Risk Management And Derivatives

9 Months Ended

Nov. 01, 2014

General Discussion of Derivative Instruments and Hedging Activities [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 October 2015. Credit risk is managed through the continuous monitoring of exposures to such counterparties. 

The Company’s hedging strategy principally uses foreign currency forward contracts as cash flow hedges, which are recorded in the condensed consolidated balance sheet at fair value, 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 effective portion of gains and losses resulting from changes in the fair value of these hedge instruments are deferred in accumulated other comprehensive income (loss) and reclassified to earnings in the period that the hedged transaction is recognized in earnings.  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. The amount of hedge ineffectiveness for the thirteen andthirty-nine weeks ended November 1, 2014 and November 2, 2013 was not material. 

As of November 1, 2014, November 2, 2013, and February 1, 2014, the Company had forward contracts maturing at various dates through October 2015,  October 2014, and January 2015, respectively. The contract notional amount represents the net amount of all purchase and sale contracts of a foreign currency.

	Contract Notional Amount
(U.S. $ equivalent in thousands)	November 1, 2014		November 2, 2013		February 1, 2014
Financial Instruments
U.S. dollars (purchased by the Company’s Canadian division with Canadian dollars)	$	20,391	$	18,024	$	20,197
Chinese yuan	14,659		14,860		15,278
Euro	14,583		8,729		11,270
Japanese yen	1,505		1,657		1,586
Other currencies	1,540		1,372		1,345
Total financial instruments	$	52,678	$	44,642	$	49,676

The classification and fair values of derivative instruments designated as hedging instruments included within the condensed consolidated balance sheets as of November 1, 2014, November 2, 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:
November 1, 2014	Prepaid expenses and other current assets	$	440	Other accrued expenses	$	923
November 2, 2013	Prepaid expenses and other current assets	417		Other accrued expenses	184
February 1, 2014	Prepaid expenses and other current assets	1,056		Other accrued expenses	222

For the thirteen andthirty-nine weeks ended November 1, 2014 and November 2, 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)	November 1, 2014						November 2, 2013
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 Reclassified from Accumulated OCI into Earnings
Net sales	$	114		$	16		$	161		$	59
Cost of goods sold	(388		)	30			(163		)	24
Selling and administrative expenses	268			(16		)	145			85
Interest expense	5			—			(3		)	—

	Thirty-nine Weeks Ended					Thirty-nine Weeks Ended
($ in thousands)	November 1, 2014					November 2, 2013
Foreign exchange forward contracts: Income Statement Classification Gains (Losses) - Realized	Gain (Loss) Recognized in OCI on Derivatives			Gain Reclassified from Accumulated OCI into Earnings		Gain Recognized in OCI on Derivatives		Gain Reclassified from Accumulated OCI into Earnings
Net sales	$	110		$	32	$	278	$	207
Cost of goods sold	(1,145		)	19		382		51
Selling and administrative expenses	(442		)	2		354		272
Interest expense	(12		)	—		8		—

All gains and losses currently included within accumulated other comprehensive income (loss) 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.