Risk Management and Derivatives

9 Months Ended

Oct. 28, 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 November 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 and thirty-nine weeks ended October 28, 2017 and October 29, 2016 was not material. 

As of October 28, 2017, October 29, 2016 and January 28, 2017, the Company had forward contracts maturing at various dates through November 2018, October 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)	October 28, 2017		October 29, 2016		January 28, 2017
Financial Instruments
U.S. dollars (purchased by the Company’s Canadian division with Canadian dollars)	$	18,242	$	17,229	$	18,826
Euro	18,815		10,854		13,297
Chinese yuan	12,613		13,038		7,723
New Taiwanese dollars	580		538		526
United Arab Emirates dirham	—		1,143		823
Japanese yen	—		1,145		769
Other currencies	—		206		124
Total financial instruments	$	50,250	$	44,153	$	42,088

The classification and fair values of derivative instruments designated as hedging instruments included within the condensed consolidated balance sheets as of October 28, 2017, October 29, 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
October 28, 2017	Prepaid expenses and other current assets	$	760	Other accrued expenses	$	564
October 29, 2016	Prepaid expenses and other current assets	362		Other accrued expenses	570
January 28, 2017	Prepaid expenses and other current assets	234		Other accrued expenses	874

For the periods ended October 28, 2017 and October 29, 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)	October 28, 2017					October 29, 2016
Foreign Exchange Forward Contracts: Income Statement Classification (Losses) Gains - Realized	(Loss) Gain Recognized in OCL on Derivatives			Gain Reclassified from Accumulated OCL into Earnings		Gain (Loss) Recognized in OCL on Derivatives			Loss Reclassified from Accumulated OCL into Earnings
Net sales	$	(4	)	$	6	$	16		$	(55	)
Cost of goods sold	(42		)	3		(181		)	(8		)
Selling and administrative expenses	364			109		(97		)	(15		)
Interest expense	6			—		5			(1		)

	Thirty-Nine Weeks Ended						Thirty-Nine Weeks Ended
($ thousands)	October 28, 2017						October 29, 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 Recognized in OCL on Derivatives			(Loss) Gain Reclassified from Accumulated OCL into Earnings
Net sales	$	(44	)	$	30		$	(173	)	$	(127	)
Cost of goods sold	695			164			(766		)	109
Selling and administrative expenses	480			42			(121		)	(373		)
Interest expense	(4		)	(1		)	(19		)	(1		)

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.