ANIXTER INTERNATIONAL INC, 10-K filed on 2/20/2020
Annual Report
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Cover page - USD ($)
12 Months Ended
Jan. 03, 2020
Feb. 12, 2020
Jun. 28, 2019
Cover page [Line Items]      
Document Type 10-K    
Document Annual Report true    
Document Period End Date Jan. 03, 2020    
Document Transition Report false    
Entity File Number 001-10212    
Entity Registrant Name Anixter International Inc.    
Entity Incorporation, State or Country Code DE    
Entity Tax Identification Number 94-1658138    
Entity Address, Address Line One 2301 Patriot Blvd.    
Entity Address, City or Town Glenview    
Entity Address, State or Province IL    
Entity Address, Postal Zip Code 60026    
City Area Code 224    
Local Phone Number 521-8000    
Title of 12(b) Security Common stock, $1 par value    
Trading Symbol AXE    
Security Exchange Name NYSE    
Entity Well-known Seasoned Issuer Yes    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Interactive Data Current Yes    
Entity Filer Category Large Accelerated Filer    
Entity Small Business false    
Entity Emerging Growth Company false    
Entity Shell Company false    
Entity Public Float     $ 1,810,436,970
Entity Common Stock, Shares Outstanding   33,830,569  
Amendment Flag false    
Document Fiscal Year Focus 2019    
Document Fiscal Period Focus FY    
Entity Central Index Key 0000052795    
Current Fiscal Year End Date --01-03    
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CONSOLIDATED STATEMENTS OF INCOME - USD ($)
shares in Millions, $ in Millions
12 Months Ended
Jan. 03, 2020
Dec. 28, 2018
Dec. 29, 2017
Net sales $ 8,845.6 $ 8,400.2 $ 7,927.4
Cost of goods sold 7,069.8 6,742.2 6,356.4
Gross profit 1,775.8 1,658.0 1,571.0
Operating expenses 1,408.3 1,348.3 1,258.1
Operating income 367.5 309.7 312.9
Other expense:      
Interest expense (77.1) (76.3) (74.7)
Other, net 3.0 (10.2) (0.6)
Income before income taxes 293.4 223.2 237.6
Income tax expense 30.5 66.9 128.6
Net Income $ 262.9 $ 156.3 $ 109.0
Income per share:      
Basic $ 7.71 $ 4.62 $ 3.24
Diluted $ 7.67 $ 4.58 $ 3.21
Basic weighted-average common shares outstanding 34.1 33.8 33.6
Effect of dilutive securities:      
Stock options and units 0.2 0.3 0.4
Diluted weighted-average common shares outstanding 34.3 34.1 34.0
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($)
$ in Millions
12 Months Ended
Jan. 03, 2020
Dec. 28, 2018
Dec. 29, 2017
Net income $ 262.9 $ 156.3 $ 109.0
Other comprehensive income (loss):      
Foreign currency translation 23.1 (45.4) 30.7
Changes in unrealized pension cost, net of tax (13.3) (13.7) 9.9
Other comprehensive income (loss) 9.8 (59.1) 40.6
Comprehensive income $ 272.7 $ 97.2 $ 149.6
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CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Millions
Jan. 03, 2020
Dec. 28, 2018
Current assets:    
Cash and cash equivalents $ 79.6 $ 81.0
Accounts receivable, net 1,540.3 1,600.0
Inventories 1,354.7 1,440.4
Other current assets 63.3 50.6
Total current assets 3,037.9 3,172.0
Property and equipment, at cost 432.3 398.4
Accumulated depreciation (257.4) (235.1)
Property and equipment, net 174.9 163.3
Operating leases 273.3 0.0
Goodwill 828.7 832.0
Intangible assets, net 361.2 392.9
Other assets 132.9 92.9
Total assets 4,808.9 4,653.1
Current liabilities:    
Accounts payable 1,100.3 1,320.0
Accrued expenses 330.3 309.0
Current operating lease obligations 62.9 0.0
Total current liabilities 1,493.5 1,629.0
Long-term debt 1,059.7 1,252.7
Operating lease obligations 219.1 0.0
Other liabilities 175.7 201.0
Total liabilities 2,948.0 3,082.7
Stockholders’ equity:    
Common Stock 34.2 33.9
Capital surplus 310.2 292.7
Retained earnings 1,783.8 1,513.2
Accumulated other comprehensive loss:    
Foreign currency translation (145.5) (168.6)
Unrecognized pension liability, net (121.8) (100.8)
Total accumulated other comprehensive loss (267.3) (269.4)
Total stockholders’ equity 1,860.9 1,570.4
Total liabilities and stockholders’ equity $ 4,808.9 $ 4,653.1
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CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares
Jan. 03, 2020
Dec. 28, 2018
Common stock, par value $ 1.00 $ 1.00
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 34,214,795 33,862,704
Common stock, shares outstanding 34,214,795 33,862,704
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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Millions
12 Months Ended
Jan. 03, 2020
Dec. 28, 2018
Dec. 29, 2017
Operating activities:      
Net income $ 262.9 $ 156.3 $ 109.0
Adjustments to reconcile net income to net cash provided by operating activities:      
Loss on extinguishment of debt 0.0 4.6 0.0
Depreciation 37.2 31.7 28.2
Amortization of intangible assets 35.0 37.3 36.1
Stock-based compensation 20.0 18.9 18.1
Deferred income taxes (41.4) (1.6) 13.6
Pension plan contributions (6.3) (7.4) (27.4)
Pension plan expenses 6.4 4.3 10.5
Impact of tax legislation 0.0 (2.1) 35.6
Impairment of intangible assets 0.0 0.0 5.7
Changes in current assets and liabilities, net      
Accounts receivable 66.6 (170.6) (54.2)
Inventories 91.4 (204.7) (39.8)
Accounts payable (224.2) 245.3 58.5
Other current assets and liabilities, net (7.1) 28.0 (10.0)
Other, net 12.6 2.3 0.1
Net cash provided by operating activities 227.9 137.7 183.8
Investing activities:      
Acquisitions of businesses, net of cash acquired 0.0 (150.1) 0.0
Capital expenditures, net (40.0) (42.4) (41.1)
Other 2.9 9.1 0.0
Net cash used in investing activities (37.1) (183.4) (41.1)
Financing activities:      
Proceeds from borrowings 4,226.5 3,192.4 1,843.3
Repayments of borrowings (4,425.0) (3,082.4) (1,884.0)
Retirement of Notes due 2019 0.0 (353.9) 0.0
Proceeds from issuance of Notes due 2025 0.0 246.9 0.0
Repayments of Canadian term loan 0.0 0.0 (100.2)
Deferred financing costs 0.0 (2.9) 0.0
Proceeds from stock options exercised 4.7 1.5 5.0
Other, net (2.1) 0.0 (0.2)
Net cash (used in) provided by financing activities (195.9) 1.6 (136.1)
(Decrease) increase in cash and cash equivalents (5.1) (44.1) 6.6
Effect of exchange rate changes on cash balances 3.7 9.1 (5.7)
Cash and cash equivalents at beginning of period 81.0 116.0 115.1
Cash and cash equivalents at end of period 79.6 81.0 116.0
Cash paid for interest 74.3 73.9 70.6
Cash paid for taxes $ 87.1 $ 88.4 $ 76.4
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($)
$ in Millions
Total
Common Stock [Member]
Capital Surplus [Member]
Retained Earnings [Member]
Accumulated Other Comprehensive Loss [Member]
Common stock, shares issued at Dec. 30, 2016   33,400,000      
Stockholders' equity at Dec. 30, 2016 $ 1,292.2 $ 33.4 $ 261.8 $ 1,247.9 $ (250.9)
Net income 109.0     109.0  
Other comprehensive income (loss):          
Foreign currency translation 30.7       30.7
Changes in unrealized pension cost, net of tax 9.9       9.9
Stock-based compensation 18.1   18.1    
Issuance of common stock and related taxes, shares   300,000      
Issuance of common stock and related taxes (0.9) $ 0.3 (1.2)    
Common stock, shares issued at Dec. 29, 2017   33,700,000      
Stockholders' equity at Dec. 29, 2017 1,459.0 $ 33.7 278.7 1,356.9 (210.3)
Other comprehensive income (loss):          
Tax related to unrealized pension cost 10.4        
Net income 156.3     156.3  
Foreign currency translation (45.4)       (45.4)
Changes in unrealized pension cost, net of tax (13.7)       (13.7)
Stock-based compensation 18.9   18.9    
Issuance of common stock and related taxes, shares   200,000      
Issuance of common stock and related taxes $ (4.7) $ 0.2 (4.9)    
Common stock, shares issued at Dec. 28, 2018 33,862,704 33,900,000      
Stockholders' equity at Dec. 28, 2018 $ 1,570.4 $ 33.9 292.7 1,513.2 (269.4)
Other comprehensive income (loss):          
Tax related to unrealized pension cost 4.7        
Net income 262.9     262.9  
Foreign currency translation 23.1       23.1
Changes in unrealized pension cost, net of tax (13.3)       (13.3)
Reclassification of tax effects 7.7     7.7 [1] (7.7) [1]
Stock-based compensation 20.0   20.0    
Issuance of common stock and related taxes, shares   300,000      
Issuance of common stock and related taxes $ (2.2) $ 0.3 (2.5)    
Common stock, shares issued at Jan. 03, 2020 34,214,795 34,200,000      
Stockholders' equity at Jan. 03, 2020 $ 1,860.9 $ 34.2 $ 310.2 $ 1,783.8 $ (267.3)
Other comprehensive income (loss):          
Tax related to unrealized pension cost $ (2.4)        
[1] The Company reclassified $7.7 million of tax benefits from "Accumulated other comprehensive loss" to "Retained earnings" for the tax effects resulting from the December 22, 2017 enactment of the Tax Cuts and Jobs Act in accordance with the adoption of Accounting Standards Update 2018-02, "Income Statement - Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" in the first quarter of 2019.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
12 Months Ended
Jan. 03, 2020
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization: Anixter International Inc. and its subsidiaries (collectively referred to as "Anixter" or the "Company"), formerly known as Itel Corporation, which was incorporated in Delaware in 1967, is a leading distributor of enterprise cabling and security solutions, electrical and electronic wire and cable solutions and utility power solutions through Anixter Inc. and its subsidiaries.
Basis of presentation: The Consolidated Financial Statements include the accounts of Anixter International Inc. and its subsidiaries. The Company's fiscal year ends on the Friday nearest December 31 and includes 53 weeks in 2019 and 52 weeks in 2018 and 2017. Certain prior period amounts have been reclassified to conform to the current year presentation.
Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles ("U.S. GAAP") requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Anixter's significant estimates include allowance for doubtful accounts, inventory obsolescence, pension obligations, goodwill and indefinite-lived intangible assets, deferred tax assets and uncertain tax positions.
Cash and cash equivalents: Cash equivalents consist of short-term, highly liquid investments with an original maturity three months or less. Such investments are stated at cost, which approximates fair value.
Receivables and allowance for doubtful accounts: The Company carries its accounts receivable at their face amounts less an allowance for doubtful accounts, which was $30.4 million and $39.9 million at the end of 2019 and 2018, respectively. On a regular basis, Anixter evaluates its accounts receivable and establishes the allowance for doubtful accounts based on a combination of specific customer circumstances, as well as credit conditions and history of write-offs and collections. The amounts charged to income for doubtful accounts were $10.1 million, $8.5 million and $10.0 million in 2019, 2018 and 2017, respectively. A receivable is considered past due if payments have not been received within the agreed upon invoice terms. Receivables are written off and deducted from the allowance account when the receivables are deemed uncollectible.
Inventories: Inventories, consisting primarily of purchased finished goods, are stated at the lower of cost or market. Cost is determined using the average-cost method. The Company has agreements with some vendors that provide a right to return products. This right is typically limited to a small percentage of total purchases from that vendor. Such rights provide that Anixter can return slow-moving product and the vendor will replace it with faster-moving product chosen by the Company. Some vendor agreements contain price protection provisions that require the manufacturer to issue a credit in an amount sufficient to reduce Anixter's current inventory carrying cost down to the manufacturer’s current price. The Company considers these agreements in determining the reserve for obsolescence.
At January 3, 2020 and December 28, 2018, the Company reported inventory of $1,354.7 million and $1,440.4 million, respectively (net of inventory reserves of $50.0 million and $51.5 million, respectively). Each quarter the Company reviews for excess inventories and makes an assessment of the net realizable value. There are many factors that management considers in determining whether or not the amount by which a reserve should be established. These factors include the following:
 
