Derivative Instruments

3 Months Ended

Apr. 29, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS

DERIVATIVE INSTRUMENTS

The Company is exposed to risks associated with changes in foreign currency exchange rates and uses derivative instruments, primarily forward contracts, to manage the financial impacts of these exposures. The Company does not use forward contracts to engage in currency speculation and does not enter into derivative financial instruments for trading purposes.

The Company uses derivative instruments, primarily forward contracts designated as cash flow hedges, to hedge the foreign currency exposure associated with forecasted foreign-currency-denominated intercompany inventory sales to foreign subsidiaries and the related settlement of the foreign-currency-denominated intercompany receivables. Fluctuations in exchange rates will either increase or decrease the Company’s intercompany equivalent cash flows and affect the Company’s U.S. Dollar earnings. Gains or losses on the foreign currency exchange forward contracts that are used to hedge these exposures are expected to partially offset this variability. Foreign currency exchange forward contracts represent agreements to exchange the currency of one country for the currency of another country at an agreed upon settlement date. These forward contracts typically have a maximum term of twelve months. The sale of the inventory to the Company’s customers will result in the reclassification of related derivative gains and losses that are reported in accumulated other comprehensive loss (“AOCL”). Substantially all of the unrealized gains or losses related to designated cash flow hedges as of April 29, 2017 will be recognized in cost of sales, exclusive of depreciation and amortization, over the next twelve months.

The Company presents its derivative assets and derivative liabilities at their gross fair values on the Condensed Consolidated Balance Sheets. However, the Company's Master International Swap Dealers Association, Inc., Agreement and other similar arrangements allow net settlements under certain conditions.

As of April 29, 2017, the Company had outstanding the following foreign currency exchange forward contracts that were entered into to hedge either a portion, or all, of forecasted foreign-currency-denominated intercompany inventory sales, the resulting settlement of the foreign-currency-denominated intercompany accounts receivable, or both:

(in thousands)	Notional Amount(1)
Euro	$	81,038
British pound	$	30,243
Canadian dollar	$	15,119
Japanese yen	$	7,934

⁽¹⁾  Amounts reported are the U.S. Dollar notional amounts outstanding as of April 29, 2017.

The Company also uses foreign currency exchange forward contracts to hedge certain foreign-currency-denominated net monetary assets/liabilities. Examples of monetary assets/liabilities include cash balances, receivables and payables. Fluctuations in exchange rates result in transaction gains/(losses) being recorded in earnings as U.S. GAAP requires that monetary assets/liabilities be remeasured at the spot exchange rate at quarter-end or upon settlement. The Company has chosen not to apply hedge accounting to these instruments because there are no differences in the timing of gain or loss recognition on the hedging instruments and the hedged items.

As of April 29, 2017, the Company had outstanding the following foreign currency exchange forward contracts that were entered into to hedge foreign-currency-denominated net monetary assets/liabilities:

(in thousands)	Notional  Amount(1)
Euro	$	13,895
British pound	$	1,283

⁽¹⁾  Amounts reported are the U.S. Dollar notional amounts outstanding as of April 29, 2017.

The location and amounts of derivative fair values on the Condensed Consolidated Balance Sheets as of April 29, 2017 and January 28, 2017 were as follows:

(in thousands)	Location	April 29, 2017		January 28, 2017		Location	April 29, 2017		January 28, 2017
Derivatives designated as hedging instruments:
Foreign currency exchange forward contracts	Other current assets	$	2,415	$	5,920	Accrued expenses	$	1,226	$	486
Derivatives not designated as hedging instruments:
Foreign currency exchange forward contracts	Other current assets	$	—	$	122	Accrued expenses	$	17	$	6
Total	Other current assets	$	2,415	$	6,042	Accrued expenses	$	1,243	$	492

Refer to Note 3, “FAIR VALUE,” for further discussion of the determination of the fair value of derivative instruments.

The location and amounts of derivative gains and losses for the thirteen weeks ended April 29, 2017 and April 30, 2016 on the Condensed Consolidated Statements of Operations and Comprehensive Loss were as follows:

		Thirteen Weeks Ended
		April 29, 2017		April 30, 2016
(in thousands)	Location	Gain/(Loss)		Gain/(Loss)
Derivatives not designated as hedging instruments:
Foreign currency exchange forward contracts	Other operating income, net	$	28	$	(1,777	)

	Effective Portion											Ineffective Portion and Amount Excluded from Effectiveness Testing
	Amount of Loss Recognized in OCI on Derivative Contracts (1)						Location of Gain Reclassified from AOCL into Earnings	Amount of Gain Reclassified from AOCL into Earnings (2)				Location of Gain Recognized in Earnings on Derivative Contracts	Amount of Gain  Recognized in Earnings on Derivative Contracts (3)
	Thirteen Weeks Ended
(in thousands)	April 29, 2017			April 30, 2016				April 29, 2017		April 30, 2016			April 29, 2017		April 30, 2016
Derivatives in cash flow hedging relationships:
Foreign currency exchange forward contracts	$	(1,373	)	$	(9,382	)	Cost of sales, exclusive of depreciation and amortization	$	3,535	$	2,305	Other operating income, net	$	528	$	355

⁽¹⁾  The amount represents the change in fair value of derivative contracts due to changes in spot rates.

⁽²⁾  The amount represents the reclassification from AOCL into earnings when the hedged item affects earnings, which is when merchandise is sold to the Company’s customers.

⁽³⁾  The amount represents the change in fair value of derivative contracts due to changes in the difference between the spot price and forward price that is excluded from the assessment of hedge effectiveness and, therefore, recognized in earnings.