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Derivatives and Hedging Activities
 9 Months Ended
Oct. 29, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities
Derivatives and Hedging Activities

The Company is exposed to certain risk arising from both its business operations and economic conditions and principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company, on a routine basis and in the normal course of business, experiences expenses denominated in Swiss Franc ("CHF"), Canadian Dollar ("CAD") and Great British Pound ("GBP"). Such expenses expose the Company to exchange rate fluctuations between these foreign currencies and the U.S. Dollar ("USD"). The Company uses derivative financial instruments in the form of forward contracts to mitigate risk associated with adverse movements in these foreign currency exchange rates on a portion of foreign denominated expenses expected to be realized during the current and following fiscal year. Currency forward contracts involve fixing the exchange rate for delivery of a specified amount of foreign currency on a specified date.

The Company’s accounting treatment for these instruments is based on whether or not the instruments are designated as a hedging instrument. The Company is currently applying hedge accounting to all foreign currency derivatives and has designated these hedges as cash flow hedges.

At October 29, 2017, the Company had the following outstanding foreign exchange contracts:
(in thousands)
 
 
 
 
 
 
Foreign Exchange Contracts
 
Number of Instruments
 
Sell Notional Value
 
Buy Notional Value
Sell USD/Buy CAD Forward Contract
 
3
 
$
4,976

 
C$
6,750

Sell USD/Buy GBP Forward Contract
 
3
 
$
2,762

 
£
2,250

Total
 
6
 

 
 


These contracts met the criteria for cash flow hedges and the unrealized gains or losses, after tax, are recorded as a component of "Accumulated other comprehensive loss" within the Balance Sheet. The effective portions of cash flow hedges are recorded in accumulated other comprehensive income or loss ("AOCI") until the hedged item is recognized in selling, general and administrative ("SG&A") expense within the Statements of Income when the underlying hedged expense is recognized. Any ineffective portions of cash flow hedges are recorded in "Non-operating expense, net" within the Company’s Statements of Income. The Company presents its derivative assets and liabilities at their gross fair values on the Balance Sheets.

The table below summarizes the carrying values of derivative instruments as of October 29, 2017 and January 29, 2017:
 
 
Carrying Values of Derivative Instruments as of October 29, 2017
(in thousands)
 
Fair Value - Assets (2)
 
Fair Value - (Liabilities) (2)
 
Derivative Net Carrying Value
Derivatives designated as hedging instruments
 
 
 
 
 
 
Foreign exchange contracts (1)
 
$
482

 
$
—

 
$
482

Total derivatives
 
$
482

 
$
—

 
$
482

 
 
 
 
 
 
 
 
 
Carrying Values of Derivative Instruments as of January 29, 2017
 
 
Fair Value - Assets (2)
 
Fair Value - (Liabilities) (2)
 
Derivative Net Carrying Value
Derivatives designated as hedging instruments
 
 
 
 
 
 
Foreign exchange contracts (1)
 
$
326

 
$
—

 
$
326

Total derivatives
 
$
326

 
$
—

 
$
326

(1)
Assets are included in "Other current assets" and liabilities are included in "Accrued liabilities" within the Balance Sheets.
(2)
The fair values of the foreign exchange forward contracts are valued using Level 2 inputs. Please refer to Note 6.

The following table summarizes the amount of income recognized from derivative instruments for the three months ended October 29, 2017 and October 30, 2016 as well as the line items within the accompanying Statements of Income where the results are recorded for cash flow hedges:
 
Amount of Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)
 
 Location of Gain or Loss into Income (Effective Portion)
 
Amount of (Gain) Loss Reclassified from AOCI into Income (Effective Portion)
 
Location of Gain or Loss Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
 
Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
 
Three Months Ended
 
 
Three Months Ended
 
 
Three Months Ended
(in thousands)
October 29, 2017
 
October 30, 2016
 
 
October 29, 2017
 
October 30, 2016
 
 
October 29, 2017
 
October 30, 2016
Sell USD/Buy CHF Forward Contract
$
—

 
$
(85
)
 
SG&A
 
$
—

 
$
(24
)
 
SG&A
 
$
—

 
$
(1
)
Sell USD/Buy CAD Forward Contract
(184
)
 
(141
)
 
SG&A
 
(442
)
 
(334
)
 
SG&A
 
(1
)
 
—

Sell USD/Buy GBP Forward Contract
(9
)
 
(196
)
 
SG&A
 
(208
)
 
270

 
SG&A
 
—

 
(2
)
 
$
(193
)
 
$
(422
)
 
 
 
$
(650
)
 
$
(88
)
 
 
 
$
(1
)
 
$
(3
)

The following table summarizes the amount of income recognized from derivative instruments for the nine months ended October 29, 2017 and October 30, 2016 as well as the line items within the accompanying Statements of Income where the results are recorded for cash flow hedges:
 
Amount of Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)
 
 Location of Gain or Loss into Income (Effective Portion)
 
Amount of (Gain) Loss Reclassified from AOCI into Income (Effective Portion)
 
Location of Gain or Loss Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
 
Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
 
Nine Months Ended
 
 
Nine Months Ended
 
 
Nine Months Ended
(in thousands)
October 29, 2017
 
October 30, 2016
 
 
October 29, 2017
 
October 30, 2016
 
 
October 29, 2017
 
October 30, 2016
Sell USD/Buy CHF Forward Contract
$
—

 
$
51

 
SG&A
 
$
—

 
$
(72
)
 
SG&A
 
$
—

 
$
—

Sell USD/Buy CAD Forward Contract
819

 
1,113

 
SG&A
 
(532
)
 
(909
)
 
SG&A
 
(4
)
 
5

Sell USD/Buy GBP Forward Contract
296

 
(843
)
 
SG&A
 
(428
)
 
435

 
SG&A
 
—

 
(3
)
 
$
1,115

 
$
321

 
 
 
$
(960
)
 
$
(546
)
 
 
 
$
(4
)
 
$
2



The amount of losses related to the effective portion of derivative instruments designated as cash flow hedges included in AOCI within the Balance Sheets for the three months ended October 29, 2017 and October 30, 2016 was $0.8 million and $0.5 million, respectively. The amount of gains related to the effective portion of derivative instruments designated as cash flow hedges included in AOCI within the Balance Sheets for the nine months ended October 29, 2017 and October 30, 2016 was $0.2 million and $0.2 million, respectively. Any gains or losses under these contracts are expected to be realized and reclassified to selling, general and administrative within the next three months.