Return or rotation privileges with vendors 
Price protection from vendors
Expected future usage
Whether or not a customer is obligated by contract to purchase the inventory
Current market pricing
Historical consumption experience
Risk of obsolescence
If circumstances related to the above factors change, there could be a material impact on the net realizable value of the inventories.
Property and equipment: At January 3, 2020, net property and equipment consisted of $126.0 million of equipment and computer software, $39.5 million of buildings and leasehold improvements, $8.4 million of finance leases and $1.0 million of land. At December 28, 2018, net property and equipment consisted of $125.8 million of equipment and computer software, $36.5 million of buildings and leasehold improvements and $1.0 million of land. Equipment and computer software are recorded at cost and depreciated by applying the straight-line method over their estimated useful lives, which range from 2 to 20 years. Buildings are recorded at cost and depreciated by applying the straight-line method over their estimated useful lives, which are up to 40 years. Leasehold improvements are depreciated over their useful life or over the term of the related lease, whichever is shorter. Upon sale or retirement, the cost and related depreciation are removed from the respective accounts and any gain or loss is included in income. Maintenance and repair costs are expensed as incurred. Depreciation expense, including an immaterial amount of finance lease depreciation, was $37.2 million, $31.7 million and $28.2 million in 2019, 2018 and 2017, respectively.
The Company evaluates the recoverability of the carrying amount of its property and equipment whenever events or circumstances indicate that the carrying amount of an asset may not be fully recoverable. In order to measure an impairment loss of property and equipment, the Company estimates the fair value by using an orderly liquidation valuation. An orderly liquidation value is the amount that could be realized from a liquidation sale, given a reasonable period of time to find a purchaser (or purchasers), with the seller being compelled to sell the asset in the existing condition where it is located, as of a specific date, assuming the highest and best use of the asset by market participants. The valuation method also considers that it is physically possible, legally permissible and financially feasible to use the asset at the measurement date. The inputs used for the valuation include significant unobservable inputs, or Level 3 inputs, as described in the accounting fair value hierarchy, based on assumptions that market participants would use. A second step of the analysis is performed by comparing the orderly liquidation value to the carrying amount of that asset. The orderly liquidation values are applied against the original cost of the assets and the impairment loss measured as the difference between the liquidation value of the assets and the net book value of the assets.
Costs for software developed for internal use are capitalized when the preliminary project stage is complete and Anixter has committed funding for projects that are likely to be completed. Costs that are incurred during the preliminary project stage are expensed as incurred. Once the capitalization criteria has been met, external direct costs of materials and services consumed in developing internal-use computer software, payroll and payroll-related costs for employees who are directly associated with and who devote time to the internal-use computer software project (to the extent of their time spent directly on the project) and interest costs incurred when developing computer software for internal use are capitalized. At January 3, 2020 and December 28, 2018, capitalized costs, net of accumulated amortization, for software developed for internal use were approximately $60.8 million and $64.7 million, respectively. Amortization expense charged to operations for capitalized costs was $7.2 million, $6.6 million and $5.5 million in 2019, 2018 and 2017, respectively. Interest expense incurred in connection with the development of internal use software is capitalized based on the amounts of accumulated expenditures and the weighted-average cost of borrowings for the period. Interest costs capitalized for fiscal 2019, 2018 and 2017 were $0.9 million, $0.1 million and $0.3 million, respectively.
Leases: The Company adopted Accounting Standards Update ("ASU") 2016-02, Leases, as of December 29, 2018. The adoption of this standard is discussed below within the section titled "Recently issued and adopted accounting pronouncements." At contract inception the Company determines if an arrangement is a lease. Operating leases are included in "Operating leases", "Current operating lease obligations" and "Operating lease obligations" on the Consolidated Balance Sheets. Finance leases are included in "Property and equipment, net", "Accrued expenses" and "Long-term debt" on the Consolidated Balance Sheets. The gross amount of the balances recorded related to finance leases was immaterial as of January 3, 2020, and December 28, 2018. Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets. Operating lease expense is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components and has elected to account for these components as a single lease component.
Operating lease assets and liabilities are recognized at the commencement date, based on the present value of the future minimum lease payments. A certain number of these leases contain rent escalation clauses either fixed or adjusted periodically for inflation or market rates that are factored into the Company's determination of lease payments. Anixter also has variable lease payments that do not depend on a rate or index, primarily for items such as common area maintenance and real estate taxes, which are recorded as variable expense when incurred. The operating lease asset includes advance payments and excludes incentives and initial direct costs incurred. As most of Anixter’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date to discount payments to the present value. Most operating leases contain renewal options, some of which also include options to early terminate the leases. The exercise of these options is at the Company's discretion. Lease terms include these options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.
Goodwill: The Company evaluates goodwill for impairment annually at the beginning of the third quarter and when events or changes in circumstances indicate the carrying value of reporting units might exceed their current fair values. The Company assesses goodwill for impairment by first performing a qualitative assessment, which considers specific factors, based on the weight of evidence, and the significance of all identified events and circumstances in the context of determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying amount using the qualitative assessment, Anixter performs the two-step impairment test. The Company may also bypass the qualitative assessment and proceed directly to the two-step impairment test. The first step of the impairment test is to identify a potential impairment by comparing the fair value of a reporting unit with its carrying amount. The estimates of fair value of a reporting unit are determined using the income approach and the market approach as described below. If step one of the test indicates a carrying value above the estimated fair value, the second step of the goodwill impairment test is performed by comparing the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. The implied residual value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination.
The income approach is a quantitative evaluation to determine the fair value of the reporting unit. Under the income approach fair value is determined based on estimated future cash flows discounted by an estimated weighted-average cost of capital, which reflects the overall level of inherent risk of the reporting unit and the rate of return a market participant would expect to earn. The inputs used for the income approach are significant unobservable inputs, or Level 3 inputs, as described in the accounting fair value hierarchy. Estimated future cash flows are based on internal projection models, industry projections and other assumptions deemed reasonable by management.
The market approach measures the fair value of a reporting unit through the analysis of recent sales, offerings, and financial multiples (earnings before interest, tax, depreciation and amortization ("EBITDA")) of comparable businesses, which would be considered Level 2 in the fair value hierarchy. Consideration is given to the financial conditions and operating performance of the reporting unit being valued relative to those publicly-traded companies operating in the same or similar lines of business.
In connection with the annual assessment of goodwill at the beginning of the third quarter of 2019, the Company bypassed the qualitative assessment and performed a quantitative test for all reporting units and utilized a combination of the income and market approaches. As a result of this assessment, the Company concluded that no impairment existed and the carrying amount of goodwill to be fully recoverable.
Intangible assets: As of January 3, 2020 and December 28, 2018, the Company's intangible asset balances are as follows:
January 3, 2020December 28, 2018
(In millions)Average useful life (in years)Gross carrying amountAccumulated amortizationGross carrying amountAccumulated amortization
Customer relationships
6-20
$503.6  $(176.4) $500.1  $(143.7) 
Exclusive supplier agreement
21
22.3  (5.6) 22.1  (4.5) 
Trade names
3-10
22.6  (13.5) 21.8  (12.6) 
Trade namesIndefinite4.9  —  4.9  —  
Non-compete agreements
1-5
9.2  (7.9) 9.2  (6.5) 
Intellectual property
8
2.5  (0.5) 2.3  (0.2) 
Total$565.1  $(203.9) $560.4  $(167.5) 
Anixter continually evaluates whether events or circumstances have occurred that would indicate the remaining estimated useful lives of intangible assets warrant revision or that the remaining balance of such assets may not be recoverable. Trade names that have been identified to have indefinite lives are not being amortized based on the expectation that the trade name products will generate future cash flows for the foreseeable future. In 2017, the Company recorded an impairment charge of $5.7 million related to certain indefinite-lived trade names in its NSS reporting unit. This impairment charge is included in "Operating expenses" in the Consolidated Statement of Income. The impairment charge was recorded as Anixter no longer plans to use certain trade names on certain products. All remaining indefinite-lived trade names are expected to be used on existing products for the foreseeable future.
For definite-lived intangible assets, the Company uses an estimate of the related undiscounted cash flows over the remaining life of the asset in measuring whether the asset is recoverable. The Company's definite-lived intangible assets are primarily related to customer relationships. In order to measure an impairment loss of customer relationships, Anixter estimates the fair value by using an excess earnings model, a form of the income approach. The analysis requires making various judgments, including assumptions about future cash flows based on projected growth rates of revenue and expense, rates of customer attrition and working capital needs. The assumptions about future cash flows and growth rates are based on management’s forecast of the asset group. The key inputs utilized in determining the fair value of customer relationships include significant unobservable inputs, or Level 3 inputs, as described in the accounting fair value hierarchy. Inputs included discount rates derived from an estimated weighted-average cost of capital, which reflected the overall level of inherent risk of the asset group and the rate of return a market participant would expect to earn, as well as customer attrition rates.
Intangible amortization expense is expected to average $33.6 million per year for the next five years. The Company's definite lived intangible assets are amortized over a straight line basis as it approximates the customer attrition patterns and best estimates the use pattern of the assets.
Other, net: The following represents the components of "Other, net" as reflected in the Consolidated Statements of Income:
Years Ended
(In millions)January 3,
2020
December 28,
2018
December 29,
2017
Other, net:
Foreign exchange loss$(2.2) $(8.2) $(3.4) 
Cash surrender value of life insurance policies4.4  (1.3) 2.4  
Net periodic pension benefit2.4  5.1  0.2  
Loss on extinguishment of debt—  (4.6) —  
Other(1.6) (1.2) 0.2  
Total other, net$3.0  $(10.2) $(0.6) 
Certain subsidiaries of Anixter conduct business in a currency other than the legal entity’s functional currency. Transactions may produce receivables or payables that are fixed in terms of the amount of foreign currency that will be received or paid. A change in exchange rates between the functional currency and the currency in which a transaction is denominated increases or decreases the expected amount of functional currency cash flows upon settlement of the transaction. The increase or decrease in expected functional currency cash flows is a foreign currency transaction gain or loss that is included in "Other, net" in the Consolidated Statements of Income.
The Company purchases foreign currency forward contracts to minimize the effect of fluctuating foreign currency-denominated accounts on its reported income. The foreign currency forward contracts are not designated as hedges for accounting purposes. The Company's strategy is to negotiate terms for its derivatives and other financial instruments to be highly effective, such that the change in the value of the derivative offsets the impact of the underlying hedged item (e.g., various foreign currency-denominated accounts). Its counterparties to foreign currency forward contracts have investment-grade credit ratings. Anixter expects the creditworthiness of its counterparties to remain intact through the term of the transactions. The Company regularly monitors the creditworthiness of its counterparties to ensure no issues exist which could affect the value of the derivatives.
The Company does not hedge 100% of its foreign currency-denominated accounts. In addition, the results of hedging can vary significantly based on various factors, such as the timing of executing the foreign currency forward contracts versus the movement of the currencies as well as the fluctuations in the account balances throughout each reporting period. The fair value of the foreign currency forward contracts is based on the difference between the contract rate and the current exchange rate. The fair value of the foreign currency forward contracts is measured using observable market information. These inputs would be considered Level 2 in the fair value hierarchy. At January 3, 2020 and December 28, 2018, foreign currency forward contracts were revalued at then-current foreign exchange rates with the changes in valuation reflected directly in "Other, net" in the Consolidated Statements of Income offsetting the transaction gain/loss recorded on the foreign currency-denominated accounts. At January 3, 2020 and December 28, 2018, the gross notional amount of the foreign currency forward contracts outstanding was approximately $130.2 million and $96.3 million, respectively. At January 3, 2020 and December 28, 2018, the net notional amount of the foreign currency forward contracts outstanding was approximately $95.4 million and $75.7 million, respectively. While all of the Company's foreign currency forward contracts are subject to master netting arrangements with its counterparties, assets and liabilities related to these contracts are presented on a gross basis within the Consolidated Balance Sheets. The gross fair value of assets and liabilities related to foreign currency forward contracts are immaterial.
The combined effect of changes in both the equity and bond markets resulted in changes in the cash surrender value of the Company's company owned life insurance policies associated with the sponsored deferred compensation program.
Fair value measurement: Assets and liabilities measured at fair value on a recurring basis consist of foreign currency forward contracts and the assets of Anixter's defined benefit plans. The fair value of the foreign currency forward contracts is discussed above in the section titled "Other, net." The fair value of the assets of Anixter's defined benefit plans is discussed in Note 8. "Pension Plans, Post-Retirement Benefits and Other Benefits". Fair value disclosures of debt are discussed in Note 5. "Debt".
The Company measure the fair values of goodwill, intangible assets and property and equipment on a nonrecurring basis if required by impairment tests applicable to these assets. The fair value measurements of goodwill, intangible assets and property and equipment are discussed above.
The inputs used in the determination of fair values are categorized according to the fair value hierarchy as being Level 1, Level 2 or Level 3. In general, fair values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets or liabilities in active markets, and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset or liability. In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability.
Revenue recognition: Anixter is a leading global distributor of network and security solutions, electrical and electronic solutions and utility power solutions. Through a global distribution network along with supply chain and technical expertise, Anixter helps customers reduce the risk, cost and complexity of their supply chains. Anixter is a leader in providing advanced inventory management services including procurement, just-in-time delivery, material management programs, turn-key yard layout and management, quality assurance testing, component kit production, storm/event kitting, small component assembly and e-commerce and electronic data interchange to a broad spectrum of customers with nearly 600,000 products. Revenue arrangements primarily consist of a single performance obligation to transfer promised goods or services. See Note 10. "Business Segments" for revenue disaggregated by geography.
Sales to customers and related cost of sales are primarily recognized at the point in time when control of goods transfers to the customer. For product sales, this generally occurs upon shipment of the products, however, this may occur at a later date depending on the agreed upon sales terms, such as delivery at the customer's designated location, or based on consignment terms. In instances where goods are not stocked by Anixter and delivery times are critical, product is purchased from the manufacturer and drop-shipped to the customer. Anixter generally takes control of the goods when shipped by the manufacturer and then recognizes revenue when control of the product transfers to the customer. When providing services, sales are recognized over time as control transfers to the customer, which occurs as services are rendered.
Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. The Company estimates different forms of variable consideration at the time of sale based on historical experience, current conditions and contractual obligations. Revenue is recorded net of customer discounts, rebates and similar charges. When Anixter offers the right to return product, historical experience is utilized to establish a liability for the estimate of expected returns, which was $36.7 million and $35.0 million at January 3, 2020 and December 28, 2018, respectively. Sales and other tax amounts collected from customers for remittance to governmental authorities are excluded from revenue. The Company has elected to treat shipping and handling as a fulfillment activity. The practical expedient not to disclose information about remaining performance obligations has also been elected as these contacts have an original duration of one year or less or are contracts where the Company has applied the practical expedient to recognize service revenue in proportion to the amount Anixter has the right to invoice. The Company typically receives payment 30 to 60 days from the point it has satisfied the related performance obligation.
At December 28, 2018, $17.2 million of deferred revenue related to outstanding contracts was reported in "Accrued expenses" in the Company's Consolidated Balance Sheet. This balance primarily represents prepayments from customers. During the year ended January 3, 2020, $14.9 million of this deferred revenue was recognized. At January 3, 2020, deferred revenue was $11.6 million. The Company expects to recognize this balance as revenue within the next twelve months.
 
