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Derivative Financial Instruments | 3 Months Ended
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Apr. 30, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments | Derivative Financial Instruments Hedging Strategy Foreign Exchange Currency Contracts The Company operates in foreign countries, which exposes it to market risk associated with foreign currency exchange rate fluctuations. The Company has entered into certain forward contracts to hedge the risk of foreign currency rate fluctuations. The Company has elected to apply the hedge accounting rules in accordance with authoritative guidance for certain of these hedges. The Company’s primary objective is to hedge the variability in forecasted cash flows due to the foreign currency risk. Various transactions that occur primarily in Europe, Canada, South Korea and Mexico are denominated in U.S. dollars and British pounds and thus are exposed to earnings risk as a result of exchange rate fluctuations when converted to their functional currencies. These types of transactions include U.S. dollar denominated purchases of merchandise and U.S. dollar and British pound denominated intercompany liabilities. In addition, certain operating expenses, tax liabilities and pension-related liabilities are denominated in Swiss francs and are exposed to earnings risk as a result of exchange rate fluctuations when converted to the functional currency. The Company enters into derivative financial instruments, including forward exchange currency contracts, to offset some but not all of the exchange risk on certain of these anticipated foreign currency transactions. Periodically, the Company may also use foreign exchange currency contracts to hedge the translation and economic exposures related to its net investments in certain of its international subsidiaries. Interest Rate Swap Agreements The Company is exposed to interest rate risk on its floating-rate debt. The Company has entered into interest rate swap agreements to effectively convert its floating-rate debt to a fixed-rate basis. The principal objective of these contracts is to eliminate or reduce the variability of the cash flows in interest payments associated with the Company’s floating-rate debt, thus reducing the impact of interest rate changes on future interest payment cash flows. The Company has elected to apply the hedge accounting rules in accordance with authoritative guidance for certain of these contracts. Refer to Note 9 for further information. The impact of the credit risk of the counterparties to the derivative contracts is considered in determining the fair value of the foreign exchange currency contracts and interest rate swap agreements. As of April 30, 2016, credit risk has not had a significant effect on the fair value of the Company’s foreign exchange currency contracts and interest rate swap agreements. Hedge Accounting Policy Foreign Exchange Currency Contracts U.S. dollar forward contracts are used to hedge forecasted merchandise purchases over specific months. Changes in the fair value of these U.S. dollar forward contracts, designated as cash flow hedges, are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are recognized in cost of product sales in the period which approximates the time the hedged merchandise inventory is sold. The Company also hedges forecasted intercompany royalties over specific months. Changes in the fair value of these U.S. dollar forward contracts, designated as cash flow hedges, are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are recognized in other income and expense in the period in which the royalty expense is incurred. The Company has also used U.S. dollar forward contracts to hedge the net investments of certain of the Company’s international subsidiaries over specific months. Changes in the fair value of these U.S. dollar forward contracts, designated as net investment hedges, are recorded in foreign currency translation adjustment as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are not recognized in earnings until the sale or liquidation of the hedged net investment. The Company also has foreign exchange currency contracts that are not designated as hedging instruments for accounting purposes. Changes in fair value of foreign exchange currency contracts not designated as hedging instruments are reported in net earnings (loss) as part of other income and expense. Interest Rate Swap Agreements Interest rate swap agreements are used to hedge the variability of the cash flows in interest payments associated with the Company’s floating-rate debt. Changes in the fair value of interest rate swap agreements designated as cash flow hedges are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are amortized to interest expense over the term of the related debt. Periodically, the Company may also enter into interest rate swap agreements that are not designated as hedging instruments for accounting purposes. Changes in the fair value of interest rate swap agreements not designated as hedging instruments are reported in net earnings (loss) as part of other income and expense. Summary of Derivative Instruments The fair value of derivative instruments in the condensed consolidated balance sheets as of April 30, 2016 and January 30, 2016 is as follows (in thousands):
|  | Derivative Balance Sheet Location |  | Fair Value at Apr 30, 2016 |  | Fair Value at Jan 30, 2016
ASSETS: |  |  |  |  |  |  |  |
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |
Cash flow hedges: |  |  |  |  |  |
Foreign exchange currency contracts |  | Other current assets/ Other assets |  | $ | 99 |  |  | $ | 7,491 |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |
Foreign exchange currency contracts |  | Other current assets |  | 18 |  |  | 2,306 |
Total |  |  |  | $ | 117 |  |  | $ | 9,797 |
LIABILITIES: |  |  |  |  |  |  |  |
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |
Cash flow hedges: |  |  |  |  |  |
Foreign exchange currency contracts |  | Accrued expenses/ Other long-term liabilities |  | $ | 5,667 |  |  | $ | 47 |
Interest rate swap |  | Other long-term liabilities |  | 81 |  |  | — |
Total derivatives designated as hedging instruments |  |  |  | 5,748 |  |  | 47 |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |
Foreign exchange currency contracts |  | Accrued expenses |  | 3,930 |  |  | 319 |
Interest rate swap |  | Accrued expenses |  | — |  |  | 37 |
Total derivatives not designated as hedging instruments |  |  |  | 3,930 |  |  | 356 |
