Risk Management And Derivatives

9 Months Ended

Oct. 27, 2012

Risk Management And Derivatives [Abstract]

Risk Management And Derivatives

Note 11 Risk Management and Derivatives

In the normal course of business, the Company’s financial results are impacted by currency rate movements in foreign currency denominated assets, liabilities and cash flows as it makes a portion of its purchases and sales in local currencies. The Company has established policies and business practices that are intended to mitigate a portion of the effect of these exposures. The Company uses derivative financial instruments, primarily forward contracts, to manage its currency exposures. These derivative instruments are viewed as risk management tools and are not used for trading or speculative purposes. Derivatives entered into by the Company are designated as cash flow hedges of forecasted foreign currency transactions.

Derivative financial instruments expose the Company to credit and market risk. The market risk associated with these instruments resulting from currency exchange movements is expected to offset the market risk of the underlying transactions being hedged. The Company does not believe there is a significant risk of loss in the event of non-performance by the counterparties associated with these instruments because these transactions are executed with major financial institutions and have varying maturities through November 2013. Credit risk is managed through the continuous monitoring of exposures to such counterparties.

The Company principally uses foreign currency forward contracts as cash flow hedges to offset a portion of the effects of exchange rate fluctuations. The Company’s cash flow exposures include anticipated foreign currency transactions, such as foreign currency denominated sales, costs, expenses, intercompany charges, as well as collections and payments. The Company performs a quarterly assessment of the effectiveness of the hedge relationship and measures and recognizes any hedge ineffectiveness in the condensed consolidated statement of earnings. Hedge ineffectiveness is evaluated using the hypothetical derivative method, and the ineffective portion of the hedge is reported in the Company’s condensed consolidated statement of earnings. The amount of hedge ineffectiveness for the thirteen weeks and thirty-nine weeks ended October 27, 2012 and October 29, 2011 was not material.

The Company’s hedging strategy uses forward contracts as cash flow hedging instruments, which are recorded in the Company’s condensed consolidated balance sheet at fair value. The effective portion of gains and losses resulting from changes in the fair value of these hedge instruments are deferred in accumulated other comprehensive income and reclassified to earnings in the period that the hedged transaction is recognized in earnings.

As of October 27, 2012, October 29, 2011 and January 28, 2012, the Company had forward contracts maturing at various dates through November 2013, October 2012 and February 2013, respectively. The contract amount represents the net amount of all purchase and sale contracts of a foreign currency.

	Contract Amount
(U.S. $ equivalent in thousands)	October 27, 2012		October 29, 2011		January 28, 2012
Financial Instruments
Chinese yuan	$	22,193	$	16,934	$	43,407
U.S. dollars (purchased by the Company’s Canadian division with Canadian dollars)		19,427		18,218		19,002
Euro		4,784		6,048		7,293
Japanese yen		1,563		1,207		1,365
New Taiwanese dollars		935		1,196		830
Great Britain pounds sterling		211		–		2,947
Other currencies		853		1,183		1,107
Total financial instruments	$	49,966	$	44,786	$	75,951

The classification and fair values of derivative instruments designated as hedging instruments included within the condensed consolidated balance sheet as of October 27, 2012, October 29, 2011 and January 28, 2012 are as follows:

	Asset Derivatives			Liability Derivatives
($ in thousands)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Foreign exchange forward contracts:
October 27, 2012	Prepaid expenses and other current assets	$	189	Other accrued expenses	$	438
October 29, 2011	Prepaid expenses and other current assets		477	Other accrued expenses		495
January 28, 2012	Prepaid expenses and other current assets		839	Other accrued expenses		633

For the thirteen weeks ended October 27, 2012 and October 29, 2011, the effect of derivative instruments in cash flow hedging relationships on the condensed consolidated statements of earnings was as follows:

	Thirteen Weeks Ended				Thirteen Weeks Ended
($ in thousands)	October 27, 2012				October 29, 2011
Foreign exchange forward contracts: Income Statement Classification Gains (Losses) - Realized		Gain (Loss) Recognized in OCI on Derivatives		Gain (Loss) Reclassified from Accumulated OCI into Earnings		Gain (Loss) Recognized in OCI on Derivatives		Gain (Loss) Reclassified from Accumulated OCI into Earnings
Net sales	$	16	$	(26)	$	(10)	$	(26)
Cost of goods sold		204		(187)		357		10
Selling and administrative expenses		423		11		187		36
Interest expense		–		–		15		–

	Thirty-nine Weeks Ended				Thirty-nine Weeks Ended
($ in thousands)	October 27, 2012				October 29, 2011
Foreign exchange forward contracts: Income Statement Classification Gains (Losses) - Realized		Gain (Loss) Recognized in OCI on Derivatives		Gain (Loss) Reclassified from Accumulated OCI into Earnings		Gain (Loss) Recognized in OCI on Derivatives		Gain (Loss) Reclassified from Accumulated OCI into Earnings
Net sales	$	37	$	(12)	$	(117)	$	(115)
Cost of goods sold		(672)		(265)		114		(51)
Selling and administrative expenses		(49)		40		199		150
Interest expense		(7)		–		16		–

During 2011, the effect of derivative instruments in cash flow hedging relationships on the condensed consolidated statement of earnings was as follows:

($ in thousands)	Fiscal Year Ended January 28, 2012
Foreign exchange forward contracts: Income Statement Classification Gains (Losses) - Realized		Gain (Loss) Recognized in OCI on Derivatives		Gain (Loss) Reclassified from Accumulated OCI into Earnings
Net sales	$	(99)	$	(145)
Cost of goods sold		335		(90)
Selling and administrative expenses		232		169
Interest expense		14		–

All of the gains and losses currently included within accumulated other comprehensive income associated with the Company’s foreign exchange forward contracts are expected to be reclassified into net earnings within the next 13 months. Additional information related to the Company’s derivative financial instruments are disclosed within Note 12 to the condensed consolidated financial statements.