Advertising and sales promotion: Advertising and sales promotion costs are expensed as incurred. Advertising and promotion costs included in operating expenses on the Consolidated Statements of Income were $15.6 million, $15.8 million and $10.6 million in 2019, 2018 and 2017, respectively. The majority of the advertising and sales promotion costs are recouped through various cooperative advertising programs with vendors.
Shipping and handling fees and costs: Shipping and handling fees billed to customers are included in net sales. Shipping and handling costs associated with outbound freight are included in "Operating expenses" on the Consolidated Statements of Income, which were $133.1 million, $139.7 million and $119.1 million in 2019, 2018 and 2017, respectively.
Stock-based compensation: The Company measures the cost of all share-based payments to employees, including grants of employee stock options, using a fair-value-based method. Compensation costs are determined based on the fair value at the grant date and amortized over the respective vesting period representing the requisite service period. The Company accounts for forfeitures of share-based payments as they occur.
Accumulated other comprehensive loss: Unrealized gains and losses are accumulated in "Accumulated other comprehensive loss" ("AOCI"). These changes are also reported in "Other comprehensive income (loss)" on the Consolidated Statements of Comprehensive Income. These include unrealized gains and losses related to the Company's defined benefit obligations and foreign currency translation. See Note 8. "Pension Plans, Post-Retirement Benefits and Other Benefits" for pension related amounts reclassified into net income.
Investments in several subsidiaries are recorded in currencies other than the U.S. dollar ("USD"). As these foreign currency denominated investments are translated at the end of each period during consolidation using period-end exchange rates, fluctuations of exchange rates between the foreign currency and the USD increase or decrease the value of those investments. The results of operations for foreign subsidiaries, where the functional currency is not the USD, are translated into USD using the average exchange rates during the periods reported, while the assets and liabilities are translated using period-end exchange rates. The assets and liabilities related translation adjustments are recorded as a separate component of AOCI, "Foreign currency translation." In addition, as Anixter's subsidiaries maintain investments denominated in currencies other than local currencies, exchange rate fluctuations will occur. Borrowings are raised in certain foreign currencies to minimize the exchange rate translation adjustment risk.
Income taxes: Deferred taxes are recognized for the future tax effects of temporary differences between financial and income tax reporting based upon enacted tax laws and rates. The Company maintains valuation allowances to reduce deferred tax assets if it is more likely than not that some portion or all of the deferred tax asset will not be realized based on available evidence. Anixter recognizes the benefit of tax positions when a benefit is more likely than not (i.e., greater than 50% likely) to be sustained on its technical merits. Recognized tax benefits are measured at the largest amount that is more likely than not to be sustained, based on cumulative probability, in final settlement of the position.

