Risk Management And Derivatives

3 Months Ended

May 03, 2014

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 May 2015. 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 thirteenweeks ended May 3, 2014 and May 4, 2013 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 May 3, 2014, May 4, 2013, and February 1, 2014, the Company had forward contracts maturing at various dates through May 2015,  May 2014, and January 2015, 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)	May 3, 2014		May 4, 2013		February 1, 2014
Financial Instruments
U.S. dollars (purchased by the Company’s Canadian division with Canadian dollars)	$	22,369	$	17,869	$	20,197
Chinese yuan		14,386		15,460		15,278
Euro		14,284		6,080		11,270
Japanese yen		1,625		1,500		1,586
Other currencies		1,318		1,407		1,345
Total financial instruments	$	53,982	$	42,316	$	49,676

The classification and fair values of derivative instruments designated as hedging instruments included within the condensed consolidated balance sheets as of May 3, 2014, May 4, 2013, and February 1, 2014 are as follows:

	Asset Derivatives			Liability Derivatives
($ thousands)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Foreign exchange forward contracts:
May 3, 2014	Prepaid expenses and other current assets	$	446	Other accrued expenses	$	364
May 4, 2013	Prepaid expenses and other current assets		181	Other accrued expenses		477
February 1, 2014	Prepaid expenses and other current assets		1,056	Other accrued expenses		222

For the thirteen weeks ended May 3, 2014 and May 4, 2013, 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
($ thousands)	May 3, 2014				May 4, 2013
Foreign exchange forward contracts: Income Statement Classification (Losses) Gains - Realized		(Loss) Gain Recognized in OCI on Derivatives		Gain Reclassified from Accumulated OCI into Earnings		Gain (Loss) Recognized in OCI on Derivatives		Gain Reclassified from Accumulated OCI into Earnings
Net sales	$	(7)	$	13	$	9	$	54
Cost of goods sold		19		53		85		21
Selling and administrative expenses		(456)		12		(158)		57
Interest expense		(11)		–		1		–

All 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 12 to the condensed consolidated financial statements.