Note 15 - Risk Management and Derivatives

6 Months Ended

Aug. 03, 2019

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 15 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 May 2020.  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 August 3, 2019, August 4, 2018 and February 2, 2019, the Company had forward contracts maturing at various dates through May 2020, August 2019, and January 2020, 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)	August 3, 2019		August 4, 2018		February 2, 2019
Financial Instruments
Euro	$	5,718	$	14,852	$	13,383
U.S. dollars (purchased by the Company’s Canadian division with Canadian dollars)		9,630		15,992		15,196
Chinese yuan		3,643		12,394		4,507
New Taiwanese dollars		329		526		461
Other currencies		250		391		382
Total financial instruments	$	19,570	$	44,155	$	33,929

The classification and fair values of derivative instruments designated as hedging instruments included within the condensed consolidated balance sheets as of August 3, 2019, August 4, 2018 and February 2, 2019 are as follows:

	Asset Derivatives			Liability Derivatives
($ thousands)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Foreign Exchange Forward Contracts
August 3, 2019	Prepaid expenses and other current assets	$	60	Other accrued expenses	$	418
August 4, 2018	Prepaid expenses and other current assets		305	Other accrued expenses		1,380
February 2, 2019	Prepaid expenses and other current assets		159	Other accrued expenses		745

For the thirteen and twenty-six weeks ended August 3, 2019 and August 4, 2018, 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)	August 3, 2019						August 4, 2018
Foreign Exchange Forward Contracts: Income Statement Classification (Losses) Gains - Realized	(Loss) Gain Recognized in OCL on Derivatives			Loss Reclassified from Accumulated OCL into Earnings			Loss Recognized in OCL on Derivatives			(Loss) Gain Reclassified from Accumulated OCL into Earnings
Net sales	$	(22	)	$	(5	)	$	(17	)	$	(4	)
Cost of goods sold		63			(16	)		(283	)		28
Selling and administrative expenses		(150	)		(66	)		(730	)		97

	Twenty-Six Weeks Ended						Twenty-Six Weeks Ended
($ thousands)	August 3, 2019						August 4, 2018
Foreign Exchange Forward Contracts: Income Statement Classification (Losses) Gains - Realized	(Loss) Gain Recognized in OCL on Derivatives			Loss Reclassified from Accumulated OCL into Earnings			Loss Recognized in OCL on Derivatives			(Loss) Gain Reclassified from Accumulated OCL into Earnings
Net sales	$	(121	)	$	(5	)	$	(42	)	$	(4	)
Cost of goods sold		352			(38	)		(684	)		(64	)
Selling and administrative expenses		(115	)		(215	)		(802	)		334

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 16 to the condensed consolidated financial statements.