Derivatives and Hedging Activities

6 Months Ended

Jul. 31, 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 the U.S. Dollar (“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 within 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 July 31, 2016, the Company had the following outstanding foreign exchange contracts:

(in thousands)
Foreign Exchange Contracts	Number of Instruments	Buy Notional Value		Sell Notional Value
Sell USD/Buy CHF Forward Contract	6	Fr.	5,344	$	5,451
Sell USD/Buy CAD Forward Contract	6	C$	13,129	$	9,387
Sell USD/Buy GBP Forward Contract	6	£	3,508	$	5,129
Total	18

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 (“AOCI”) until the hedged item is recognized in selling, general and administrative (“SG&A”) expense within the unaudited condensed consolidated statements of operations when the underlying hedged expense is recognized. Any ineffective portions of cash flow hedges are recorded in “Non-operating (expense) income, net” within the Company’s unaudited 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 July 31, 2016 and January 31, 2016:

	Carrying Values of Derivative Instruments as of July 31, 2016
(in thousands)	Fair Value - Assets (2)		Fair Value - (Liabilities) (2)			Derivative Net Carrying Value
Derivatives designated as hedging instruments
Foreign exchange contracts (1)	$	766	$	(483	)	$	283
Total derivatives	$	766	$	(483	)	$	283
	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” within the condensed consolidated balance sheets.

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

The following table summarizes the amount of income recognized from derivative instruments for the three months ended July 31, 2016 and July 26, 2015 as well as the line items within the accompanying unaudited condensed consolidated statements of operations where the results are recorded for cash flow hedges:

	Amount of Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)					Location of Gain or Loss into Income (Effective Portion)	Amount of (Gain) Loss Reclassified from AOCI 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)	July 31, 2016			July 26, 2015			July 31, 2016			July 26, 2015			July 31, 2016			July 26, 2015
Sell USD/Buy CHF Forward Contract	$	(129	)	$	—	SG&A	$	(31	)	$	—	SG&A	$	—		$	—
Sell USD/Buy CAD Forward Contract	(532		)	—		SG&A	(434		)	—		SG&A	1			—
Sell USD/Buy GBP Forward Contract	(574		)	—		SG&A	94			—		SG&A	(2		)	—
	$	(1,235	)	$	—		$	(371	)	$	—		$	(1	)	$	—

The following table summarizes the amount of income recognized from derivative instruments for the six months ended July 31, 2016 and July 26, 2015 as well as the line items within the accompanying unaudited condensed consolidated statements of operations where the results are recorded for cash flow hedges:

	Amount of Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)					Location of Gain or Loss into Income (Effective Portion)	Amount of (Gain) Loss Reclassified from AOCI 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)
	Six Months Ended						Six Months Ended						Six Months Ended
(in thousands)	July 31, 2016			July 26, 2015			July 31, 2016			July 26, 2015			July 31, 2016			July 26, 2015
Sell USD/Buy CHF Forward Contract	$	136		$	—	SG&A	$	(49	)	$	—	SG&A	$	1		$	—
Sell USD/Buy CAD Forward Contract	1,253			—		SG&A	(574		)	—		SG&A	5			—
Sell USD/Buy GBP Forward Contract	(646		)	—		SG&A	165			—		SG&A	(2		)	—
	$	743		$	—		$	(458	)	$	—		$	4		$	—

The amount of losses, net of tax, related to the effective portion of derivative instruments designated as cash flow hedges included in "Accumulated other comprehensive income" within the condensed consolidated balance sheets for the three months ended July 31, 2016 and July 26, 2015 was $1.6 million and $0.0 million, respectively. 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" within the condensed consolidated balance sheets for the six months ended July 31, 2016 and July 26, 2015 was $0.3 million and $0.0 million. Any gains or losses under these contracts are expected to be realized and reclassified to selling, general and administrative within the next twelve months.