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DERIVATIVE FINANCIAL INSTRUMENTS | 3 Months Ended
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May 06, 2018
Notes to Financial Statements [Abstract] |
DERIVATIVE FINANCIAL INSTRUMENTS | DERIVATIVE FINANCIAL INSTRUMENTS Cash Flow Hedges The Company has exposure to changes in foreign currency exchange rates related to anticipated cash flows associated with certain international inventory purchases. The Company uses foreign currency forward exchange contracts to hedge against a portion of this exposure. The Company also has exposure to interest rate volatility related to its term loans under the 2016 facilities. The Company has entered into interest rate swap agreements to hedge against a portion of this exposure. Please see Note 9, “Debt,” for further discussion of the 2016 facilities and these agreements. The Company records the foreign currency forward exchange contracts and interest rate swap agreements at fair value in its Consolidated Balance Sheets, and does not net the related assets and liabilities. The foreign currency forward exchange contracts associated with certain international inventory purchases and the interest rate swap agreements are designated as effective hedging instruments (collectively referred to as “cash flow hedges”). The changes in the fair value of the cash flow hedges are recorded in equity as a component of accumulated other comprehensive loss (“AOCL”). The cash flows from such hedges are presented in the same category in the Company’s Consolidated Statements of Cash Flows as the items being hedged. No amounts were excluded from effectiveness testing. There was no ineffective portion of the cash flow hedges during the thirteen weeks ended May 6, 2018 and April 30, 2017. Net Investment Hedges The Company has exposure to changes in foreign currency exchange rates related to the value of its investments in foreign subsidiaries denominated in a currency other than the United States dollar. To hedge against a portion of this exposure, during the fourth quarter of 2017 and the second quarter of 2016, the Company designated the carrying amounts of its €600.0 million euro-denominated principal amount of 3 1/8% senior notes due 2027 and €350.0 million euro-denominated principal amount of 3 5/8% senior notes due 2024, respectively, (collectively referred to as the “foreign currency borrowings”) that it had issued in the United States as net investment hedges of its investments in certain of its foreign subsidiaries that use the euro as their functional currency. Please see Note 9, “Debt,” for further discussion of the Company’s foreign currency borrowings. The Company records the foreign currency borrowings at carrying value in its Consolidated Balance Sheets. The carrying value of the foreign currency borrowings is remeasured at the end of each reporting period to reflect changes in the foreign currency exchange spot rate. Since the foreign currency borrowings are designated as a net investment hedge, such remeasurement is recorded in equity as a component of AOCL. The fair value and the carrying value of the foreign currency borrowings designated as a net investment hedge were $1,164.4 million and $1,121.2 million, respectively, as of May 6, 2018, $1,226.7 million and $1,169.7 million, respectively, as of February 4, 2018 and $398.8 million and $376.3 million, respectively, as of April 30, 2017. The Company evaluates the effectiveness of its net investment hedges at inception and at the beginning of each quarter thereafter. No amounts were excluded from effectiveness testing. There was no ineffective portion of the net investment hedges during the thirteen weeks ended May 6, 2018 and April 30, 2017. Undesignated Contracts The Company records immediately in earnings changes in the fair value of hedges that are not designated as effective hedging instruments (“undesignated contracts”), including all of the foreign currency forward exchange contracts related to intercompany transactions and intercompany loans that are not of a long-term investment nature. Any gains and losses that are immediately recognized in earnings on such contracts are largely offset by the remeasurement of the underlying intercompany balances. In addition, the Company has exposure to changes in foreign currency exchange rates related to the translation of the earnings of its subsidiaries denominated in a currency other than the United States dollar. To hedge against a portion of this exposure, the Company entered into several foreign currency option contracts during 2017 and 2016. These contracts represented the Company’s purchase of euro put/United States dollar call options and Chinese yuan renminbi put/United