| Employee Benefit Plans | 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 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 $3.0 million, $1.6 million, and $3.3 million for the years 2021, 2020 and 2019, respectively. No discretionary contributions were made in 2021, 2020 or 2019. 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. The deferred compensation liability in connection with the NSPs totaled $34.2 million and $33.1 million at January 2, 2022 and January 3, 2021, respectively. The Company invests the deferrals in insurance instruments with readily determinable cash surrender values and in exchange traded mutual funds beginning in fiscal 2021. The value of the insurance instruments was $20.0 million and $33.9 million as of January 2, 2022 and January 3, 2021, respectively. The fair value of the mutual fund investments at January 2, 2022 was $15.6 million. In 2020, the Company temporarily suspended its 401(k) and NSP matching contributions described above. These employer matching contributions were resumed in 2021. Multiemployer Plan As discussed below, on December 31, 2019, a plan amendment was executed to eliminate future service accruals in our defined benefit pension plan in the Netherlands (the “Dutch Plan”), which resulted in a curtailment of the plan. The Dutch Plan remains in existence and continues to pay vested benefits. Active participants no longer accrue benefits after December 31, 2019, and instead participate in the Industry-Wide Pension Fund (the “IWPF”) multi-employer plan beginning in fiscal year 2020. During 2021 and 2020, the Company recorded multi-employer pension expense related to multi-employer contributions of $2.6 million and $2.5 million, respectively. The Company’s contributions into the IWPF are less than 5% of total plan contributions. The IWPF is more than 95% funded at the end of 2020, which is the latest date plan information is available. The IWPF multi-employer plan is not considered to be significant based on the funded status of the plan and our contributions. Foreign Defined Benefit Plans The Company has trusteed defined benefit retirement plans which cover many of its European employees. The benefits under these defined benefit retirement plans are generally based on years of service and the employee’s average monthly compensation. In connection with the nora acquisition in 2018, the Company acquired an additional defined benefit plan, which covers certain employees in Germany (the “nora Plan”). The nora plan has no plan assets. The Company uses a year-end measurement date for the plans, which is the closest practical date to the Company’s fiscal year end. As described above, on December 31, 2019, a plan amendment was executed to eliminate future service accruals in the Dutch defined benefit plan. The Dutch Plan remains in existence and continues to pay vested benefits. The reduction in future benefit accruals resulted in a curtailment of the Dutch Plan. Participants in the Dutch Plan no longer accrue benefits under the plan after December 31, 2019 and participate in the IWPF beginning in fiscal year 2020. Although the Dutch Plan is frozen to new participants, vested benefits prior to the curtailment will continue to be accounted for in accordance with applicable accounting standards for defined benefit plans. The Dutch Plan is financed by assets held in an insurance contract. The guarantee provision included in the insurance contract, that existed to fund any shortfall between the fair value of plan investments and the benefit obligation, expired on December 31, 2019. The Company will fund the cost to guarantee vested benefits and this amount is recorded as an obligation on the Company’s consolidated balance sheet. The curtailment of the Dutch Plan resulted in a decrease to the projected benefit obligation with an offsetting actuarial gain recognized in accumulated other comprehensive loss of approximately $2.4 million in fiscal year 2019. The accumulated net actuarial loss for the Dutch Plan, after the impact of the curtailment, was $16.7 million at December 29, 2019. This amount will be reclassified out of accumulated other comprehensive loss and increase pension expense over the life expectancy of vested participants when the actuarial loss exceeds the 10% corridor. The curtailment also resulted in a $0.5 million reclassification of prior service cost from accumulated other comprehensive loss, which was recognized as a reduction of pension expense in