Derivatives and Hedging Activities

3 Months Ended

May. 01, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

Derivatives and Hedging Activities

The Company is exposed to certain risk 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 USD. The Company uses derivative financial instruments in the form of forward contracts, to mitigate risk associated with adverse movements in these foreign currency exchange rates on a portion of foreign denominated expenses expected to be realized over the next twelve months. Currency forward contracts involve fixing the exchange rate for delivery of a specified amount of foreign currency on a specified date.

The Company records all derivatives in the condensed consolidated balance sheets at fair value, with assets included in "Other current assets" and liabilities included in "Accrued liabilities". 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 currently applying hedge accounting to all foreign currency derivatives.

At May 1, 2016, the Company had the following open foreign currency contracts:

(in thousands)
Foreign Currency Derivative	Number of Instruments	Sell Notional Value		Buy Notional Value
Sell CHF/Buy USD Forward Contract	9	Fr.	8,016	$	8,156
Sell CAD/Buy USD Forward Contract	9	C$	19,991	$	14,289
Sell GBP/Buy USD Forward Contract	9	£	5,302	$	7,750
Total	27

These contracts, with maturities within the next twelve months, met the criteria for cash flow hedges and the unrealized gains or losses, after tax, are recorded as a component of accumulated other comprehensive gain in shareholders’ equity. The effective portions of cash flow hedges are recorded in accumulated other comprehensive income until the hedged item is recognized in revenue on the condensed consolidated statements of operations when the underlying hedged revenue is recognized. Any ineffective portions of cash flow hedges are recorded in "Non-operating (expense) income, net" on the Company’s condensed consolidated statements of operations. The Company presents its derivative assets and liabilities at their gross fair values on the condensed consolidated balance sheets.

The table below summarizes the carrying values of derivative instruments as of May 1, 2016 and January 31, 2016:

	Carrying Values of Derivative Instruments as of May 1, 2016
(in thousands)	Fair Value - Assets (2)		Fair Value - (Liabilities) (2)			Derivative Net Carrying Value
Derivatives designated as hedging instruments
Foreign exchange contracts (1)	$	1,895	$	(1	)	$	1,894
Total derivatives	$	1,895	$	(1	)	$	1,894
	Carrying Values of Derivative Instruments as of January 31, 2016
	Fair Value - Assets (2)		Fair Value - (Liabilities) (2)			Derivative Net Carrying Value
Derivatives designated as hedging instruments
Foreign exchange contracts (1)	$	—	$	—		$	—
Total derivatives	$	—	$	—		$	—

(1) Assets are included in "Other current assets" and liabilities are included in "Accrued liabilities" in the condensed consolidated balance sheets.

(2) The fair values of the foreign exchange forward contracts are considered to be Level 2. Please refer to Note 7.

The following table summarizes the amount of income recognized from derivative instruments for the periods indicated and the line items in the accompanying statements of operations where the results are recorded for cash flow hedges:

	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)					Location of Gain or Loss into Income (Effective Portion)	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)					Location of Gain or Loss Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
	Three months ended						Three months ended						Three months ended
(in thousands)	May 1, 2016			April 26, 2015			May 1, 2016			April 26, 2015			May 1, 2016		April 26, 2015
Sell CHF/Buy USD Forward Contract	$	266		$	—	Net sales	$	17		$	—	Other income / (expense)	$	1	$	—
Sell CAD/Buy USD Forward Contract	1,785			—		Net sales	141			—		Other income / (expense)	3		—
Sell GBP/Buy USD Forward Contract	(73		)	—		Net sales	(71		)	—		Other income / (expense)	—		—
	$	1,978		$	—		$	87		$	—		$	4	$	—

The amount of gains, net of tax, related to the effective portion of derivative instruments designated as cash flow hedges included in accumulated other comprehensive income for the three months ended May 1, 2016 and April 26, 2015 was $1.9 million and $0.0 million, respectively. Any gains or losses under these contracts are expected to be realized and reclassed within the next twelve months.