DERIVATIVE FINANCIAL INSTRUMENTS

The following tables present information about the Company's hedge instruments measured at fair value on a recurring basis as of December 31, 2017 and January 1, 2017, all of which utilize Level 2 inputs under the fair value hierarchy:



(In thousands)	Balance Sheet Classification	December 31, 2017		January 1, 2017
Assets:
Derivatives designated as hedging instruments:
Foreign currency option contracts	Prepaid expenses and other current assets	$	—	$	1,711
Foreign currency forward exchange contracts	Prepaid expenses and other current assets	61		—
		$	61	$	1,711
Derivatives not designated as hedging instruments:
Foreign currency option contracts	Prepaid expenses and other current assets	$	—	$	1,076
Foreign currency forward exchange contracts	Prepaid expenses and other current assets	2,518		2,015
Interest rate contracts	Other long-term assets	—		11,429
		$	2,518	$	14,520

Liabilities:
Derivatives designated as hedging instruments:
Foreign currency option contracts	Accrued liabilities	$	—	$	71
Interest rate contracts	Other long-term liabilities	715		448
		$	715	$	519

Derivatives not designated as hedging instruments:
Foreign currency option contracts	Accrued liabilities	$	—	$	15
Foreign currency forward exchange contracts	Accrued liabilities	1,452		1,937
Interest rate contracts	Other long-term liabilities	459		—
		$	1,911	$	1,952



	December 31, 2017
							Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Rights to Offset
(In thousands)	Gross Amounts Recognized		Gross Amounts Offset		Net Amounts Presented		Financial Instruments		Cash Collateral		Net Amounts
Derivative assets	$	2,579	$	—	$	2,579	$	603	$	—	$	1,976
Derivative liabilities	$	2,626	$	—	$	2,626	$	603	$	—	$	2,023



	January 1, 2017
							Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Rights to Offset
(In thousands)	Gross Amounts Recognized		Gross Amounts Offset		Net Amounts Presented		Financial Instruments		Cash Collateral		Net Amounts
Derivative assets	$	16,231	$	—	$	16,231	$	1,694	$	—	$	14,537
Derivative liabilities	$	2,471	$	—	$	2,471	$	1,694	$	—	$	777

The following table summarizes the pre-tax amount of unrealized gain or loss recognized in "Accumulated other comprehensive income" ("OCI") in "Stockholders' equity" in the Consolidated Balance Sheets:



	Fiscal Year
(In thousands)	2017			2016			2015
Derivatives designated as cash flow hedges:
Gain (loss) in OCI at the beginning of the period	$	1,203		$	5,942		$	(1,443	)
Unrealized gain (loss) recognized in OCI (effective portion)	(905		)	2,626			12,129
Less: Loss (gain) reclassified from OCI to revenue (effective portion)	(859		)	(7,365		)	(4,744		)
Net gain (loss) on derivatives	$	(1,764	)	$	(4,739	)	$	7,385
Gain (loss) in OCI at the end of the period	$	(561	)	$	1,203		$	5,942

The following table summarizes the amount of gain or loss recognized in "Other, net" in the Consolidated Statements of Operations in the years ended December 31, 2017, January 1, 2017 and January 3, 2016:



	Fiscal Year
(In thousands)	2017		2016			2015
Derivatives designated as cash flow hedges:
Gain (loss) recognized in "Other, net" on derivatives (ineffective portion and amount excluded from effectiveness testing)	$	254	$	(1,069	)	$	(1,925	)
Derivatives not designated as hedging instruments:
Gain (loss) recognized in "Other, net"	$	1,635	$	(6,964	)	$	4,146

Foreign Currency Exchange Risk

Designated Derivatives Hedging Cash Flow Exposure

The Company's cash flow exposure primarily relates to anticipated third-party foreign currency revenues and expenses and interest rate fluctuations. To protect financial performance, the Company enters into foreign currency forward and option contracts designated as cash flow hedges to hedge certain forecasted revenue transactions denominated in currencies other than their functional currencies.

As of December 31, 2017, the Company had designated outstanding cash flow hedge forward contracts with an aggregate notional value of $2.1 million. As of January 1, 2017, the Company had designated outstanding cash flow hedge option contracts with an aggregate notional value of $17.3 million. The Company designates either gross external or intercompany revenue up to its net economic exposure. These derivatives have a maturity of a month or less and consist of foreign currency forward contracts. The effective portion of these cash flow hedges is reclassified into revenue when third-party revenue is recognized in the Consolidated Statements of Operations.

Non-Designated Derivatives Hedging Transaction Exposure

Derivatives not designated as hedging instruments consist of forward and option contracts used to hedge re-measurement of foreign currency denominated monetary assets and liabilities primarily for intercompany transactions, receivables from customers, and payables to third parties. Changes in exchange rates between the Company's subsidiaries' functional currencies and the currencies in which these assets and liabilities are denominated can create fluctuations in the Company's reported consolidated financial position, results of operations and cash flows. As of December 31, 2017, to hedge balance sheet exposure, the Company held forward contracts with an aggregate notional value of $8.2 million. The maturity dates of these contracts range from January 2, 2018 to January 30, 2018. As of January 1, 2017, to hedge balance sheet exposure, the Company held option contracts and forward contracts with aggregate notional values of $11.0 million and $42.9 million, respectively. The maturity dates of these contracts ranged from January 2017 to June 2017.

Interest Rate Risk

The Company also enters into interest rate swap agreements to reduce the impact of changes in interest rates on its project specific non-recourse floating rate debt. As of both December 31, 2017 and January 1, 2017, the Company had interest rate swap agreements designated as cash flow hedges with aggregate notional values of $58.1 million and $7.6 million, respectively, and interest rate swap agreements not designated as cash flow hedges with aggregate notional values of $21.1 million and $170.3 million, respectively. These swap agreements allow the Company to effectively convert floating-rate payments into fixed rate payments periodically over the life of the agreements. These derivatives have a maturity of more than 12 months. The effective portion of these swap agreements designated as cash flow hedges is reclassified into interest expense when the hedged transactions are recognized in the Consolidated Statements of Operations. The Company analyzes its designated interest rate swaps quarterly to determine if the hedge transaction remains effective or ineffective. The Company may discontinue hedge accounting for interest rate swaps prospectively if certain criteria are no longer met, the interest rate swap is terminated or exercised, or if the Company elects to remove the cash flow hedge designation. If hedge accounting is discontinued, and the forecasted hedged transaction is considered possible to occur, the previously recognized gain or loss on the interest rate swaps will remain in accumulated other comprehensive loss and will be reclassified into earnings during the same period the forecasted hedged transaction affects earnings or is otherwise deemed improbable to occur. All changes in the fair value of non-designated interest rate swap agreements are recognized immediately in current period earnings.

Credit Risk

The Company's option and forward contracts do not contain any credit-risk-related contingent features. The Company is exposed to credit losses in the event of nonperformance by the counterparties to these option and forward contracts. The Company enters into derivative contracts with high-quality financial institutions and limits the amount of credit exposure to any single counterparty. In addition, the Company continuously evaluates the credit standing of its counterparties.