Risk Management And Derivatives

9 Months Ended

Oct. 31, 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 October 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 sheets 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, inventory purchases, 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 statements of earnings.

Hedge ineffectiveness is evaluated using the hypothetical derivative method. The amount of hedge ineffectiveness for the thirteen and thirty-nine weeks ended October 31, 2015 and November 1, 2014 was not material. 

As of October 31, 2015, November 1, 2014 and January 31, 2015, the Company had forward contracts maturing at various dates through October 2016,  October 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)	October 31, 2015		November 1, 2014		January 31, 2015
Financial Instruments
U.S. dollars (purchased by the Company’s Canadian division with Canadian dollars)	$	17,820	$	20,391	$	19,633
Euro	16,178		14,583		16,152
Chinese yuan	15,828		14,659		14,512
Japanese yen	1,184		1,505		1,523
United Arab Emirates dirham	866		921		970
New Taiwanese dollars	610		619		599
Other currencies	243		—		—
Total financial instruments	$	52,729	$	52,678	$	53,389

The classification and fair values of derivative instruments designated as hedging instruments included within the condensed consolidated balance sheets as of October 31, 2015, November 1, 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:
October 31, 2015	Prepaid expenses and other current assets	$	513	Other accrued expenses	$	598
November 1, 2014	Prepaid expenses and other current assets	440		Other accrued expenses	923
January 31, 2015	Prepaid expenses and other current assets	1,863		Other accrued expenses	1,784

For the thirteen and thirty-nine weeks ended October 31, 2015 and November 1, 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)	October 31, 2015						November 1, 2014
Foreign exchange forward contracts: Income Statement Classification (Losses) Gains - Realized	(Loss) Gain 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	$	(35	)	$	19		$	114		$	16
Cost of goods sold	413			74			(388		)	30
Selling and administrative expenses	(603		)	(109		)	268			(16		)
Interest expense	(13		)	—			5			—

	Thirty-nine Weeks Ended						Thirty-nine Weeks Ended
($ thousands)	October 31, 2015						November 1, 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			Gain (Loss)  Recognized in OCI on Derivatives			Gain Reclassified from Accumulated OCI into Earnings
Net sales	$	24		$	132		$	110		$	32
Cost of goods sold	945			(48		)	(1,145		)	19
Selling and administrative expenses	(570		)	(62		)	(442		)	2
Interest expense	(27		)	—			(12		)	—

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.