Derivative Instruments

6 Months Ended

Jul. 04, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

DERIVATIVE INSTRUMENTS

Interest Rate Risk Management

From time to time, the Company enters into interest rate swap transactions 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 these interest rate swaps 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.

Cash Flow Interest Rate Swaps

In the fourth quarter of 2020 the Company terminated its designated interest rate swap transactions with a total notional value of $250 million. Hedge accounting was also discontinued at that time. Losses recorded in accumulated other comprehensive loss for these terminated interest rate swaps are reclassified and recorded in the consolidated condensed statements of operations to the extent it is probable that a portion of the original forecasted transactions related to the portion of the hedged debt repaid will not occur by the end of the originally specified time period. See Note 14 entitled “Items Reclassified From Accumulated Other Comprehensive Loss” for additional information.

As of July 4, 2021 and January 3, 2021, the remaining accumulated other comprehensive loss associated with the terminated interest rate swaps was $6.5 million and $8.7 million, respectively, and will be amortized to earnings over the remaining term of the interest rate swaps prior to termination. We expect that approximately $4.0 million related to the terminated interest rate swaps will be reclassified from accumulated other comprehensive loss 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 had on accumulated other comprehensive loss, net of tax, during the three and six months ended July 5, 2020:

	Three Months Ended		Six Months Ended
	July 5, 2020		July 5, 2020
	(in thousands)
Interest rate swap contracts loss	$	(351)	$	(6,491)

Derivative Transactions Not Designated as Hedging Instruments

Our Asia-Pacific operations, from time to time, purchase foreign currency options to economically hedge inventory purchases denominated in foreign currencies other than their functional currency. The Company’s objective with respect to these foreign currency options is to protect the Company against adverse fluctuations in currency rates by reducing its exposure to variability in cash flows related to payment on inventory purchases. These options are classified as non-designated derivative instruments. Gains and losses on the changes in fair value of these foreign currency options are recognized in earnings each period. As of July 4, 2021, the Company had outstanding foreign currency options with an aggregate notional amount of $4.4 million.

The table below sets forth the fair value of derivative instruments not designated as hedging instruments as of July 4, 2021 and January 3, 2021:

		Asset Derivatives
	Balance Sheet Location	Fair Value as of July 4, 2021		Fair Value as of January 3, 2021
		(in thousands)
Foreign currency options	Other current assets	$	3	$	37

The following tables summarize gains and losses on derivatives not designated as hedging instruments within the consolidated condensed statements of operations for the three and six months ended July 4, 2021 and July 5, 2020:

		Three Months Ended
	Statement of Operations Location	July 4, 2021		July 5, 2020
		(in thousands)
Foreign currency options gain (loss)	Other expense	$	134	$	(1,629)

		Six Months Ended
	Statement of Operations Location	July 4, 2021		July 5, 2020
		(in thousands)
Foreign currency options gain	Other expense	$	319	$	79