Total |  |  |  | $ | 9,678 |  |  | $ | 403 |
Derivatives Designated as Hedging Instruments Foreign Exchange Currency Contracts Designated as Cash Flow Hedges During the three months ended April 30, 2016, the Company purchased U.S. dollar forward contracts in Canada and Europe totaling US$21.3 million and US$18.9 million, respectively, to hedge forecasted merchandise purchases and intercompany royalties that were designated as cash flow hedges. As of April 30, 2016, the Company had forward contracts outstanding for its European and Canadian operations of US$104.8 million and US$59.0 million, respectively, which are expected to mature over the next 18 months. As of April 30, 2016, accumulated other comprehensive income (loss) related to foreign exchange currency contracts included a net unrealized loss of approximately $3.7 million, net of tax, of which $0.9 million will be recognized in cost of product sales or other expense over the following 12 months, at the then current values on a pre-tax basis, which can be different than the current quarter-end values. At January 30, 2016, the Company had forward contracts outstanding for its European and Canadian operations of US$106.3 million and US$48.2 million, respectively, that were designated as cash flow hedges. Interest Rate Swap Agreement Designated as Cash Flow Hedge During the three months ended April 30, 2016, the Company entered into an interest rate swap agreement with a notional amount of $21.5 million, designated as a cash flow hedge, to hedge the variability of cash flows in interest payments associated with the Company’s floating-rate debt. This interest rate swap agreement matures in January 2026 and converts the nature of the Company’s real estate secured term loan from LIBOR floating-rate debt to fixed-rate debt, resulting in a swap fixed rate of approximately 3.06%. As of April 30, 2016, accumulated other comprehensive income (loss) related to the interest rate swap agreement included a net unrealized loss of approximately $0.1 million, net of tax, which will be recognized in interest expense over the following 12 months, at the then current values on a pre-tax basis, which can be different than the current quarter-end values. The following table summarizes the gains (losses) before taxes recognized on the derivative instruments designated as cash flow hedges in OCI and net earnings (loss) for the three months ended April 30, 2016 and May 2, 2015 (in thousands):
| Loss Recognized in OCI |  | Location of Gain (Loss) Reclassified from Accumulated OCI into Earnings (Loss) (1) |  | Gain (Loss) Reclassified from Accumulated OCI into Earnings (Loss)
| Three Months Ended |  |  | Three Months Ended
| Apr 30, 2016 |  | May 2, 2015 |  |  | Apr 30, 2016 |  | May 2, 2015
Derivatives designated as cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange currency contracts | $ | (11,412 | ) |  | $ | (1,147 | ) |  | Cost of product sales |  | $ | 1,435 |  |  | $ | 1,750 |
Foreign exchange currency contracts | $ | (699 | ) |  | $ | (148 | ) |  | Other income/expense |  | $ | 32 |  |  | $ | 486 |
Interest rate swap | $ | (132 | ) |  | $ | — |  |  | Interest expense |  | $ | (51 | ) |  | $ | — |
__________________________________
(1) | The Company recognized gains of $0.5 million resulting from the ineffective portion related to foreign exchange currency contracts in interest income during the three months ended April 30, 2016. The ineffective portion related to foreign exchange currency contracts was immaterial during the three months ended May 2, 2015. There was no ineffectiveness recognized related to the interest rate swap during the three months ended April 30, 2016.
The following table summarizes net after-tax derivative activity recorded in accumulated other comprehensive income (loss) (in thousands):
| Three Months Ended
| Apr 30, 2016 |  | May 2, 2015
Beginning balance gain | $ | 7,252 |  |  | $ | 7,157 |
Net losses from changes in cash flow hedges | (9,880 | ) |  | (926 | )
Net gains reclassified to earnings (loss) | (1,145 | ) |  | (1,935 | )
Ending balance gain (loss) | $ | (3,773 | ) |  | $ | 4,296 |
Derivatives Not Designated as Hedging Instruments As of April 30, 2016, the Company had euro foreign exchange currency contracts to purchase US$68.5 million expected to mature over the next 12 months and Canadian dollar foreign exchange currency contracts to purchase US$22.6 million expected to mature over the next 11 months. The following table summarizes the gains (losses) before taxes recognized on the derivative instruments not designated as hedging instruments in other income and expense for the three months ended April 30, 2016 and May 2, 2015 (in thousands):
|  | Location of Gain (Loss) Recognized in Earnings (Loss) |  | Gain (Loss) Recognized in Earnings (Loss)
|  |  | Three Months Ended
|  |  | Apr 30, 2016 |  | May 2, 2015
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |
Foreign exchange currency contracts |  | Other income/expense |  | $ | (6,029 | ) |  | $ | (701 | )
Interest rate swap |  | Other income/expense |  | $ | 38 |  |  | $ | 49 |
At January 30, 2016, the Company had euro foreign exchange currency contracts to purchase US$54.8 million and Canadian dollar foreign exchange currency contracts to purchase US$25.8 million.

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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 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624171-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=56946850&loc=d3e41620-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624163-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5579240-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624177-113959 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80784-113994 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=56946850&loc=d3e41641-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5579245-113959 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624258-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80748-113994 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5708775-113959 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5708773-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5618551-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5580258-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624181-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=56946850&loc=d3e41638-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 + Details
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