Risk Management And Derivatives

9 Months Ended

Oct. 29, 2011

Risk Management And Derivatives [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 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 financial institutions and have varying maturities through October 2012. Credit risk is managed through the continuous monitoring of exposures to such counterparties.

The Company principally uses foreign currency forward contracts as cash flow hedges to offset a portion of the effects of exchange rate fluctuations. The Company's cash flow exposures include anticipated foreign currency transactions, such as foreign currency denominated sales, costs, expenses and intercompany charges, as well as collections and payments. The Company performs a quarterly assessment of the effectiveness of the hedge relationship and measures and recognizes any hedge ineffectiveness in the condensed consolidated statement of earnings. Hedge ineffectiveness is evaluated using the hypothetical derivative method, and the ineffective portion of the hedge is reported in the Company's condensed consolidated statement of earnings. The amount of hedge ineffectiveness for the thirteen weeks and thirty-nine weeks ended October 29, 2011 and October 30, 2010 were not material.

The Company's hedging strategy uses forward contracts as cash flow hedging instruments, which are recorded in the Company's condensed consolidated balance sheet 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 income and reclassified to earnings in the period that the hedged transaction is recognized in earnings.

As of October 29, 2011, January 29, 2011 and October 30, 2010, the Company had forward contracts maturing at various dates through October 2012, January 2012 and October 2011, respectively. The contract amount represents the net amount of all purchase and sale contracts of a foreign currency.

	Contract Amount
(U.S. $ equivalent in thousands)	October 29, 2011		October 30, 2010		January 29, 2011
Deliverable Financial Instruments
U.S. dollars (purchased by the Company's Canadian division with Canadian dollars)	$	18,218	$	15,313	$	19,200
Euro		6,048		6,872		5,977
Other currencies		222		178		229
Non-deliverable Financial Instruments
Chinese yuan		16,934		12,937		13,199
Japanese yen		1,207		1,566		1,344
New Taiwanese dollars		1,196		1,229		1,263
Other currencies		961		786		795
	$	44,786	$	38,881	$	42,007

The classification and fair values of derivative instruments designated as hedging instruments included within the condensed consolidated balance sheet are as follows:

	Asset Derivatives			Liability Derivatives
($ in thousands)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Foreign exchange forward contracts:
October 29, 2011	Prepaid expenses and other current assets	$	477	Other accrued expenses	$	495
October 30, 2010	Prepaid expenses and other current assets		386	Other accrued expenses		439
January 29, 2011	Prepaid expenses and other current assets		223	Other accrued expenses		567

The effect of derivative instruments in cash flow hedging relationships on the condensed consolidated statements of earnings was as follows:

($ in thousands)	Thirteen Weeks Ended October 29, 2011						Thirteen Weeks Ended October 30, 2010
Foreign exchange forward contracts: Income Statement Classification (Losses) Gains - Realized	(Loss) Gain Recognized  in OCI on Derivatives			Loss (Gain) Reclassified from Accumulated OCI into Earnings			(Loss) Gain Recognized in OCI on Derivatives			Loss (Gain) Reclassified from Accumulated OCI into Earnings
Net sales	$	(10	)	$	26		$	(142	)	$	(57	)
Cost of goods sold		357			(10	)		17			(21	)
Selling and administrative expenses		187			(36	)		378			35
Interest expense		15			–			(2	)		–

($ in thousands)	Thirty-nine Weeks Ended October 29, 2011						Thirty-nine Weeks Ended October 30, 2010
Foreign exchange forward contracts: Income Statement Classification (Losses) Gains - Realized	(Loss) Gain Recognized in OCI on Derivatives			Loss (Gain) Reclassified from Accumulated OCI into Earnings			(Loss) Gain Recognized in OCI on Derivatives			Gain Reclassified from Accumulated OCI into Earnings
Net sales	$	(117	)	$	115		$	(260	)	$	(165	)
Cost of goods sold		114			51			597			(69	)
Selling and administrative expenses		199			(150	)		148			(67	)
Interest expense		16			–			(3	)		–

($ in thousands)	Year Ended January 29, 2011
Foreign exchange forward contracts: Income Statement Classification (Losses) Gains - Realized	(Loss) Gain Recognized in OCI on Derivatives			Loss Reclassified from Accumulated OCI into Earnings
Net sales	$	(242	)	$	232
Cost of goods sold		442			34
Selling and administrative expenses		41			91
Interest expense		(7	)		–

All of the gains and losses currently included within accumulated other comprehensive income 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.