Net income per share: Diluted net income per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock.
The Company had 0.2 million, 0.3 million, and 0.4 million in 2019, 2018 and 2017, respectively, of additional shares related to stock options and stock units included in the computation of diluted earnings per share because the effect of those common stock equivalents were dilutive during these periods. Antidilutive stock options and units are excluded from the calculation of weighted-average shares for diluted earnings per share. For 2019, 2018 and 2017, the antidilutive stock options and units were immaterial.
Recently issued and adopted accounting pronouncements: In February 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-02, Leases, which requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. The standard is effective for Anixter's financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. In July 2018, the FASB issued additional authoritative guidance providing companies with an optional transition method to use the effective date of ASU 2016-02 as the date of initial application of transition and not restate comparative periods. The Company adopted the standard in the first quarter of 2019 using this optional transition method. The Company elected the package of practical expedients, which allows it to carry forward historical lease classification, the practical expedient to not separate non-lease components from lease components, and the short-term lease accounting policy election as defined in ASU 2016-02. The Company implemented internal controls and a lease accounting information system to enable the preparation of financial information on adoption. The standard had a material impact on the Company's Consolidated Balance Sheet, but did not have an impact on the Consolidated Statements of Income. The most significant impact was the recognition of right-of-use assets of $244.1 million and lease liabilities of $249.6 million for operating leases, while accounting for finance leases remained substantially unchanged.
In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which will allow a reclassification from accumulated other comprehensive income to retained earnings for the tax effects resulting from the December 22, 2017 enactment of the Tax Cuts and Jobs Act (the "Act") that are stranded in accumulated other comprehensive income. The standard is effective for Anixter's financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company adopted this standard effective the first quarter of fiscal year 2019 and elected to reclassify $7.7 million of tax benefits from "Accumulated other comprehensive loss" to "Retained earnings" within its Consolidated Financial Statements.
In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting, which will expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The standard is effective for Anixter's financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company adopted this standard effective the first quarter of fiscal year 2019. The result of this adoption did not have a material impact on the Consolidated Financial Statements.
Recently issued accounting pronouncements not yet adopted: In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which requires the measurement of expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable forecasts. The main objective of this ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The standard is effective for Anixter's financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company is currently evaluating the impact of adoption of this ASU, but it is not expected to have a material effect on the Company's Consolidated Financial Statements.
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment, which removes step two from the goodwill impairment test. Step two measures a goodwill impairment loss by comparing the implied fair value of a reporting unit's goodwill with the carrying amount of that goodwill. The new guidance requires an entity to perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The standard is effective for Anixter's financial statements issued for fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently assessing the impact the adoption of this ASU will have on its methodology for evaluating goodwill for impairment subsequent to adoption of this standard.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement: Changes to the Disclosure Requirements for Fair Value Measurement, which changes the disclosure requirements for fair value measurements by removing, adding and modifying certain disclosures. The standard is effective for Anixter's financial statements issued for fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact of adoption of this ASU on its related disclosures.
In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General: Changes to the Disclosure Requirements for Defined Benefit Plans, which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing and adding certain disclosures for these plans. The standard is effective for Anixter's financial statements issued for fiscal years ending after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the impact of adoption of this ASU on its related disclosures.
In December 2019, the FASB issued ASU 2019-12, Income Taxes - Simplifying the Accounting for Income Taxes, which clarifies existing guidance and removes certain exceptions to the general principles for income taxes. The standard is effective for Anixter's financial statements issued for fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the impact of adoption of this ASU on its Consolidated Financial Statements.
The Company does not believe that any other recently issued, but not yet effective, accounting pronouncements, if adopted, would have a material impact on its Consolidated Financial Statements or disclosures.
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ACCRUED EXPENSES
12 Months Ended
Jan. 03, 2020
Accrued Liabilites, Current [Abstract]  
Accrued Liabilities Disclosure [Text Block] ACCRUED EXPENSES
Accrued expenses consisted of the following:  
January 3,
2020
December 28,
2018
(In millions)
Salaries and fringe benefits$136.2  $109.7  
Other accrued expenses194.1  199.3  
Total accrued expenses$330.3  $309.0  
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RESTRUCTURING CHARGES
12 Months Ended
Jan. 03, 2020
Restructuring and Related Activities [Abstract]  
RESTRUCTURING AND OTHER CHARGES RESTRUCTURING CHARGES
The Company considers restructuring activities to be programs whereby Anixter fundamentally changes its operations, such as closing and consolidating facilities, reducing headcount and realigning operations in response to changing market conditions. The following table summarizes activity related to liabilities associated with restructuring activities:
Restructuring Activity
Q2 2018
Plan
Employee-Related Costs (a)Facility Exit and Other Costs (b)Total
Balance at December 29, 2017$—  $—  $—  
Charges9.6  0.5  $10.1  
Payments and other(2.9) (0.3) (3.2) 
Balance at December 28, 2018$6.7  $0.2  $6.9  
Payments and other(4.9) (0.1) (5.0) 
Balance at January 3, 2020$1.8  $0.1  $1.9  
(a)Employee-related costs primarily consist of severance benefits provided to employees who have been involuntarily terminated.
(b)Facility exit and other costs primarily consist of lease termination costs.
Q2 2018 Restructuring Plan
In the second quarter of 2018, the Company recorded a pre-tax charge of $2.1 million, $1.3 million and $1.1 million in its Network & Security Solutions ("NSS"), Electrical & Electronic Solutions ("EES") and Utility Power Solutions ("UPS") segments, respectively, and an additional $5.4 million at its corporate headquarters, primarily for severance-related expenses associated with a reduction of approximately 260 positions. In the third quarter of 2018, the Company recorded an additional $0.2 million charge at its corporate headquarters. The $10.1 million charge related to the second quarter 2018 plan primarily reflects actions related to facilities consolidation, systems integration and back office functions. This charge was included in "Operating expenses" in the Company's Consolidated Statement of Income for fiscal year 2018. The majority of the balance included in accrued expenses of $1.9 million as of January 3, 2020 is expected to be paid by the first half of 2020.
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LEASES
12 Months Ended
Jan. 03, 2020
Leases [Abstract]  
Lessee, Operating Leases [Text Block] LEASES
The Company adopted ASU 2016-02, Leases, as of December 29, 2018, using the modified retrospective approach. Prior year financial statements were not recast under the new standard and, therefore, certain prior period amounts have been disclosed in conformity with prior year presentation.
Substantially all of Anixter's office and warehouse facilities are leased under operating leases. The Company also leases certain equipment and vehicles primarily as operating leases. A certain number of Anixter's leases are long-term operating leases and expire at various dates through 2038. Lease costs are included within "Operating expenses" in the Company's Consolidated Statements of Income and were as follows:
 Year Ended
(In millions)January 3, 2020
Lease cost
Operating lease cost$79.0  
Variable lease cost22.2  
Short-term lease cost1.2  
Total lease cost$102.4  
Total rental expense was $107.3 million and $100.9 million in 2018 and 2017, respectively.
The weighted-average remaining lease term and weighted-average discount rate under operating leases were as follows:
January 3, 2020
Lease term and discount rate
Weighted-average remaining lease term6.5 years
Weighted-average discount rate (a)
5.9 %
(a)Upon adoption of ASU 2016-02, the discount rate used for existing leases was established as of December 29, 2018.
Maturities of operating lease liabilities at January 3, 2020 were as follows:
(In millions)
2020$75.4  
202159.2  
202254.4  
202340.8  
202432.0  
2025 and thereafter81.6  
Total lease payments$343.4  
Less imputed interest61.4  
Present value of lease liabilities$282.0  

