Derivatives and Hedging Activities

3 Months Ended

Apr. 26, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The Company is exposed to certain risks arising from both its business operations and economic conditions and principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company, on a routine basis and in the normal course of business, experiences expenses denominated in Swiss Franc ("CHF"), Canadian Dollar ("CAD") and Great British Pound ("GBP"). Such expenses expose the Company to exchange rate fluctuations between these foreign currencies and the U.S. Dollar ("USD"). The Company occasionally uses derivative financial instruments, in the form of forward contracts, to mitigate a portion of the risk associated with adverse movements in these foreign currency exchange rates during a twelve-month window. Currency forward contracts involve fixing the exchange rate for delivery of a specified amount of foreign currency on a specified date. The Company’s accounting treatment for these instruments is based on whether or not the instruments are designated as a hedging instrument. The Company is applying hedge accounting to all foreign currency derivatives and has designated these hedges as cash flow hedges.

The Company's foreign currency forward contracts had the following outstanding balances:


	July 30, 2023					January 29, 2023
(in thousands, except number of instruments)	Number of Instruments	Sell Notional Value		Buy Notional Value		Number of Instruments	Sell Notional Value		Buy Notional Value
Sell USD/Buy CAD Forward Contract	3	$	3,400	$	4,648	9	$	9,965	$	13,643

Sell USD/Buy GBP Forward Contract	6	$	1,274	£	1,144	18	$	3,801	£	3,406
Total	9					27

These contracts have been designated as cash flows hedges and the unrealized gains or losses, net of tax, are recorded as a component of "Accumulated other comprehensive income or loss" ("AOCI") in the Balance Sheets. The effective portions of the cash flow hedges are recorded in AOCI until the hedged item is recognized in either "Selling, general and administrative expense" or "Product development and engineering expense" in the Statements of Operations once the foreign exchange contract matures, offsetting the underlying hedged expenses. Any ineffective portions of the cash flow hedges are recorded in "Non-operating income, net" in the Statements of Operations. The Company presents its derivative assets and liabilities at their gross fair values in the Balance Sheets.

In the first quarter of fiscal year 2024, the Company entered into an interest rate swap agreement with a 2.75 year term to hedge the variability of interest payments on $150.0 million of debt outstanding on the Term Loans at a Term SOFR rate of 3.58%, plus a variable margin and spread based on the Company’s consolidated leverage ratio.

In the fourth quarter of fiscal year 2023, the Company entered into an interest rate swap agreement with a 5 year term to hedge the variability of interest payments on $450.0 million of debt outstanding on the Term Loans at a Term SOFR rate of 3.44%, plus a variable margin and spread based on the Company’s consolidated leverage ratio.

In the first quarter of fiscal year 2021, the Company entered into an interest rate swap agreement with a 3 year term to hedge the variability of interest payments on the first $150.0 million of debt outstanding under the Company's Revolving Credit Facility at a LIBOR-referenced rate of 0.73%, plus a variable margin and spread based on the Company's consolidated leverage ratio. This interest rate swap agreement matured during the first quarter of 2024.

The interest rate swap agreements have been designated as cash flow hedges and unrealized gains or losses, net of income tax, are recorded as a component of AOCI in the Balance Sheets. As the various settlements are made on a monthly basis, the realized gain or loss on the settlements are recorded in "Interest expense" in the Statements of Operations. The interest rate swap agreements resulted in a realized gain of $2.4 million for the three months ended July 30, 2023, compared to a realized gain of $0.2 million for the three months ended July 31, 2022. The interest rate swap agreements resulted in a realized gain of $4.6 million for the six months ended July 30, 2023, compared to an immaterial realized gain for the six months ended July 31, 2022.

The fair values of the Company's instruments that qualify as cash flow hedges in the Balance Sheets were as follows:


(in thousands)	July 30, 2023		January 29, 2023
Interest rate swap agreement	$	10,052	$	6,067
Foreign currency forward contracts	309		717
Total other current assets	$	10,361	$	6,784

Interest rate swap agreement	$	3,344	$	—
Total other long-term assets	$	3,344	$	—






Interest rate swap agreement	—		6,432
Total other long-term liabilities	$	—	$	6,432

During fiscal year 2021, the Company entered into an economic hedge program that uses total return swap contracts to hedge the market risk associated with the unfunded portion of the Company's deferred compensation liability. The total return swap contracts generally have a duration of one month and are rebalanced and re-hedged at the end of each monthly term. While the total returns swap contracts are treated as economic hedges, the Company has not designated them as hedges for accounting purposes. The total return swap contracts are measured at fair value and recognized in the Balance Sheets in "Accrued Liabilities" if the instruments are in a loss position and in "Other Current Assets" if the instruments are in a gain position. Unrealized gains and losses, as well as realized gains and losses for settlements, on the total return swap contracts are recognized in "Selling, general and administrative expenses" in the Statements of Operations. As of July 30, 2023, the notional value of the total return swap contracts was $7.6 million and the fair value resulted in an asset of $0.04 million. As of January 29, 2023, the notional value of the total return swap contracts was $5.2 million and the fair value resulted in an asset of $0.1 million. The total return swap contracts resulted in a net gain recognized in earnings of $0.3 million for the three months ended July 30, 2023, compared to a net gain recognized in earnings of $0.1 million for the three months ended July 31, 2022. The total return swap contracts resulted in a net gain recognized in earnings of $0.2 million for the six months ended July 30, 2023, compared to a net loss recognized in earnings of $0.4 million for the six months ended July 31, 2022.