Risk Management And Derivatives

12 Months Ended

Feb. 02, 2013

Risk Management And Derivatives [Abstract]

Risk Management And Derivatives

12. RISK MANAGEMENT AND DERIVATIVES

General Risk Management

The Company maintains cash and cash equivalents and certain other financial instruments with various financial institutions. The financial institutions are located throughout the world and the Company’s policy is designed to limit exposure to any one institution or geographic region. The Company’s periodic evaluations of the relative credit standing of these financial institutions are considered in the Company’s investment strategy.

The Company’s Wholesale Operations segment sells to national chains, department stores, independent retailers, mass merchandisers, online retailers andcatalogsprimarily in the United States, Canada and China. Receivables arising from these sales are not collateralized; however, a portion is covered by documentary letters of credit. Credit risk is affected by conditions or occurrences within the economy and the retail industry. The Company maintains an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers and historical trends.

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 financial 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 international financial institutions and have varying maturities through January 2014. 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 consolidated statement of earnings. Hedge ineffectiveness is evaluated using the hypothetical derivative method. The amount of hedge ineffectiveness for 2012, 2011 and 2010 was not material.

The Company’s hedging strategy uses forward contracts as cash flow hedging instruments, which are recorded in the Company’s consolidated balance sheets 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 February 2, 2013, the Company had forward contracts maturing at various dates through January 2014. The contract amount represents the net amount of all purchase and sale contracts of a foreign currency.

	Contract Amount
(U.S. $ equivalent in thousands)	February 2, 2013		January 28, 2012
Financial Instruments
U.S. dollars (purchased by the Company’s Canadian division with Canadian dollars)	$	18,442	$	19,002
Chinese yuan		15,544		43,407
Euro		3,459		7,293
Japanese yen		1,665		1,365
New Taiwanese dollars		734		830
Great Britain pounds sterling		63		2,947
Other currencies		729		1,107
	$	40,636	$	75,951

The classification and fair values of derivative instruments designated as hedging instruments included within the consolidated balance sheet as of February 2, 2013 and January 28, 2012 are as follows:

($ in thousands)	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Foreign exchange forwards contracts:
	Prepaid expenses and
February 2, 2013	other current assets	$	380	Other accrued expenses	$	373
	Prepaid expenses and other
January 28, 2012	current assets	$	839	Other accrued expenses	$	633

During 2012 and 2011, the effect of derivative instruments in cash flow hedging relationships on the consolidated statement of earnings was as follows:

($ in thousands)	Fiscal Year Ended 2012				Fiscal Year Ended 2011
Foreign exchange forward contracts:	Gain (Loss) Recognized in		Gain (Loss) Reclassified from		Gain (Loss) Recognized in		Gain (Loss) Reclassified from
Income Statement Classification	OCI on		Accumulated OCI		OCI on		Accumulated OCI
Gains (Losses) - Realized	Derivatives		into Earnings		Derivatives		into Earnings
Net sales	$	6	$	(27)	$	(99)	$	(145)
Cost of goods sold		(546)		(325)		335		(90)
Selling and administrative expenses		(9)		(16)		232		169
Interest expense		(7)		–		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 12 months. Additional information related to the Company’s derivative financial instruments are disclosed within Note 1 and Note 13 to the consolidated financial statements.