Operating lease payments include $17.4 million related to options to extend lease terms that are reasonably certain of being exercised. As of January 3, 2020, the Company has additional leases related to facilities that have not yet commenced of $7.5 million. These operating leases will commence in fiscal year 2020 with lease terms of three to eleven years. Anixter subleases certain real estate to third parties. During the year ended January 3, 2020, the Company recognized income of $1.1 million, which was included within "Operating expenses" in the Company's Consolidated Statements of Income. Aggregate future minimum rentals to be received under non-cancelable subleases at January 3, 2020 were $3.7 million.
During the year ended January 3, 2020, leased assets obtained in exchange for operating lease obligations were $348.3 million. The operating cash outflow for amounts included in the measurement of operating lease obligations was $63.5 million.
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DEBT
12 Months Ended
Jan. 03, 2020
Text Block [Abstract]  
DEBT DEBT
Debt is summarized below:
(In millions)January 3,
2020
December 28,
2018
Long-term debt:
6.00% Senior notes due 2025$247.3  $246.9  
5.50% Senior notes due 2023347.9  347.4  
5.125% Senior notes due 2021398.3  397.4  
Revolving lines of credit56.0  260.0  
Finance lease obligations6.0  0.9  
Other8.8  6.1  
Unamortized deferred financing costs(4.6) (6.0) 
Total long-term debt$1,059.7  $1,252.7  
 
Certain debt agreements entered into by Anixter's operating subsidiaries contain various restrictions, including restrictions on payments to the Company. These restrictions have not had, nor are expected to have, an adverse impact on the Company's ability to meet cash obligations. Anixter International Inc. has guaranteed substantially all of the debt of its subsidiaries.
Aggregate annual maturities of debt before accretion of debt discount as reflected on the Consolidated Balance Sheet at January 3, 2020 are as follows: 2020 - $8.8 million, 2021 - $398.3 million, 2022 - $0.0 million, 2023 - $403.9 million, 2024 - $0.0 million and $247.3 million thereafter.
The Company's average borrowings outstanding was $1,406.6 million and $1,433.8 million for the fiscal years ending January 3, 2020 and December 28, 2018, respectively. The Company's weighted-average cost of borrowings was 5.5% for the year ended January 3, 2020 and 5.3% for the years ended December 28, 2018 and December 29, 2017, respectively. Interest paid in 2019, 2018 and 2017 was $74.3 million, $73.9 million and $70.6 million, respectively.
At the end of fiscal 2019, Anixter had approximately $524.7 million and $134.3 million in available, committed, unused borrowings under the $600.0 million U.S. accounts receivable asset based revolving credit facility and $150.0 million U.S. inventory asset based revolving credit facility, respectively. All credit lines are with financial institutions with investment grade credit ratings. Borrowings under these facilities are limited based on the borrowing base criteria as described below.
The Company is in compliance with all of its covenants and believes that there is adequate margin between the covenant ratios and the actual ratios given the current trends of the business.

Revolving Lines of Credit and Canadian Term Loan
On October 5, 2015, Anixter, through its wholly-owned subsidiaries, Anixter Inc., Anixter Receivables Corporation ("ARC") and Anixter Canada Inc., entered into certain financing transactions in connection with the consummation of the acquisition of Power Solutions, including a U.S. accounts receivable asset based revolving credit facility in an aggregate committed amount of $600.0 million ("Receivables Facility"), a U.S. inventory asset based revolving credit facility in an aggregate committed amount of $150.0 million ("Inventory Facility") for a U.S. combined commitment of $750.0 million ("Combined Commitment"). Additionally, the Company entered into a Canadian term loan facility in Canada in an aggregate principal amount of $300.0 million Canadian dollars, the equivalent to approximately $225.0 million USD, with a five-year maturity ("Canadian Term Loan"). In connection with these financing transactions, the Company incurred approximately $6.7 million in financing transaction costs, of which approximately $5.4 million was capitalized as deferred financing costs and will be amortized through maturity using the straight-line method, and approximately $1.3 million was expensed as incurred.
On November 16, 2018, Anixter amended the Receivables and Inventory Facilities to extend the maturity date from October 5, 2020 to November 16, 2023. An additional $2.1 million of deferred financing costs were capitalized and will be amortized through maturity.

Receivables Facility
On October 5, 2015, Anixter, through its wholly-owned subsidiary, ARC, entered into a Receivables Facility, which is a receivables based revolving credit facility in an aggregate committed amount of $600.0 million. Borrowings under the Receivables Facility are secured by a first lien on all assets of ARC and supported by an unsecured guarantee by Anixter International, Inc.
The Receivables Facility has a borrowing base of 85% of eligible receivables, subject to certain reserves.
In connection with the entry into the Receivables Facility, on October 5, 2015, Anixter Inc. and ARC entered into a Third Amended and Restated Receivables Sale Agreement (the "Amended and Restated RSA"), which amended and restated the existing Second Amended and Restated Sales Agreement. The purpose of the Amended and Restated RSA is (i) to reflect the entry into the Receivables Facility and the termination of the Second Amended and Restated Receivables Purchase Agreement, and (ii) to include in the receivables sold by Anixter Inc. to ARC receivables originated by Tri-Northern Holdings, Inc. and its subsidiaries (collectively, the "Tri-Ed Subsidiaries") and subsidiaries acquired in the Power Solutions acquisition (the "Power Solutions Subsidiaries").
Inventory Facility
On October 5, 2015, Anixter and certain of its wholly-owned subsidiaries, including the Tri-Ed Subsidiaries and Power Solutions Subsidiaries, entered into the Inventory Facility, an asset based lending revolving credit facility, in an aggregate committed amount of $150.0 million. Borrowings under the Inventory Facility are secured by a first lien on Anixter Inc.'s and certain of its subsidiaries' personal property and supported by a guarantee by Anixter International Inc.
The Inventory Facility has a borrowing base, (a) with respect to appraised eligible domestic inventory, of the lesser of (i) 85% of the net orderly liquidation value of such inventory; and (ii) 75% of book value of such inventory, plus, (b) with respect to eligible domestic inventory not appraised, 40% of the net orderly liquidation value of such inventory, less (c) certain reserves.

The Receivables Facility and the Inventory Facility (collectively, the "Combined Facilities")
The Combined Facilities drawn pricing will range from LIBOR plus 125 basis points when the combined unused availability (the "Combined Availability") under the Combined Facilities is greater than $500.0 million or LIBOR plus 150 basis points when Combined Availability is less than $500.0 million. Undrawn fees are 25 basis points.
Acquisitions and restricted payments will be permitted, subject to, among other things, (i) Combined Availability of at least $131.3 million after giving pro forma effect to any acquisition or restricted payment or (ii) (a) Combined Availability of at least $93.8 million and (b) maintenance of a minimum fixed charge coverage ratio of at least 1.1x, after giving pro forma effect to the acquisition or restricted payment.
The Combined Facilities provides for customary representations and warranties and customary events of default, generally with corresponding grace periods, including, without limitation, payment defaults with respect to the facility, covenant defaults, cross-defaults to other agreements evidencing material indebtedness, certain judgments and events of bankruptcy.
Canadian Term Loan
On October 5, 2015, Anixter, through its wholly-owned subsidiaries, Anixter Canada Inc. and Tri-Ed ULC, entered into a $300.0 million Canadian dollars (equivalent to approximately $225.0 million USD) Canadian Term Loan. During 2017, the Company repaid $100.2 million of the outstanding balance. The Company incurred $0.2 million of additional interest expense in 2017 due to the write-off of deferred financing costs on the early payment of debt. The Canadian Term Loan was guaranteed by all present and future material Canadian subsidiaries of Anixter Canada Inc. and Tri-Ed ULC as well as Anixter Mid Holdings BV. The Canadian Term Loan was secured by a first priority security interest in all of the assets of Anixter Canada Inc. and each of its Canadian subsidiaries, which comprised the borrowing group.
In the fourth quarter of 2017, the Company paid off the Canadian Term Loan in full.

