13,723,068	Euro Dollars	July 3, 2015
5,000,000	British Pounds	6,885,156	Euro Dollars	July 3, 2015
5,500,000	Euro Dollars	5,924,050	US Dollars	July 3, 2015
10,000,000	Euro Dollars	10,770,000	US Dollars	July 3, 2015
4,700,000	Euro Dollars	5,061,900	US Dollars	July 3, 2015
15,000,000	Australian Dollars	11,326,500	US Dollars	July 3, 2015
10,000,000	Australian Dollars	7,551,000	US Dollars	July 3, 2015
10,000,000	Australian Dollars	7,558,000	US Dollars	July 3, 2015
7,500,000	Canadian Dollars	5,847,953	US Dollars	July 3, 2015
10,000,000	Brazilian Real	2,748,763	US Dollars	December 15, 2015

Interest Rate: The company has entered into interest rate swaps to fix the interest rate applicable to certain of its variable-rate debt. The agreements swap one-month LIBOR for fixed rates. The company has designated these swaps as cash flow hedges and all changes in fair value of the swaps are recognized in accumulated other comprehensive income. As of April 4, 2015, the fair value of these instruments was a liability of $1.6 million. The change in fair value of these swap agreements in the first three months of 2015 was a loss of $0.5 million, net of taxes.

The following tables summarize the company’s fair value of interest rate swaps (in thousands):

	Condensed Consolidated Balance Sheet Presentation	Apr 4, 2015			Jan 3, 2015
Fair value	Other non-current liabilities	$	(1,609	)	$	(810	)

The impact on earnings from interest rate swaps was as follows (in thousands):

		Three Months Ended
	Presentation of Gain/(loss)	Apr 4, 2015			Mar 29, 2014
Gain/(loss) recognized in accumulated other comprehensive income	Other comprehensive income	$	(1,297	)	$	(103	)
Gain/(loss) reclassified from accumulated other comprehensive income (effective portion)	Interest expense	$	(485	)	$	(543	)
Gain/(loss) recognized in income (ineffective portion)	Other expense	$	13		$	31

Interest rate swaps are subject to default risk to the extent the counterparties are unable to satisfy their settlement obligations under the interest rate swap agreements. The company reviews the credit profile of the financial institutions and assesses its creditworthiness prior to entering into the interest rate swap agreements. The interest rate swap agreements typically contain provisions that allow the counterparty to require early settlement in the event that the company becomes insolvent or is unable to maintain compliance with its covenants under its existing debt agreements.