Risk Management And Derivatives

3 Months Ended

May 02, 2015

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 April 2016. 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, and 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 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 weeks ended May 2, 2015 and May 3, 2014 was not material. 

As of May 2, 2015, May 3, 2014 and January 31, 2015, the Company had forward contracts maturing at various dates through April 2016,  May 2015 and January 2016, 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)	May 2, 2015		May 3, 2014		January 31, 2015
Financial Instruments
U.S. dollars (purchased by the Company’s Canadian division with Canadian dollars)	$	17,635	$	22,369	$	19,633
Chinese yuan	10,978		14,386		14,512
Euro	16,449		14,284		16,152
Japanese yen	1,483		1,625		1,523
New Taiwanese dollars	528		524		599
Other currencies	932		794		970
Total financial instruments	$	48,005	$	53,982	$	53,389

The classification and fair values of derivative instruments designated as hedging instruments included within the condensed consolidated balance sheets as of May 2, 2015, May 3, 2014 and January 31, 2015 are as follows:

	Asset Derivatives			Liability Derivatives
($ thousands)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Foreign exchange forward contracts:
May 2, 2015	Prepaid expenses and other current assets	$	973	Other accrued expenses	$	1,032
May 3, 2014	Prepaid expenses and other current assets	446		Other accrued expenses	364
January 31, 2015	Prepaid expenses and other current assets	1,863		Other accrued expenses	1,784

For the thirteen weeks ended May 2, 2015 and May 3, 2014, 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 2, 2015						May 3, 2014
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			(Loss) Gain Recognized in OCI on Derivatives			Gain Reclassified from Accumulated OCI into Earnings
Net sales	$	25		$	54		$	(7	)	$	13
Cost of goods sold	(201		)	(129		)	19			53
Selling and administrative expenses	(88		)	4			(456		)	12
Interest expense	(22		)	—			(11		)	—

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.