States dollar call options. All foreign currency option contracts had expired as of February 4, 2018. The Company’s foreign currency option contracts were also undesignated contracts. As such, the changes in the fair value of these foreign currency option contracts were immediately recognized in earnings. This mitigated, to an extent, the effect of any strengthening of the United States dollar against the euro and Chinese yuan renminbi on the reporting of the Company’s euro-denominated and Chinese yuan renminbi-denominated earnings, respectively. The Company does not use derivative or non-derivative financial instruments for trading or speculative purposes. The following table summarizes the fair value and presentation of the Company’s derivative financial instruments in its Consolidated Balance Sheets:
(In millions) | Assets |  | Liabilities
| 5/6/2018 |  | 2/4/2018 |  | 4/30/2017 |  | 5/6/2018 |  | 2/4/2018 |  | 4/30/2017
| Other Current Assets | Other Assets |  | Other Current Assets | Other Assets |  | Other Current Assets | Other Assets |  | Accrued Expenses | Other Liabilities |  | Accrued Expenses | Other Liabilities |  | Accrued Expenses | Other Liabilities
Contracts designated as cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward exchange contracts (inventory purchases) | $ | 8.1 |  | $ | 1.6 |  |  | $ | 0.9 |  | $ | 0.1 |  |  | $ | 18.6 |  | $ | 0.1 |  |  | $ | 14.8 |  | $ | 0.2 |  |  | $ | 62.4 |  | $ | 4.1 |  |  | $ | 6.1 |  | $ | 1.0 |
Interest rate swap agreements | 1.7 |  | 1.1 |  |  | 1.1 |  | 1.3 |  |  | — |  | — |  |  | — |  | — |  |  | 0.1 |  | — |  |  | 4.0 |  | — |
Total contracts designated as cash flow hedges | 9.8 |  | 2.7 |  |  | 2.0 |  | 1.4 |  |  | 18.6 |  | 0.1 |  |  | 14.8 |  | 0.2 |  |  | 62.5 |  | 4.1 |  |  | 10.1 |  | 1.0 |
Undesignated contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward exchange contracts | 0.7 |  | — |  |  | 0.5 |  | — |  |  | 0.6 |  | — |  |  | 1.6 |  | — |  |  | 0.9 |  | — |  |  | 0.9 |  | — |
Foreign currency option contracts | — |  | — |  |  | — |  | — |  |  | 1.7 |  | — |  |  | — |  | — |  |  | — |  | — |  |  | — |  | — |
Total undesignated contracts | 0.7 |  | — |  |  | 0.5 |  | — |  |  | 2.3 |  | — |  |  | 1.6 |  | — |  |  | 0.9 |  | — |  |  | 0.9 |  | — |
Total | $ | 10.5 |  | $ | 2.7 |  |  | $ | 2.5 |  | $ | 1.4 |  |  | $ | 20.9 |  | $ | 0.1 |  |  | $ | 16.4 |  | $ | 0.2 |  |  | $ | 63.4 |  | $ | 4.1 |  |  | $ | 11.0 |  | $ | 1.0 |
The notional amount outstanding of foreign currency forward exchange contracts was $1,007.2 million at May 6, 2018. Such contracts expire principally between May 2018 and September 2019. The following table summarizes the effect of the Company’s hedges designated as cash flow and net investment hedging instruments:
|  | Gain (Loss) Recognized in Other Comprehensive (Loss) Income |  | (Loss) Gain Reclassified from AOCL into (Expense) Income
(In millions) |  |  | Location | Amount
Thirteen Weeks Ended |  | 5/6/18 |  | 4/30/17 |  |  | 5/6/18 |  | 4/30/17
Foreign currency forward exchange contracts (inventory purchases) |  | $ | 29.4 |  |  | $ | (7.8 | ) |  | Cost of goods sold | $ | (22.9 | ) |  | $ | 4.4 |
Interest rate swap agreements |  | 0.5 |  |  | 0.8 |  |  | Interest expense | 0.0 |  |  | (2.3 | )
Foreign currency borrowings (net investment hedges) |  | 49.0 |  |  | (8.6 | ) |  | N/A | — |  |  | — |
Total |  | $ | 78.9 |  |  | $ | (15.6 | ) |  |  | $ | (22.9 | ) |  | $ | 2.1 |
A net loss in AOCL on foreign currency forward exchange contracts at May 6, 2018 of $26.3 million is estimated to be reclassified in the next 12 months in the Company’s Consolidated Income Statement to costs of goods sold as the underlying inventory hedged by such forward exchange contracts is sold. In addition, a net gain in AOCL for interest rate swap agreements at May 6, 2018 of $1.7 million is estimated to be reclassified to interest expense within the next 12 months. Amounts recognized in AOCL for foreign currency borrowings would be recognized in earnings only upon the sale or substantially complete liquidation of the hedged net investment. The following table summarizes the effect of the Company’s undesignated contracts recognized in SG&A expenses in its Consolidated Income Statements:
(In millions) |  | (Loss) Gain Recognized in (Expense) Income
Thirteen Weeks Ended |  | 5/6/18 |  | 4/30/17
Foreign currency forward exchange contracts |  | $ | (0.5 | ) |  | $ | 0.2 |
Foreign currency option contracts |  | — |  |  | (2.6 | )
The Company had no derivative financial instruments with credit risk-related contingent features underlying the related contracts as of May 6, 2018.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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