Derivatives

12 Months Ended

Jan. 02, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Interest Rate Swap Agreements

The Company has entered into interest rate swap agreements to hedge its exposure to movements in USD LIBOR on its U.S. dollar-denominated debt. In 2018, the Company entered into an interest rate swap agreement (2018 Swap Agreement) with Citizens which has a $15,000,000 notional value and expires on June 30, 2023. On a quarterly basis, the Company receives three-month USD LIBOR, which is subject to a zero percent floor, and pays a fixed rate of interest of 3.15% plus an applicable margin as defined in the Credit Agreement. In 2015, the Company entered into an interest rate swap agreement (2015 Swap Agreement) with Citizens which had a $10,000,000 notional value and expired on March 27, 2020. Under the 2015 Swap Agreement, the Company received three-month USD LIBOR and paid a fixed rate of interest of 1.5% plus an applicable margin as defined in the Credit Agreement.

The Company designated its 2018 Swap Agreement as a cash flow hedge and structured it to be 100% effective. Unrealized gains and losses related to the fair value of the 2018 Swap Agreement are recorded to AOCI, net of tax. In the event of early termination of the 2018 Swap Agreement, the Company will receive from or pay to the counterparty the fair value of the interest rate swap agreement, and the unrealized gain or loss outstanding will be recognized in earnings.

The counterparty to the 2018 Swap Agreement could demand an early termination of that agreement if the Company were to be in default under the Credit Agreement, or any agreement that amends or replaces the Credit Agreement in which the counterparty is a member, and if it were to be unable to cure the default. See Note 6, Long-Term Obligations, for further details.

Forward Currency-Exchange Contracts

The Company uses forward currency-exchange contracts that generally have maturities of twelve months or less to hedge exposures resulting from fluctuations in currency exchange rates. Such exposures result from assets and liabilities that are denominated in currencies other than the functional currencies.

Forward currency-exchange contracts that hedge forecasted accounts receivable or accounts payable are designated as cash flow hedges and unrecognized gains and losses are recorded to AOCI, net of tax. Deferred gains and losses are recognized in the statement of income in the period in which the underlying transaction occurs. The fair values of forward currency-exchange contracts that are designated as fair value hedges and forward currency-exchange contracts that are not designated as hedges are recognized currently in earnings.

The Company recognized losses of $16,000 in 2020, $46,000 in 2019 and $27,000 in 2018 within SG&A expenses in the accompanying consolidated statement of income associated with forward currency-exchange contracts that were not designated as hedges.

The following table summarizes the fair value of derivative instruments in the accompanying consolidated balance sheet:


		January 2, 2021				December 28, 2019
(In thousands)	Balance Sheet Location	Asset (Liability) (a)		Notional Amount (b)		Asset (Liability) (a)		Notional Amount
Derivatives Designated as Hedging Instruments:
Derivatives in an Asset Position:
2015 Swap Agreement	Other Current Assets	$	—	$	—	$	11	$	10,000
Forward currency-exchange contract	Other Current Assets	$	25	$	842	$	—	$	—
Derivatives in a Liability Position:
Forward currency-exchange contracts	Other Current Liabilities	$	—	$	—	$	(75)	$	4,825
2018 Swap Agreement	Other Long-Term Liabilities	$	(1,099)	$	15,000	$	(770)	$	15,000
Derivatives Not Designated as Hedging Instruments:
Derivatives in an Asset Position:
Forward currency-exchange contracts	Other Current Assets	$	12	$	582	$	3	$	387
Derivatives in a Liability Position:
Forward currency-exchange contracts	Other Current Liabilities	$	(7)	$	825	$	(43)	$	2,545

(a)See Note 11, Fair Value Measurements and Fair Value of Financial Instruments, for the fair value measurements relating to these financial instruments.

(b)The year-end 2020 notional amounts are indicative of the level of the Company's recurring derivative activity during the year.

The following table summarizes the activity in AOCI associated with the Company's derivative instruments designated as cash flow hedges as of and for the year ended January 2, 2021:


(In thousands)	Interest Rate Swap Agreements		Forward Currency- Exchange Contracts		Total
Unrealized Loss, Net of Tax, at December 28, 2019	$	(589)	$	(55)	$	(644)
Loss (gain) reclassified to earnings (a)	253		(21)		232
(Loss) gain recognized in AOCI	(510)		94		(416)
Unrealized (Loss) Gain, Net of Tax, at January 2, 2021	$	(846)	$	18	$	(828)

(a)See Note 14, Accumulated Other Comprehensive Items, for the income statement classification.

At year-end 2020, the Company expects to reclassify losses of $324,000 from AOCI to earnings over the next twelve months based on the estimated cash flows of the interest rate swap agreement and the maturity date of the forward currency- exchange contract.