fiscal year 2019. As discussed above, the Company still has an obligation to pay vested benefits in the frozen Dutch Plan. As of January 2, 2022, the under-funded status of the Dutch Plan of $4.5 million is recorded on the consolidated balance sheet in other long-term liabilities. Pension expense for our three European defined benefit plans was $2.5 million, $2.5 million, and $2.3 million for the years 2021, 2020 and 2019, respectively. Plan assets are primarily invested in insurance contracts and equity and fixed income securities. As of January 2, 2022, for the European plans, the Company had a net liability recorded of $38.8 million, an amount equal to their underfunded status, and had recorded in accumulated other comprehensive loss an amount equal to $45.2 million (net of taxes of approximately $15.4 million) related to the future amounts to be recorded in net periodic benefit costs. In the next fiscal year, approximately $1.4 million will be reclassified from accumulated other comprehensive loss into net periodic benefit cost. 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 2021 2020 (in thousands) Change in benefit obligation: Benefit obligation, beginning of year $ 364,443 $ 314,841 Service cost 1,087 1,070 Interest cost 2,687 4,038 Benefits and expenses paid (11,339) (12,041) Actuarial loss (gain) (19,723) 31,618 Currency translation adjustment (12,747) 24,917 Benefit obligation, end of year $ 324,408 $ 364,443 Change in plan assets: Plan assets, beginning of year $ 303,531 $ 266,450 Actual return on assets (2,817) 25,239 Company contributions 5,393 4,451 Benefits paid (11,339) (12,041) Currency translation adjustment (9,168) 19,432 Plan assets, end of year $ 285,600 $ 303,531 Funded status $ (38,808) $ (60,912) Amounts recognized in consolidated balance sheets: Other assets $ 10,975 $ — Current liabilities (1,049) (1,089) Other long-term liabilities, net of current portion (48,734) (59,823) Under funded status at end of fiscal year $ (38,808) $ (60,912) Amounts recognized in accumulated other comprehensive loss, after tax: Unrecognized actuarial loss $ 45,209 $ 58,257 Unamortized prior service credits — — Total amount recognized $ 45,209 $ 58,257 Accumulated benefit obligation $ 324,408 $ 364,443 The above disclosure represents the aggregation of information related to the Company’s three defined benefit plans which cover many of its European employees. As of January 2, 2022, one of these plans, which primarily covers certain employees in the United Kingdom (the “UK Plan”), had assets in excess of the accumulated benefit obligation. The accumulated benefit obligation of the Dutch Plan exceeded plan assets as of January 2, 2022. The nora Plan is an unfunded defined benefit plan and the accumulated benefit obligation exceeded plan assets as of January 2, 2022. The following table summarizes this information as of January 2, 2022 and January 3, 2021. End of Fiscal Year 2021 2020 (in thousands) UK Plan Projected benefit obligation $ 181,997 $ 198,215 Accumulated benefit obligation 181,997 198,215 Plan assets 192,971 193,991 Dutch Plan Projected benefit obligation $ 97,108 $ 116,379 Accumulated benefit obligation 97,108 116,379 Plan assets 92,629 109,540 nora Plan Projected benefit obligation $ 45,303 $ 49,849 Accumulated benefit obligation 45,303 49,849 Plan assets — — Fiscal Year 2021 2020 2019 (in thousands) Components of net periodic benefit cost: Service cost $ 1,087 $ 1,070 $ 1,589 Interest cost 2,687 4,038 5,676 Expected return on plan assets (3,312) (4,256) (5,561) Amortization of prior service cost 114 106 63 Amortization of net actuarial (gains) losses 1,968 1,549 991 Curtailment gain — — (453) Net periodic benefit cost $ 2,544 $ 2,507 $ 2,305 In accordance with applicable accounting standards, the service cost component of net periodic benefit costs is presented within operating income in the consolidated statements of operations, while all other components of net periodic benefit costs are presented within other expense in the consolidated statements of operations. During 2021, other comprehensive loss was impacted by a net gain of approximately $11.8 million (net of $3.9 million of tax), comprised of actuarial gain of approximately $10.3 million (net of $3.4 million of tax) and amortization of loss of $1.5 million (net of $0.5 million of tax). Fiscal Year 2021 2020 2019 Weighted average assumptions used to determine net periodic benefit cost: Discount rate 0.9 % 1.0 % 1.9 % Expected return on