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Financial Instruments and Risk Management
 12 Months Ended
Feb. 28, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Financial Instruments and Risk Management
Note 16 - Financial Instruments and Risk Management

Foreign Currency Risk

The U.S. Dollar is the functional currency for the Company and all of its subsidiaries and is also the reporting currency for the Company. By operating internationally, we are subject to foreign currency risk from transactions denominated in currencies other than the U.S. Dollar (“foreign currencies”). Such transactions include sales and operating expenses. As a result of such transactions, portions of our cash, trade accounts receivable and trade accounts payable are denominated in foreign currencies. Approximately 13%, 10%, and 12% of our net sales revenue was denominated in foreign currencies during fiscal 2023, 2022 and 2021, respectively. These sales were primarily denominated in Euros, British Pounds and Canadian Dollars. We make most of our inventory purchases from manufacturers in Asia and primarily use the U.S. Dollar for such purchases.
We recorded in SG&A foreign currency exchange rate net losses of $1.7 million, $0.2 million and $0.6 million during fiscal 2023, 2022 and 2021, respectively. We mitigate certain foreign currency exchange rate risk by using forward contracts and cross-currency debt swaps to protect against the foreign currency exchange rate risk inherent in our transactions denominated in foreign currencies. We do not enter into any derivatives or similar instruments for trading or other speculative purposes. Certain of our forward contracts are designated as cash flow hedges (“foreign currency contracts”) and are recorded on the balance sheet at fair value with changes in fair value recorded in OCI until the hedge transaction is settled, at which point amounts are reclassified from AOCI to our consolidated statements of income. Foreign currency derivatives for which we have not elected hedge accounting consist of our forward contracts and cross-currency debt swaps, and any changes in the fair value of these derivatives are recorded in our consolidated statements of income. These undesignated derivatives are used to hedge monetary net asset and liability positions. Cash flows from our foreign currency derivatives are classified as cash flows from operating activities in our consolidated statements of cash flows, which is consistent with the classification of the cash flows from the underlying hedged item. We evaluate our derivatives designated as cash flow hedges each quarter to assess hedge effectiveness.

Interest Rate Risk

Interest on our outstanding debt as of February 28, 2023 is based on floating interest rates. If short-term interest rates increase, we will incur higher interest expense on any future outstanding balances of floating rate debt. Floating interest rates are hedged with interest rate swaps to effectively fix interest rates on a portion of our outstanding principal balance under the Credit Agreement, which totaled $936.9 million and $799.5 million as of February 28, 2023 and February 28, 2022, respectively. As of February 28, 2023 and February 28, 2022, $425 million and $125 million of the outstanding principal balance under the Credit Agreement, respectively, was hedged with interest rate swaps to fix the interest rate we pay. Our interest rate swaps are designated as cash flow hedges and are recorded on the balance sheet at fair value with changes in fair value recorded in OCI until the hedge transaction is settled, at which point amounts are reclassified from AOCI to our consolidated statements of income. Cash flows from our interest rate swaps are classified as cash flows from operating activities in our consolidated statements of cash flows, which is consistent with the classification of the cash flows from the underlying hedged item. We evaluate our derivatives designated as cash flow hedges each quarter to assess hedge effectiveness.

The following tables summarize the fair values of our derivative instruments at the end of fiscal 2023 and 2022:

 (in thousands)
February 28, 2023

Derivatives designated as hedging instruments
Hedge
Type		Final
Settlement
Date		Notional AmountPrepaid
Expenses
and Other
Current
Assets		Other
Assets		Accrued
Expenses
and Other
Current
Liabilities		Other
Liabilities
Non-current
Forward contracts - sell EuroCash flow2/2024€29,310$257 $— $— $— 
Forward contracts - sell Canadian DollarsCash flow2/2024$30,000962 11 — — 
Forward contracts - sell PoundsCash flow1/2024£19,400— — 711 — 
Forward contracts - sell Norwegian KronerCash flow2/2024kr40,000 185 — — — 
Interest rate swapsCash flow2/2026$425,0003,941 1,805 — — 
Subtotal   5,345 1,816 711 — 
Derivatives not designated under hedge accounting       
Forward contracts - buy Euro(1)3/2023€5006 — — — 
Forward contracts - buy Pounds(1)3/2023£4002 — — — 
Subtotal   8 — — — 
Total fair value   $5,353 $1,816 $711 $— 
 (in thousands)
February 28, 2022

Derivatives designated as hedging instruments
Hedge
Type		Final
Settlement Date		Notional AmountPrepaid
Expenses
and Other
Current
Assets		Other
Assets		Accrued
Expenses
and Other
Current
Liabilities		Other
Liabilities
Non-current
Forward contracts - sell EuroCash flow2/2023€17,000$1,224 $— $— $— 
Forward contracts - sell Canadian DollarsCash flow2/2023$40,000475 — — — 
Forward contracts - sell PoundsCash flow2/2023£24,0001,219 — — — 
Forward contracts - sell Australian DollarsCash flow12/2022A$5,700— — 113 — 
Interest rate swapsCash flow1/2024$125,000— — 1,446 1,335 
Subtotal 2,918 — 1,559 1,335 
Derivatives not designated under hedge accounting       
Cross-currency debt swaps - Euro(2)04/2022€6,000— — 244 — 
Cross-currency debt swaps - Pounds(2)04/2022£4,500— — 468 — 
Subtotal— — 712 — 
Total fair value   $2,918 $— $2,271 $1,335 

(1)These forward contracts, for which we have not elected hedge accounting, hedge monetary net asset and liability positions for the notional amounts reported, creating an economic hedge against currency movements.

(2)These cross-currency debt swaps, for which we have not elected hedge accounting, adjust the currency denomination of a portion of our outstanding debt to the Euro and British Pound, as applicable, for the notional amounts reported, creating an economic hedge against currency movements.

The pre-tax effects of derivative instruments designated as cash flow hedges for fiscal 2023 and 2022 were as follows:

 Fiscal Years Ended Last Day of February,
 Gain (Loss) Recognized in AOCI Gain (Loss) Reclassified
from AOCI into Income
(in thousands)20232022Location20232022
Foreign currency contracts - cash flow hedges$8,289 $5,509 Sales revenue, net$10,390 $(2,240)
Interest rate swaps - cash flow hedges8,382 2,403 Interest expense(145)(4,757)
Total$16,671 $7,912  $10,245 $(6,997)

The pre-tax effects of derivative instruments not designated under hedge accounting for fiscal 2023 and 2022 were as follows:

 Fiscal Years Ended Last Day of February,
 Gain (Loss) 
Recognized in Income
(in thousands)Location20232022
Forward contractsSG&A$(281)$— 
Cross-currency debt swaps - principalSG&A875 861 
Cross-currency debt swaps - interestInterest Expense— (3)
Total $594 $858 

We expect a net gain of $4.6 million associated with foreign currency contracts and interest rate swaps currently recorded in AOCI to be reclassified into income over the next twelve months. The amount ultimately realized, however, will differ as exchange rates and interest rates change and the underlying contracts settle. See Notes 1, 15 and 17 to these consolidated financial statements for more information.
Counterparty Credit Risk

Financial instruments, including foreign currency contracts, forward contracts, cross-currency debt swaps and interest rate swaps, expose us to counterparty credit risk for non-performance. We manage our exposure to counterparty credit risk by only dealing with counterparties who are substantial international financial institutions with significant experience using such derivative instruments. We believe that the risk of incurring credit losses is remote.