Risk Management and Derivatives

3 Months Ended

Apr. 29, 2017

General Discussion of Derivative Instruments and Hedging Activities [Abstract]

Risk Management And Derivatives

Note 12 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 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 May 2018. Credit risk is managed through the continuous monitoring of exposures to such counterparties. 

The Company’s hedging strategy uses forward contracts as cash flow hedging instruments, which are recorded in the Company's condensed 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 loss and reclassified to earnings in the period that the hedged transaction is recognized in earnings.

Hedge ineffectiveness is evaluated using the hypothetical derivative method. The amount of hedge ineffectiveness for the thirteen weeks ended April 29, 2017 and April 30, 2016 was not material. 

As of April 29, 2017, April 30, 2016 and January 28, 2017, the Company had forward contracts maturing at various dates through May 2018, April 2017 and February 2018, respectively. The contract amounts in the following table represent the net notional amount of all purchase and sale contracts of a foreign currency. 

(U.S. $ equivalent in thousands)	April 29, 2017		April 30, 2016		January 28, 2017
Financial Instruments
U.S. dollars (purchased by the Company’s Canadian division with Canadian dollars)	$	20,813	$	15,767	$	18,826
Euro	16,446		15,182		13,297
Chinese yuan	4,476		14,066		7,723
Japanese yen	416		1,152		769
United Arab Emirates dirham	528		900		823
New Taiwanese dollars	545		514		526
Other currencies	66		170		124
Total financial instruments	$	43,290	$	47,751	$	42,088

The classification and fair values of derivative instruments designated as hedging instruments included within the condensed consolidated balance sheets as of April 29, 2017, April 30, 2016 and January 28, 2017 are as follows:

	Asset Derivatives			Liability Derivatives
($ thousands)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Foreign exchange forward contracts:
April 29, 2017	Prepaid expenses and other current assets	$	610	Other accrued expenses	$	187
April 30, 2016	Prepaid expenses and other current assets	615		Other accrued expenses	962
January 28, 2017	Prepaid expenses and other current assets	234		Other accrued expenses	874

For the thirteen weeks ended April 29, 2017 and April 30, 2016, 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)	April 29, 2017						April 30, 2016
Foreign exchange forward contracts: Income Statement Classification (Losses) Gains - Realized	(Loss) Gain Recognized in OCL on Derivatives			Gain (Loss) Reclassified from Accumulated OCL into Earnings			(Loss) Gain Recognized in OCL on Derivatives			(Loss) Gain Reclassified from Accumulated OCL into Earnings
Net sales	$	(32	)	$	18		$	(164	)	$	(36	)
Cost of goods sold	793			3			(113		)	83
Selling and administrative expenses	310			(67		)	51			(170		)
Interest expense	4			(1		)	(38		)	—

All gains and losses currently included within accumulated other comprehensive 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 13 to the condensed consolidated financial statements.