6.00% Senior Notes Due 2025
On November 13, 2018, the Company's primary operating subsidiary, Anixter Inc., completed the issuance of $250.0 million principal amount of Senior notes due 2025 ("Notes due 2025"). The Notes due 2025 were issued at a price that was 98.75% of par, which resulted in a discount related to underwriting fees of $3.1 million. The discount is reported on the Consolidated Balance Sheet as a reduction to the face amount of the Notes due 2025 and is being amortized to interest expense over the term of the related debt, using the effective interest method. In addition, $0.8 million of deferred financing costs were paid, which are being amortized through maturity using the straight-line method. The Notes due 2025 pay interest semi-annually at a rate of 6.00% per annum and will mature on December 1, 2025. In addition, Anixter Inc. may at any time prior to September 1, 2025, redeem some or all of the Notes due 2025 at a price equal to 100% of the principal amount plus a "make whole" premium. At any time on or after September 1, 2025, Anixter Inc. may redeem some or all of the Notes due 2025 at a price equal to 100% of the principal amount, plus accrued and unpaid interest. If the Company experiences certain kinds of changes of control, Anixter Inc. must offer to repurchase all of the Notes due 2025 outstanding at 101% of the aggregate principal amount repurchased, plus accrued and unpaid interest. The proceeds were used along with available borrowings under Anixter's revolving lines of credit to retire the Company's Senior notes due 2019. Anixter International Inc. fully and unconditionally guarantees the Notes due 2025, which are unsecured obligations of Anixter Inc.
5.50% Senior Notes Due 2023
On August 18, 2015, the Company's primary operating subsidiary, Anixter Inc., completed the issuance of $350.0 million principal amount of Senior notes due 2023 ("Notes due 2023"). The Notes due 2023 were issued at a price that was 98.75% of par, which resulted in a discount related to underwriting fees of $4.4 million. The discount is reported on the Consolidated Balance Sheet as a reduction to the face amount of the Notes due 2023 and is being amortized to interest expense over the term of the related debt, using the effective interest method. In addition, $1.7 million of deferred financing costs were paid, which are being amortized through maturity using the straight-line method. The Notes due 2023 pay interest semi-annually at a rate of 5.50% per annum and will mature on March 1, 2023. In addition, Anixter Inc. may at any time redeem some or all of the Notes due 2023 at a price equal to 100% of the principal amount plus a "make whole" premium. If the Company experiences certain kinds of changes of control, Anixter Inc. must offer to repurchase all of the Notes due 2023 outstanding at 101% of the aggregate principal amount repurchased, plus accrued and unpaid interest. The proceeds were used to partially finance the Power Solutions acquisition. Anixter International Inc. fully and unconditionally guarantees the Notes due 2023, which are unsecured obligations of Anixter Inc.
5.125% Senior Notes Due 2021
On September 23, 2014, the Company's primary operating subsidiary, Anixter Inc., completed the issuance of $400.0 million principal amount of Senior notes due 2021 ("Notes due 2021"). The Notes due 2021 were issued at a price that was 98.50% of par, which resulted in a discount related to underwriting fees of $6.0 million. Net proceeds from this offering were approximately $393.1 million after also deducting for approximately $0.9 million of deferred financing costs paid that are being amortized through maturity using the straight-line method. The discount is reported on the Consolidated Balance Sheet as a reduction to the face amount of the Notes due 2021 and is being amortized to interest expense over the term of the related debt, using the effective interest method. The Notes due 2021 pay interest semi-annually at a rate of 5.125% per annum and will mature on October 1, 2021. In addition, Anixter Inc. may at any time redeem some or all of the Notes due 2021 at a price equal to 100% of the principal amount plus a "make whole" premium. If Anixter Inc. and/or the Company experience certain kinds of changes of control, it must offer to repurchase all of the Notes due 2021 outstanding at 101% of the aggregate principal amount repurchased, plus accrued and unpaid interest. The proceeds were used by Anixter Inc. to repay amounts outstanding under the accounts receivable credit facility, to repay certain additional borrowings under the 5-year senior unsecured revolving credit agreement that had been incurred for the specific purpose of funding the Tri-Ed acquisition, to provide additional liquidity for maturing indebtedness and for general corporate purposes. Anixter International Inc. fully and unconditionally guarantees the Notes due 2021, which are unsecured obligations of Anixter Inc.

Short-term borrowings
Anixter has borrowings under other bank revolving lines of credit totaling $8.8 million and $6.1 million at the end of fiscal 2019 and 2018, respectively. The Company's short-term borrowings have maturity dates within the next fiscal year. However, all of the borrowings at the end of fiscal 2019 have been classified as long-term at January 3, 2020, as the Company has the intent and ability to refinance the debt under existing long-term financing agreements.
Retirement of Debt

In the fourth quarter of 2018, Anixter retired the below described 5.625% Senior notes due 2019, which had a maturity value of $350.0 million. The proceeds from the issuance of Notes due 2025 and available borrowings under Anixter's revolving lines of credit were used to settle the maturity value. The Company paid a $3.9 million make whole premium and incurred $0.7 million of additional expense due to the write-off of discounts and deferred financing costs on the early payment of debt.
On April 30, 2012, the Company's primary operating subsidiary, Anixter Inc., completed the issuance of $350.0 million principal amount of Senior notes due 2019 ("Notes due 2019"). The Notes due 2019 were issued at a price that was 98.25% of par, which resulted in a discount related to underwriting fees of $6.1 million. Net proceeds from this offering were approximately $342.9 million after also deducting for approximately $1.0 million of deferred financing costs paid that were amortized through maturity using the straight-line method. The discounts were reported on the Consolidated Balance Sheet as a reduction to the face amount of the Notes due 2019 and were amortized to interest expense over the term of the related debt, using the effective interest method. The Notes due 2019 paid interest semi-annually at a rate of 5.625% per annum and were scheduled to mature on May 1, 2019.
In the fourth quarter of 2017, the Company paid off the Canadian Term Loan in full.

The retirement of debt did not have a significant impact on the Company's Consolidated Statements of Income.
Fair Value of Debt
The fair value of Anixter's debt instruments is measured using observable market information which would be considered Level 2 in the fair value hierarchy described in accounting guidance on fair value measurements. The Company's fixed-rate debt consists of Senior notes due 2025, Senior notes due 2023 and Senior notes due 2021.
 
At January 3, 2020, the Company's total carrying value and estimated fair value of debt outstanding was $1,059.7 million and $1,122.1 million, respectively. This compares to a carrying value and estimated fair value of debt outstanding at December 28, 2018 of $1,252.7 million and $1,261.7 million, respectively. The decrease in the carrying value and estimated fair value is primarily due to lower outstanding borrowings under Anixter's revolving lines of credit.
v3.19.3.a.u2
COMMITMENTS AND CONTINGENCIES
12 Months Ended
Jan. 03, 2020
Text Block [Abstract]  
COMMITMENTS AND CONTINGENCIES COMMITMENTS AND CONTINGENCIES
As of January 3, 2020, the Company had $56.1 million in outstanding letters of credit and guarantees.
From time to time, Anixter is party to legal proceedings and matters that arise in the ordinary course of business. As of January 3, 2020, the Company does not believe there is a reasonable possibility that any material loss exceeding the amounts already recognized for these proceedings and matters has been incurred. However, the ultimate resolutions of these proceedings and matters are inherently unpredictable. As such, the Company's financial condition and results of operations could be adversely affected in any particular period by the unfavorable resolution of one or more of these proceedings or matters.
v3.19.3.a.u2
INCOME TAXES
12 Months Ended
Jan. 03, 2020
INCOME TAXES INCOME TAXES
Income Before Tax Expense: Domestic income before income taxes was $244.2 million, $167.8 million and $178.1 million for 2019, 2018 and 2017, respectively. Foreign income before income taxes was $49.2 million, $55.4 million and $59.5 million for 2019, 2018 and 2017, respectively.
Tax Provisions and Reconciliation to the Statutory Rate: The components of Anixter's tax expense and the reconciliation to the statutory federal rate are identified below. Income tax expense was comprised of:
Years Ended
(In millions)January 3,
2020
December 28,
2018
December 29,
2017
Current:
Foreign$21.7  $24.2  $21.7  
State10.3  9.4  8.3  
Federal39.9  34.2  99.4  
71.9  67.8  129.4  
Deferred:
Foreign(3.5) (2.5) 0.2  
State0.5  0.2  2.0  
Federal(38.4) 1.4  (3.0) 
(41.4) (0.9) (0.8) 
Income tax expense$30.5  $66.9  $128.6  
Reconciliations of income tax expense to the statutory corporate federal tax rate of 21% were as follows:
Years Ended
(In millions)January 3,
2020
December 28,
2018
December 29,
2017
Statutory tax expense$61.6  $46.9  $83.2  
Increase (reduction) in taxes resulting from:
State income taxes, net9.7  7.9  4.4  
Foreign tax effects3.5  11.9  2.0  
Change in valuation allowance(42.3) (0.6) (0.3) 
Impact of tax legislation—  (2.1) 35.6  
Foreign derived intangible income deduction(4.5) —  —  
Other, net2.5  2.9  3.7  
Income tax expense$30.5  $66.9  $128.6  