plan assets 1.5 % 1.2 % 2.1 % Rate of compensation — % — % 1.75 % Weighted average assumptions used to determine benefit obligations: Discount rate 1.6 % 1.0 % 1.7 % Rate of compensation — % — % 1.75 % 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 investment objectives of the foreign defined benefit plans are to maximize the return on the investments to ensure that the assets are sufficient to exceed minimum funding requirements, and to achieve a favorable return against performance expectations based on historical 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 2, 2022 or January 3, 2021. Dutch Plan Assets and Indexation Benefit As is common in Dutch pension plans, the Dutch Plan includes a provision for discretionary benefit increases termed “indexation.” The indexation benefit is meant to adjust pension benefits for cost-of-living increases, similar to U.S. consumer price index-based cost-of-living adjustments for U.S. retirement plans. The indexation benefit is not guaranteed, and is only provided for and paid out if sufficient assets are available due to favorable asset returns. Both the vested benefit amounts as well as amounts related to the discretionary indexation benefits under the Dutch Plan are paid pursuant to an insurance contract with a private insurer (the “Contract”). The Dutch Plan itself is financed by investment assets held within the Contract. Prior to December 31, 2019, the Contract guaranteed payment of vested benefits, regardless of whether Dutch Plan assets held through the Contract were ultimately sufficient to pay vested amounts, and also provided for payment of the indexation amount on a contingent basis if the actual return on Dutch Plan assets were sufficient to pay it. This type of insurance arrangement is common in The Netherlands, although not necessarily common in other jurisdictions. After the Dutch Plan curtailment on December 31, 2019, as discussed above, any shortfall in plan assets to pay vested benefits will be funded by the Company. The assets under the Dutch Plan, including any indexation benefit, are identified as level 3 assets under the fair value hierarchy. Under the express terms of the Contract, contract value is the greater of (i) the value of the discounted vested benefits of the Dutch Plan and (ii) the fair value of the underlying investment assets held by the insurance company under the Contract. As between those two values, the former was the greater for 2021 and 2020 and this represents the plan assets as shown above for the Dutch Plan. Because the Company will fund the cost to guarantee vested benefits, the Company has recorded a provision, which reduces the Dutch Plan assets, that consists of the net present value of the expected future guarantee payments due to the insurance company pursuant to the Company’s guarantee. As explained above, the Contract also will pay the indexation benefit if sufficient assets are available, which the Company believes not to be probable as of the end of 2021 based on recent returns. The indexation benefit for 2021 and 2020 is not significant. The Company’s actual weighted average asset allocations for 2021 and 2020, and the targeted asset allocation for 2022, of the foreign defined benefit plans by asset category, are as follows: Fiscal Year 2022 2021 2020 Asset Category Target Allocation Percentage of Plan Assets at Year End Equity securities —% — 3% —% 3% Debt and debt securities 50% — 60% 63% 60% Short-term investments 1% — 2% 4% —% Other investments 35% — 40% 33% 37% 100% 100% 100% The following table sets forth by level within the fair value hierarchy the foreign defined benefit plans’ assets at fair value, as of January 2, 2022 and January 3, 2021. The nora plan is currently unfunded. 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. As noted above, the Dutch Plan assets as represented by the insurance contract are classified as a level 3 asset and included in the “Other” asset category. Pension Plan Assets by Category as of January 2, 2022 Dutch Plan UK Plan Total (in thousands) Level 1 $ — $ 57,338 $ 57,338 Level 2 — 107,136 107,136 Level 3 92,629 28,497 121,126 Total $ 92,629 $ 192,971 $ 285,600 Pension Plan Assets by Category as of January 3, 2021 Dutch Plan UK Plan Total (in thousands) Level 1 $ — $ 70,904 $ 70,904 Level 2 — 95,004 95,004 Level 3 109,540 28,083 137,623 Total $ 109,540 $ 193,991 $ 303,531 The tables below detail the foreign defined benefit plans’ assets by asset allocation and fair