Note 14 - Risk Management and Derivatives

3 Months Ended

May 02, 2020

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 14 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.  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.

As of  May 4, 2019 and  February 1, 2020, the Company had forward contracts maturing through May 2020.  The Company had no forward contracts as of May 2, 2020.  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)	May 2, 2020		May 4, 2019		February 1, 2020
Financial Instruments
U.S. dollars (purchased by the Company’s Canadian division with Canadian dollars)	$	—	$	13,230	$	3,963
Euro		—		12,134		1,251
Chinese yuan		—		2,858		2,355
New Taiwanese dollars		—		469		—
Other currencies		—		376		69
Total financial instruments	$	—	$	29,067	$	7,638

The classification and fair values of derivative instruments designated as hedging instruments included within the condensed consolidated balance sheets as of May 2, 2020, May 4, 2019 and February 1, 2020 are as follows:

	Asset Derivatives			Liability Derivatives
($ thousands)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Foreign Exchange Forward Contracts
May 2, 2020	Prepaid expenses and other current assets		—	Other accrued expenses		—
May 4, 2019	Prepaid expenses and other current assets		183	Other accrued expenses		459
February 1, 2020	Prepaid expenses and other current assets		—	Other accrued expenses		103

For the thirteen weeks ended May 2, 2020 and May 4, 2019, the effect of derivative instruments in cash flow hedging relationships on the condensed consolidated statements of earnings was as follows:

	Thirteen Weeks Ended
($ thousands)	May 2, 2020					May 4, 2019
Foreign Exchange Forward Contracts: Income Statement Classification Gains (Losses) - Realized	Gain Recognized in OCL on Derivatives		Loss Reclassified from Accumulated OCL into Earnings			(Loss) Gain Recognized in OCL on Derivatives			Loss Reclassified from Accumulated OCL into Earnings
Net sales	$	23	$	—		$	(99	)	$	—
Cost of goods sold		60		—			289			(22	)
Selling and administrative expenses		33		(6	)		35			(149	)

 

Additional information related to the Company’s derivative financial instruments are disclosed within Note 15 to the condensed consolidated financial statements.