Impact of Tax Legislation: On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was signed into law. The Act made significant changes to the U.S. tax code. The changes impacting the Company beginning in the fourth quarter of 2017, the period of enactment, include:
The reduction of the U.S. corporate tax rate to 21% results in an adjustment to the Company's U.S. deferred tax assets and liabilities to the lower rate. The impact of the deferred tax adjustment was measured and recorded as an increase in earnings for the quarter ending December 29, 2017, of $14.4 million. The impact was revised and a deferred tax adjustment of $0.7 million was recorded as a decrease in earnings for the quarter ending December 28, 2018; and
The tax reform legislation will subject the earnings of the Company's cumulative foreign earnings and profits to U.S. income taxes as a deemed repatriation. The estimated provisional impact of the deemed repatriation decreased earnings for the quarter ending December 29, 2017 by $50.0 million. The tax impact was revised to $47.2 million and finalized in 2018.
The Act subjects U.S. shareholders to tax on Global Intangible Low-Taxed Income ("GILTI") earned by certain foreign subsidiaries. The Company is electing to recognize the tax on GILTI as a period expense in the period tax is incurred. Under this policy, the Company has not provided deferred taxes related to temporary differences that upon their reversal will affect the amount of income subject to GILTI in the period.
Tax Payments: The Company made net payments for income taxes in 2019, 2018 and 2017 of $87.1 million, $88.4 million and $76.4 million, respectively.
Net Operating Losses: Anixter International Inc. and its U.S. subsidiaries file a U.S. federal corporate income tax return on a consolidated basis. At January 3, 2020, various of Anixter's foreign subsidiaries had aggregate cumulative net operating loss ("NOL") carryforwards for foreign income tax purposes of approximately $89.7 million which are subject to various provisions of each respective country. Approximately $71.9 million of the NOL carryforwards may be carried forward indefinitely. The remaining NOL carryforwards expire at various times between 2020 and 2028.
Foreign Tax Credit Carryforwards: At January 3, 2020, the Company estimated and accrued provisional transition taxes. As a result of the transition tax, the Company estimates that it will also have foreign tax credit carryforwards of $41.7 million. At December 28, 2018, a full valuation allowance was recorded against the deferred tax asset related to foreign tax credits as there was not sufficient foreign-source income projected to utilize the foreign tax credits. After considering the relevant evidence in assessing the realizability of the deferred tax asset related to foreign tax credits, in particular the effects of changing to a U.S.-center-led business model during 2019, the Company reversed its valuation allowance in the amount of $41.7 million in 2019.
Undistributed Earnings: Undistributed earnings of Anixter's foreign subsidiaries amounted to approximately $680.0 million at January 3, 2020. The Act converted the U.S. system of taxing foreign earnings from a worldwide system to a territorial system. Future distributions of foreign earnings by Anixter affiliates abroad will no longer result in U.S. taxation. In converting to a territorial system the Act levied a one-time transition tax on deferred foreign earnings as of 2017. Anixter has calculated the net combined U.S. tax impact on this deemed repatriation to be approximately $47.2 million and plans to elect to pay the federal portion of this tax liability in installments over eight years. Despite the conversion to a territorial system, Anixter considers the undistributed earnings of its foreign subsidiaries to be indefinitely reinvested. Upon distribution of those earnings in the form of dividends or otherwise, Anixter may be subject to withholding taxes payable to the various foreign countries. With respect to the countries that have undistributed earnings as of January 3, 2020, according to the foreign laws and treaties in place at that time, estimated foreign jurisdiction withholding taxes of approximately $37.6 million would be payable upon the remittance of all earnings at January 3, 2020.
Deferred Income Taxes: Significant components of the Company's deferred tax assets (liabilities) included in "Other assets" and "Other liabilities" on the Consolidated Balance Sheets were as follows:
(In millions)January 3,
2020
December 28,
2018
Deferred compensation and other postretirement benefits$38.4  $36.0  
Foreign NOL carryforwards and other26.1  28.1  
Operating lease obligations67.6  1.6  
Accrued expenses and other9.1  8.4  
Inventory reserves8.7  8.5  
Unrealized foreign exchange0.5  2.7  
Allowance for doubtful accounts6.5  7.9  
Federal and state credits54.5  50.6  
Gross deferred tax assets$211.4  $143.8  
Property, equipment, intangibles and other(74.8) (90.1) 
Operating lease assets(66.5) —  
Gross deferred tax liabilities$(141.3) $(90.1) 
Deferred tax assets, net of deferred tax liabilities70.1  53.7  
Valuation allowance(38.3) (79.1) 
Net deferred tax assets (liabilities)$31.8  $(25.4) 
 
Uncertain Tax Positions and Jurisdictions Subject to Examinations: A reconciliation of the beginning and ending amount of unrecognized tax benefits for fiscal 2017, 2018 and 2019 is as follows:
(In millions)
Balance at December 30, 2016$5.0  
Reductions for tax positions of prior years(0.3) 
Balance at December 29, 2017$4.7  
Additions for tax positions of prior years0.6  
Reductions for tax positions of prior years(0.6) 
Balance at December 28, 2018$4.7  
Additions for tax positions of prior years0.1  
Reductions for tax positions of prior years(2.6) 
Balance at January 3, 2020$2.2  
Interest and penalties accrued for unrecognized tax benefits were $0.2 million in 2019, 2018 and 2017. The Company estimates that of the unrecognized tax benefit balance of $2.2 million, all of which would affect the effective tax rate, $0.2 million may be resolved in a manner that would impact the effective rate within the next twelve months. The reserves for uncertain tax positions, including interest and penalties, of $3.0 million cover a range of issues, including intercompany charges and withholding taxes, and involve various taxing jurisdictions.
Only the returns for fiscal tax years 2014 and later remain open to examination by the Internal Revenue Service ("IRS") in the U.S., which is Anixter's most significant tax jurisdiction. For most states, fiscal tax years 2015 and later remain subject to examination. In Canada, the fiscal tax years 2015 and later are still subject to examination, while in the United Kingdom, the fiscal tax years 2018 and later remain subject to examination.
v3.19.3.a.u2
PENSION PLANS
12 Months Ended
Jan. 03, 2020
Text Block [Abstract]  
PENSION PLANS PENSION PLANS, POST-RETIREMENT BENEFITS AND OTHER BENEFITS
The Company's defined benefit pension plans are the plans in the U.S., which consist of the Anixter Inc. Pension Plan, the Executive Benefit Plan and the Supplemental Executive Retirement Plan ("SERP") (together the "Domestic Plans") and various defined benefit pension plans covering employees of foreign subsidiaries in Canada and Europe (together the "Foreign Plans"). The majority of these defined benefit pension plans are non-contributory and, with the exception of the U.S. and Canada, cover substantially all full-time domestic employees and certain employees in other countries. Retirement benefits are provided based on compensation as defined in both the Domestic Plans and the Foreign Plans. The Company's policy is to fund all Domestic Plans as required by the Employee Retirement Income Security Act of 1974 ("ERISA") and the IRS and all Foreign Plans as required by applicable foreign laws. The Executive Benefit Plan and SERP are the only two plans that are unfunded. Assets in the various plans consist primarily of equity securities and debt securities.
Accounting rules related to pensions generally reduce the recognition of actuarial gains and losses in the net benefit cost, as any significant actuarial gains/losses are amortized over the remaining service lives of the plan participants. These actuarial gains and losses are mainly attributable to the return on plan assets that differ from that assumed and differences in the obligation due to changes in the discount rate, plan demographic changes and other assumptions.
The measurement date for all plans is December 31st. Accordingly, at the end of each fiscal year, the Company determines the discount rate to be used to discount the plan liabilities to their present value. The discount rate reflects the current rate at which the pension liabilities could be effectively settled at the end of the year. In estimating this rate at the end of 2019 and 2018, the Company reviewed rates of return on relevant market indices and concluded the Willis Towers Watson Global Rate Link Model was consistent with observable market conditions and industry standards for developing spot rate curves. These rates are adjusted to match the duration of the liabilities associated with the pension plans.
At January 3, 2020 and December 28, 2018, the Company determined the consolidated weighted-average discount rate of all plans to be 2.75% and 3.59%, respectively, and used these rates to measure the projected benefit obligation ("PBO") at the end of each respective fiscal year end. Due primarily to actuarial losses, the PBO increased to $586.5 million at the end of fiscal 2019 from $504.1 million at the end of fiscal 2018. The consolidated net unfunded status was $71.0 million at the end of fiscal 2019 compared to $55.2 million at the end of 2018.
A significant element in determining net periodic benefit cost in accordance with U.S. GAAP is the expected return on plan assets. For 2019, the Company had assumed that the weighted-average expected long-term rate of return on plan assets would be 6.01%. This expected return on plan assets is included in the net periodic benefit cost for the fiscal year ended 2019. As a result of the combined effect of valuation changes in both the equity and bond markets, the plan assets produced an actual gain of approximately 16.8% in 2019 and an actual loss of approximately 4.2% in 2018. The fair value of plan assets is $515.5 million at the end of fiscal 2019, compared to $448.9 million at the end of fiscal 2018. The difference between the expected return and the actual return on plan assets is amortized into expense over the service lives of the plan participants. These amounts are reflected on the balance sheet through charges to "Accumulated other comprehensive loss," a component of "Stockholders’ Equity" in the Consolidated Balance Sheets.
In the fourth quarter of 2019, the Company amended the Anixter Inc. Pension Plan in the U.S. to allow for terminated employees a one-time option to receive a cash payout of their vested benefits if the present value of the benefit was under $125,000. This resulted in an additional $10.9 million of lump sum payments. The cash payout did not result in a settlement charge as the amount did not exceed the service and interest costs of the plan in 2019.
In the fourth quarter of 2017, the Company transferred the benefits of certain retirees or beneficiaries to a third-party annuity provider. The Company paid $11.3 million of additional contributions into the plan using excess cash from operations to fund the contributions. The plan purchased an $11.3 million annuity contract with a third-party insurance carrier and transferred the related pension obligations to the carrier. The funding of the premiums did not result in a settlement charge as the amount did not exceed the service and interest costs of the plan in 2017.
In the third quarter of 2015, the plan was frozen to entrants first hired or rehired on or after July 1, 2015. Anixter Inc. makes an annual contribution to the Employee Savings Plan on behalf of each active participant who is first hired or rehired on or after July 1, 2015, or is not participating in the Anixter Inc. Pension Plan. The amount of the employer annual contribution to each active participant's account will be an amount determined by multiplying the participant's salary for the Plan year by either: (1) 2% if such participant's years of service as of August 1 of the Plan year is fewer than five, or (2) 2.5% if such participant's years of service as of August 1 of the Plan year is five or greater. This contribution is in lieu of being eligible for the Anixter Inc. Pension Plan.
All non-union domestic employees hired or rehired before July 1, 2015, earn a benefit under a personal retirement account (hypothetical account balance). Each year, a participant’s account receives a credit equal to 2% of the participant’s salary (2.5% if the participant’s years of service at August 1 of the plan year are five years or more). Active participants become fully vested in their hypothetical personal retirement account after three years of service. Interest earned on the credited amount is not credited to the personal retirement account but is contributed to the participant’s account in the Anixter Inc. Employee Savings Plan. The interest contribution equals the interest earned on the personal retirement account balance as of January 1st in the Domestic Plan and is based on the 10-year Treasury note rate as of the last business day of December.
In 2019 and 2018, the Society of Actuaries released new mortality tables and improvement projection scales. After reviewing the new information as well as the defined benefit plan’s population, the Company updated U.S. mortality improvement assumptions in 2019 and 2018 for purposes of determining its mortality assumption used in the U.S. defined benefit plans' liability calculation. In 2019, the Company selected the white collar version of the Pri-2012 tables projected generationally using the Society of Actuaries’ MP-2019 projection scale. The updated U.S. mortality assumptions resulted in an increase of $5.2 million to the benefit obligation as of the end of 2019, prior to reflecting the discount rate change. In 2018, the Company adjusted the long term mortality improvement projection assumption to 80% of the Society of Actuaries’ mortality improvement scale to reflect the Company’s long-term expectations. The updated U.S. mortality assumptions resulted in a decrease of $2.8 million to the benefit obligation as of the end of 2018, prior to reflecting the discount rate change.
The assets of the various defined benefit plans are held in separate independent trusts and managed by independent third party advisors. The investment objective of both the Domestic and Foreign Plans is to ensure, over the long-term life of the plans, an adequate level of assets to fund the benefits to employees and their beneficiaries at the time they are payable. In meeting this objective, the Company seeks to achieve a level of absolute investment return consistent with a prudent level of portfolio risk. Anixter's risk preference is to refrain from exposing the plans to higher volatility in pursuit of potential higher returns.