value hierarchy: End of Fiscal Year 2021 Asset Category Level 1 Level 2 Level 3 (in thousands) Equity securities $ — $ — $ — Debt and debt securities 45,516 107,136 27,176 Short-term investments (1) 11,822 — — Other investments (2) — — 93,950 $ 57,338 $ 107,136 $ 121,126 End of Fiscal Year 2020 Asset Category Level 1 Level 2 Level 3 (in thousands) Equity securities $ 9,113 $ — $ — Debt and debt securities 60,699 95,004 25,927 Short-term investments (1) 1,092 — — Other investments (2) — — 111,696 $ 70,904 $ 95,004 $ 137,623 (1) Short-term investments are generally invested in interest-bearing accounts. (2) Other investments are comprised of insurance contracts. Assets identified as level 2 above pertain to corporate bonds and other debt securities. The fair values of these assets are calculated based on quoted market prices for similar assets. With the exception of the Dutch Plan assets as discussed above, the assets identified as level 3 above in 2021 and 2020 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 range of discount rates used in the fair value calculation of level 3 assets held by the Dutch Plan and the UK Plan were 1.00% to 1.85% for 2021 and 0.50% to 1.30% for 2020. The weighted average discount rates were 1.01% and 0.52% for 2021 and 2020, respectively. These amounts are weighted based on the fair value of level 3 plan assets subject to fluctuations in the discount rate. Any changes in these variables will impact the fair value of level 3 assets. The table below indicates the change in value related to these level 3 assets during 2021 and 2020: Fiscal Year 2021 2020 (in thousands) Balance of level 3 assets, beginning of year $ 137,623 $ 115,252 Actual return on plan assets (1) (10,189) 6,767 Purchases, sales and settlements, net 440 437 Assets transferred into level 3 732 3,934 Translation adjustment (7,480) 11,233 Balance of level 3 assets, end of year $ 121,126 $ 137,623 (1) Includes $(6.6) million and $10.1 million for 2021 and 2020, respectively, of unrealized (losses) and gains recognized during the period in other comprehensive income (loss) for assets held at year end. During 2022, the Company expects to contribute $4.1 million to the plans. It is anticipated that future benefit payments for the foreign defined benefit plans will be as follows: Fiscal Year Expected Payments (in thousands) 2022 $ 10,880 2023 11,090 2024 11,321 2025 11,485 2026 11,632 2027-2031 60,632 Domestic Defined Benefit Plan The Company maintains a domestic non-qualified 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. There is no service cost component of the change in benefit obligation in 2021 and 2020 as there are no longer any participants accruing benefits in the plan. Fiscal Year 2021 2020 (in thousands) Change in benefit obligation: Benefit obligation, beginning of year $ 33,834 $ 31,740 Interest cost 706 938 Benefits paid (1,965) (2,030) Actuarial loss (gain) (2,522) 3,186 Benefit obligation, end of year $ 30,053 $ 33,834 The amounts recognized in the consolidated balance sheets are as follows: End of Fiscal Year 2021 2020 (in thousands) Current liabilities $ 1,873 $ 2,030 Non-current liabilities 28,180 31,804 Total benefit obligation $ 30,053 $ 33,834 The components of the amounts in accumulated other comprehensive loss, after tax, are as follows: Fiscal Year 2021 2020 (in thousands) Unrecognized actuarial loss $ 8,679 $ 11,031 The accumulated benefit obligation related to the SCP was $30.1 million and $33.8 million as of January 2, 2022 and January 3, 2021, 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. Fiscal Year 2021 2020 2019 (in thousands, except for assumptions) Assumptions used to determine net periodic benefit cost: Discount rate 2.15 % 3.05 % 4.10 % Assumptions used to determine benefit obligations: Discount rate 2.65 % 2.15 % 3.05 % Components of net periodic benefit cost: Interest cost $ 706 $ 938 $ 1,154 Amortizations 743 558 375 Net periodic benefit cost $ 1,449 $ 1,496 $ 1,529 The changes in other comprehensive loss during 2021 related to the SCP as a result of plan activity was a net gain of approximately $2.3 million (net of $1.0 million of tax), primarily comprised of a net gain during the period of $1.8 million (net of $0.8 million of tax) and amortization of loss of $0.5 million (net of $0.2 million of tax). During 2021, the Company contributed $2.0 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) 2022 $ 1,873 2023 1,873 2024 1,873 2025 1,873 2026 1,873 2027-2031 8,886 |
