

Note 13	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 and have varying maturities through November 2019. 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 November 3, 2018, October 28, 2017 and February 3, 2018, the Company had forward contracts maturing at various dates through November 2019, November 2018 and February 2019, respectively. 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)	November 3, 2018		October 28, 2017		February 3, 2018
Financial Instruments
Euro	$	13,480	$	18,815	$	21,223
U.S. dollars (purchased by the Company’s Canadian division with Canadian dollars)	13,877		18,242		16,874
Chinese yuan	6,570		12,613		12,058
New Taiwanese dollars	530		580		596
Other currencies	388		—		415
Total financial instruments	$	34,845	$	50,250	$	51,166

The classification and fair values of derivative instruments designated as hedging instruments included within the condensed consolidated balance sheets as of November 3, 2018, October 28, 2017 and February 3, 2018 are as follows:



	Asset Derivatives			Liability Derivatives
($ thousands)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Foreign Exchange Forward Contracts
November 3, 2018	Prepaid expenses and other current assets	$	203	Other accrued expenses	$	1,414
October 28, 2017	Prepaid expenses and other current assets	760		Other accrued expenses	564
February 3, 2018	Prepaid expenses and other current assets	1,540		Other accrued expenses	542

For the thirteen and thirty-nine weeks ended November 3, 2018 and October 28, 2017, the effect of derivative instruments in cash flow hedging relationships on the condensed consolidated statements of earnings was as follows:



	Thirteen Weeks Ended						Thirteen Weeks Ended
($ thousands)	November 3, 2018						October 28, 2017
Foreign Exchange Forward Contracts: Income Statement Classification (Losses) Gains - Realized	Loss Recognized in OCL on Derivatives			Gain (Loss) Reclassified from Accumulated OCL into Earnings			(Loss) Gain Recognized in OCL on Derivatives			Gain Reclassified from Accumulated OCL into Earnings

Net sales	$	(78	)	$	—		$	(4	)	$	6
Cost of goods sold	(286		)	26			(42		)	3
Selling and administrative expenses	(152		)	(146		)	364			109
Interest expense, net	—			—			6			—




	Thirty-Nine Weeks Ended						Thirty-Nine Weeks Ended
($ thousands)	November 3, 2018						October 28, 2017
Foreign Exchange Forward Contracts: Income Statement Classification (Losses) Gains - Realized	Loss Recognized in OCL on Derivatives			(Loss) Gain Reclassified from Accumulated OCL into Earnings			(Loss) Gain Recognized in OCL on Derivatives			Gain (Loss) Reclassified from Accumulated OCL into Earnings

Net sales	$	(120	)	$	(4	)	$	(44	)	$	30
Cost of goods sold	(970		)	(37		)	695			164
Selling and administrative expenses	(955		)	188			480			42
Interest expense, net	—			—			(4		)	(1		)

All gains and losses currently included within accumulated other comprehensive loss 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 14 to the condensed consolidated financial statements.