The Domestic Plans’ and Foreign Plans’ asset mixes as of January 3, 2020 and December 28, 2018 and the asset allocation guidelines for such plans are summarized as follows.
Domestic Plans
 January 3, 2020Allocation Guidelines
 MinTargetMax
Global equities42.5 %30 %37 %45 %
Debt securities:
     Domestic treasuries20.9  —  24  40  
     Corporate bonds7.0  —   40  
     Other14.4   14  19  
Total debt securities42.3   46  99  
Property/real estate15.2   16  23  
Other—  —    
100.0 %100 %
Domestic Plans
December 28,
2018
Allocation Guidelines
MinTargetMax
Global equities40.1 %37 %46 %66 %
Debt securities:
    Domestic treasuries15.6  —  12  34  
    Corporate bonds16.3  —  17  34  
    Other14.5   14  19  
Total debt securities46.4   43  87  
Property/real estate12.6  —  10  19  
Other0.9  —    
100.0 %100 %
Foreign Plans
January 3, 2020Allocation Guidelines
MinTargetMax
Equities:
    Domestic equities0.4 %— %— %— %
    International equities—     
    Global equities39.3  14  34  39  
Total equities39.7  16  36  41  
Debt securities:
    Domestic treasuries0.4  —  —  —  
    Corporate bonds8.1  —  —  —  
    Other37.1  16  42  73  
Total debt securities45.6  16  42  73  
Property/real estate6.3  —  14  22  
Insurance products8.3     
Other0.1  —  —  14  
100.0 %100 %
Foreign Plans
 December 28,
2018
Allocation
Guidelines
 Target
Equity securities60 %60 %
Debt securities30  30  
Other investments10  10  
100 %100 %
The pension committees meet regularly to assess investment performance and reallocate assets that fall outside of its allocation guidelines. The variations between the allocation guidelines and actual asset allocations reflect relative performance differences in asset classes. From time to time, the Company periodically rebalances its asset portfolios to be in line with its allocation guidelines.
For 2019, the U.S. investment policy guidelines were as follows:
 
Each asset class is managed by one or more active and passive investment managers
Each asset class may be invested in a commingled fund, mutual fund, or separately managed account
Investment in Exchange Traded Funds ("ETFs") is permissible
Each manager is expected to be "fully invested" with minimal cash holdings
Derivative instruments such as futures, swaps and options may be used on a limited basis;  For funds that employ derivatives, the loss of invested capital to the Trust should be limited to the amount invested in the fund
The equity portfolio is diversified by sector and geography
The real assets portfolio is invested Real Estate Investment Trusts ("REITs") and private real estate
The fixed income is invested in U.S. Treasuries, investment grade corporate debt (denominated in U.S. dollars), and other credit investments including below investment grade rated bonds and loans, securitized credit, and emerging market debt

The investment policies for the Foreign plans are the responsibility of the various trustees. Generally, the investment policy guidelines are as follows:
 
Make sure that the obligations to the beneficiaries of the Plan can be met
Maintain funds at a level to meet the minimum funding requirements
The investment managers are expected to provide a return, within certain tracking tolerances, close to that of the relevant market’s indices
The expected long-term rate of return on both the Domestic and Foreign Plans’ assets reflects the average rate of earnings expected on the invested assets and future assets to be invested to provide for the benefits included in the projected benefit obligation. The Company uses historic plan asset returns combined with current market conditions to estimate the rate of return. The expected rate of return on plan assets is a long-term assumption based on an analysis of historical and forward looking returns considering the respective plan’s actual and target asset mix. The weighted-average expected rate of return on plan assets used in the determination of net periodic pension cost for 2019 is 6.01%.
The following table sets forth the changes and the end of year components of "Accumulated other comprehensive loss" for the defined benefit plans:
(In millions)January 3,
2020
December 28,
2018
Changes to Balance:
Beginning balance$126.7  $112.2  
Recognized prior service cost3.8  4.0  
Recognized net actuarial gain(8.5) (7.5) 
Settlement(0.4) —  
Prior service cost arising in current year—  0.4  
Net actuarial loss arising in current year20.4  21.8  
Foreign currency exchange rate changes2.5  (4.2) 
Ending balance$144.5  $126.7  

Components of Balance:
Prior service credit$(9.0) $(12.8) 
Net actuarial loss153.5  139.5  
$144.5  $126.7  
Amounts in "Accumulated other comprehensive loss" expected to be recognized as components of net period pension cost in 2020 are as follows:
(In millions)
Amortization of prior service credit$(3.4) 
Amortization of actuarial loss9.4  
Total amortization expected$6.0  
The following represents a reconciliation of the funded status of the Company's pension plans for fiscal years 2019 and 2018:
Pension Benefits
 Domestic PlansForeign PlansTotal
(In millions)201920182019201820192018
Change in projected benefit obligation:
Beginning balance$261.5  $275.8  $242.6  $257.6  $504.1  $533.4  
Service cost3.1  3.5  5.7  5.9  8.8  9.4  
Interest cost10.9  10.3  6.9  6.8  17.8  17.1  
Actuarial loss (gain)41.4  (19.9) 34.8  (4.0) 76.2  (23.9) 
Benefits paid from plan assets(18.5) (7.4) (7.9) (8.1) (26.4) (15.5) 
Benefits paid from Company assets(1.2) (0.8) —  —  (1.2) (0.8) 
Plan amendment—  —  —  0.5  —  0.5  
Settlement—  —  (1.5) (0.5) (1.5) (0.5) 
Plan participants contributions—  —  0.1  0.1  0.1  0.1  
Foreign currency exchange rate changes—  —  8.7  (15.7) 8.7  (15.7) 
Other—  —  (0.1) —  (0.1) —  
Ending balance$297.2  $261.5  $289.3  $242.6  $586.5  $504.1  
Change in plan assets at fair value:
Beginning balance$260.4  $280.8  $188.5  $209.1  $448.9  $489.9  
Actual return on plan assets55.6  (13.0) 25.5  (6.9) 81.1  (19.9) 
Company contributions to plan assets—  —  6.3  7.4  6.3  7.4  
Benefits paid from plan assets(18.5) (7.4) (7.9) (8.1) (26.4) (15.5) 
Settlement—  —  (1.5) (0.5) (1.5) (0.5) 
Plan participants contributions—  —  0.1  0.1  0.1  0.1  
Foreign currency exchange rate changes—  —  7.1  (12.6) 7.1  (12.6) 
Other—  —  (0.1) —  (0.1) —  
Ending balance$297.5  $260.4  $218.0  $188.5  $515.5  $448.9  
Reconciliation of funded status:
Projected benefit obligation$(297.2) $(261.5) $(289.3) $(242.6) $(586.5) $(504.1) 
Plan assets at fair value297.5  260.4  218.0  188.5  515.5  448.9  
Funded status$0.3  $