Derivative Instruments and Hedging

9 Months Ended

Aug. 29, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging

DERIVATIVE INSTRUMENTS AND HEDGING

The Company is exposed to various market risks that arise from transactions entered into in the normal course of business. The Company selectively uses derivative instruments to manage certain such risks, including market risks associated with changes in foreign currency exchange rates and changes in interest rates. The Company does not hold or issue derivatives for trading or speculative purposes. A description of each type of derivative utilized by the Company to manage risk is included below. In addition, refer to Note 5 for information related to the fair value measurements utilized by the Company for each derivative type.

The Company may elect to designate certain derivatives as hedging instruments under the accounting standards for derivatives and hedging. The Company formally documents all relationships between designated hedging instruments and hedged items as well as its risk management objective and strategy for undertaking hedge transactions.

All derivatives are recognized on the balance sheet at fair value and classified based on the instrument's maturity date. The total notional amount of derivatives outstanding at August 29, 2015 was $50,601, which consists of derivative instruments to manage foreign exchange risk related to inter-company advances, and derivatives to manage the risk of changes in foreign currency exchange rates — principally the Euro and British pound — on certain firm sales commitments expected to be settled at future dates.

The following table presents the fair values of derivative instruments included within the Consolidated Condensed Balance Sheets at August 29, 2015 and November 29, 2014:

	August 29, 2015		November 29, 2014
Prepaid expenses and other current assets
Designated as hedging instruments:
Foreign exchange contracts	$	4	$	—
Unrecognized firm sales commitments	53		248
Total designated	$	57	$	248
Not designated as hedging instruments:
Foreign exchange contracts	—		362
Total not designated	$	—	$	362
Total derivatives	$	57	$	610
Accrued liabilities
Designated as hedging instruments:
Foreign exchange contracts	$	—	$	245
Total designated	$	—	$	245
Not designated as hedging instruments:
Foreign exchange contracts	235		122
Total not designated	$	235	$	122
Total derivatives	$	235	$	367

The following table presents the amounts of income (expense) from derivative instruments affecting the Consolidated Condensed Statements of Earnings for the nine months endedAugust 29, 2015 and August 30, 2014:

	August 29, 2015			August 30, 2014
Fair value hedges
Foreign exchange contracts - Selling and administrative expenses	$	400		$	—
Unrecognized firm sales commitments - Selling and administrative expenses	(534		)	—
Total designated	$	(134	)	$	—
Not designated as hedges
Foreign exchange contracts - Selling and administrative expenses	$	21		$	—
Foreign exchange contracts - Other, net income (expense)	641			195
Total not designated	$	662		$	195

Fair Value Hedges

The Company is exposed to changes in foreign currency exchange rates on certain unrecognized firm sales commitments expected to be settled at future dates. The Company may use foreign currency forward contracts to manage certain such risks. The Company designates each such contract as a fair value hedge from the date the firm sales commitment and derivative contract are entered into through the date the related sale occurs, at which point the foreign currency forward contract is de-designated as a fair value hedging instrument. All realized and unrealized gains or losses on such foreign currency forward contracts are recognized in income as incurred. Changes in the fair value of the related unrecognized firm sales commitments that arise due to fluctuations in foreign currency exchange rates are also reflected in income and as an asset or liability on the Consolidated Balance Sheets.

The total notional amount of foreign currency contracts designated as fair value hedges outstanding at August 29, 2015 was $11,337. There were no such fair value hedges entered into during the nine months endedAugust 30, 2014. The cash flows associated with the periodic settlement of the Company's fair value hedges are reflected as a component of Cash flows from operating activities in the Consolidated Statements of Cash Flows.

Undesignated Derivative Instruments

The Company is exposed to changes in foreign currency exchange rates on certain inter-company advances. The Company may use foreign currency forward contracts to manage certain such risks. These forward contracts are not designated as hedging instruments under the accounting standards for derivatives and hedging. These undesignated instruments are recorded at fair value as an asset or liability on the Consolidated Balance Sheets and all realized and unrealized gains or losses on such foreign currency forward contracts are recognized in Other, net income on the Consolidated Condensed Statements of Earnings as incurred. The Company intends to settle the underlying inter-company advances in cash, therefore gains and losses on translation of the inter-company advances are also recognized in Other, net on the Consolidated Condensed Statements of Earnings as incurred. The cash flows associated with the periodic settlement of the Company's undesignated derivative instruments are reflected as a component of Cash flows from operating activities in the Consolidated Statements of Cash Flows.

The total notional amount of such foreign currency contracts not designated as hedging instruments outstanding as of August 29, 2015 was $37,094. During the three months ended August 29, 2015 the Company recorded realized and unrealized gains of $842 on such forward currency contracts and losses of $969 on translation of the underlying inter-company advances. During the three months ended August 30, 2014 the Company recorded realized and unrealized losses of $39 on such forward currency contracts and losses of $149 on translation of the underlying inter-company advances. During the nine months ended August 29, 2015 the Company recorded realized and unrealized gains of $641 on such forward currency contracts and losses of $1,638 on translation of the underlying inter-company advances. During the nine months ended August 30, 2014 the Company recorded realized and unrealized gains of $195 on such forward contracts and gains of $1,174 on translation of the underlying inter-company advances.

Additionally, the total notional amount of foreign currency contracts de-designated as fair value hedges outstanding at August 29, 2015 was $2,170. There were no such foreign currency contracts de-designated as fair value hedges during the nine months endedAugust 30, 2014.

Counterparty credit risk

By using derivative instruments to manage certain of its risk exposures, the Company is subject, from time to time, to credit risk and market risk on such derivative instruments. Credit risk arises from the potential failure of the counterparty to perform under the terms of the derivative instrument. When the fair value of a derivative instrument is positive, the counterparty owes the Company, which creates credit risk for the Company. The Company mitigates this credit risk by entering into transactions with only creditworthy counterparties. Market risk arises from the potential adverse effects on the value of the derivative that result from changes in foreign currency exchange rates or interest rates, depending on the nature of the derivative. The Company mitigates this market risk by establishing and monitoring parameters that limit the types and degrees of market risk that may be undertaken.