DERIVATIVE FINANCIAL INSTRUMENTS

12 Months Ended

Feb. 03, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

 DERIVATIVE FINANCIAL INSTRUMENTS

The Company has exposure to changes in foreign currency exchange rates related to certain anticipated cash flows associated with certain international inventory purchases. In addition, the Company has exposure to changes in foreign currency exchange rates on certain intercompany loans. To help manage these exposures, the Company periodically uses foreign currency forward exchange contracts.

The Company also has exposure to interest rate volatility related to its senior secured term loan facilities. The Company has entered into an interest rate swap agreement to hedge against this exposure. The Company had also entered into an interest rate cap agreement, which expired on September 6, 2012. Please see Note 6, “Debt,” for a further discussion of the Company’s senior secured term loan facilities and these agreements.

The Company entered into foreign currency forward exchange contracts with respect to €1,550,000 during 2010 in connection with the acquisition of Tommy Hilfiger to hedge against its exposure to changes in the exchange rate for the Euro, as a portion of the acquisition purchase price was payable in cash and denominated in Euros. Such foreign currency forward exchange contracts were not designated as hedging instruments. The Company settled the foreign currency forward exchange contracts at a loss of $140,490 on May 6, 2010 in connection with the Company’s completion of the Tommy Hilfiger acquisition. Such loss is reflected in other loss in the Company’s Consolidated Income Statements.

The Company records the foreign currency forward exchange contracts and interest rate contracts at fair value in its Consolidated Balance Sheets. Changes in fair value of the foreign currency forward exchange contracts associated with certain international inventory purchases and the interest rate contracts (collectively referred to as “cash flow hedges”) that are designed as effective hedging instruments are deferred in equity as a component of AOCI. The cash flows from such hedges are presented in the same category on the Consolidated Statements of Cash Flows as the items being hedged. Any ineffectiveness in such cash flow hedges is immediately recognized in earnings and no contracts were excluded from effectiveness testing. In addition, changes in the fair value of foreign currency forward exchange contracts that are not designated as effective hedging instruments are immediately recognized in earnings, including the changes in fair value of all of the foreign exchange contracts related to intercompany loans, which are not of a long-term investment nature. Any gains and losses that are immediately recognized in earnings on such contracts related to intercompany loans are largely offset by the remeasurement of the underlying intercompany loan balances. The Company does not use derivative financial instruments for trading or speculative purposes.

The following table summarizes the fair value and presentation in the Consolidated Balance Sheets for the Company’s derivative financial instruments:

	Asset Derivatives (Classified in Other Current Assets and Other Assets)				Liability Derivatives (Classified in Accrued  Expenses and Other Liabilities)
	2012		2011		2012		2011
Contracts designated as cash flow hedges:
Foreign currency forward exchange contracts (inventory purchases)	$	4,693	$	13,581	$	13,460	$	1,590
Interest rate contracts	—		211		5,058		7,907
Total contracts designated as cash flow hedges	4,693		13,792		18,518		9,497
Undesignated contracts:
Foreign currency forward exchange contracts (inventory purchases)	—		—		—		1,265
Total undesignated contracts	—		—		—		1,265
Total	$	4,693	$	13,792	$	18,518	$	10,762

At February 3, 2013, the notional amount outstanding of foreign currency forward exchange contracts for inventory purchases was approximately $340,000. Such contracts expire principally between February 2013 and January 2014. At February 3, 2013, there were no foreign currency forward exchange contracts outstanding related to intercompany loans.

The following table summarizes the effect of the Company’s hedges designated as cash flow hedging instruments:

	Loss Recognized in Other Comprehensive Income (Effective Portion)						Gain (Loss) Reclassified from AOCI into Income (Expense)  (Effective Portion)
							Location	Amount
	2012			2011				2012			2011
Foreign currency forward exchange contracts (inventory purchases)	$	(7,535	)	$	(6,033	)	Cost of goods sold	$	12,536		$	(29,729	)
Interest rate contracts	(1,683		)	(11,333		)	Interest expense	(4,532		)	(3,426		)
Total	$	(9,218	)	$	(17,366	)		$	8,004		$	(33,155	)

There was no ineffective portion of hedges designated as cash flow hedging instruments during 2012 or 2011.    

A net loss in AOCI on foreign currency forward exchange contracts at February 3, 2013 of $11,818 is estimated to be reclassified in the next 12 months in the Consolidated Income Statements to costs of goods sold as the underlying inventory is purchased and sold. In addition, a net loss in AOCI for interest rate contracts at February 3, 2013 of $3,576 is estimated to be reclassified to interest expense within the next 12 months.

The following table summarizes the effect of the Company’s foreign currency forward exchange contracts that were not designated as cash flow hedges:

	Gain Recognized in Income
	Location	Amount
		2012		2011
Foreign currency forward exchange contracts (inventory purchases)	Selling, general and administrative expenses	$	1,211	$	1,223
Foreign currency forward exchange contracts (intercompany loans)	Selling, general and administrative expenses	157		—

The Company had no derivative financial instruments with credit risk related contingent features underlying the related contracts as of February 3, 2013.