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Derivative Financial Instruments | 3 Months Ended
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May 04, 2024
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’s primary objective is to hedge the variability in forecasted cash flows due to the foreign currency risk. The Company enters into certain forward exchange currency contracts to hedge the risk of a portion of these anticipated foreign currency transactions against foreign currency rate fluctuations. The Company may also 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 for certain of these 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. Refer to Note 10 for further information. Summary of Derivative Instruments The fair value of derivative instruments in the condensed consolidated balance sheets is (in thousands):
| Fair Value at May 4, 2024 |  | Fair Value at Feb 3, 2024 |  | Derivative Balance Sheet Location |  |
ASSETS: |  |  |  |  |  |  |
Derivatives designated as hedging instruments: |  |  |  |  |  |  |
Cash flow hedges: |  |  |  |  |  |  |
Foreign exchange currency contracts | $ | 2,191 |  |  | $ | 1,590 |  |  | Other current assets/Other assets |  |
Interest rate swap | 835 |  |  | 797 |  |  | Other assets |  |
Total derivatives designated as hedging instruments | 3,026 |  |  | 2,387 |  |  |  |  |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |
Foreign exchange currency contracts | 1,069 |  |  | 688 |  |  | Other current assets |  |
2028 Bond Hedge | 138,269 |  |  | 85,918 |  |  | Other assets |  |
Total derivatives not designated as hedging instruments | 139,338 |  |  | 86,606 |  |  |  |  |
Total | $ | 142,364 |  |  | $ | 88,993 |  |  |  |  |
LIABILITIES: |  |  |  |  |  |  |
Derivatives designated as hedging instruments: |  |  |  |  |  |  |
Cash flow hedges: |  |  |  |  |  |  |
Foreign exchange currency contracts | $ | 285 |  |  | $ | 763 |  |  | Accrued expenses/ Other long-term liabilities |  |
Interest rate swap | — |  |  | — |  |  | Other long-term liabilities |  |
Total derivatives designated as hedging instruments | 285 |  |  | 763 |  |  |  |  |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |
Foreign exchange currency contracts | 113 |  |  | 939 |  |  | Accrued expenses |  |
Embedded derivative | 30,230 |  |  | 16,390 |  |  | Convertible senior notes due 2028, net |  |
Total derivatives not designated as hedging instruments | 30,343 |  |  | 17,329 |  |  |  |  |
Total | $ | 30,628 |  |  | $ | 18,092 |  |  |  |  |
Derivatives Designated as Hedging Instruments Foreign Exchange Currency Contracts Designated as Cash Flow Hedges During the three months ended May 4, 2024, the Company purchased U.S. dollar forward contracts in Europe totaling US$135.0 million that were designated as cash flow hedges. As of May 4, 2024, the Company had forward contracts outstanding for its European operations of US$195.0 million to hedge forecasted merchandise purchases, which are expected to mature over the next 14 months. As of May 4, 2024, AOCL related to foreign exchange currency contracts included a $1.6 million net unrealized gain, net of tax, of which $1.3 million will be recognized in cost of product sales 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 February 3, 2024, the Company had forward contracts outstanding for its European operations of $104.0 million that were designated as cash flow hedges. Interest Rate Swap Agreement Designated as Cash Flow Hedge As of May 4, 2024, AOCL related to the interest rate swap agreement included a net unrealized gain of $0.6 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 summarizes the gains (losses) before income taxes recognized on derivative instruments designated as cash flow hedges in other comprehensive income (loss) (“OCL”) and net earnings (loss) (in thousands):
| Gain (Loss) Recognized in OCL |  | Location of Gain (Loss) Reclassified from AOCL into Earnings (Loss) |  | Gain (Loss) Reclassified from AOCL into Earnings (Loss)
| May 4, 2024 |  | Apr 29, 2023 |  |  |  | May 4, 2024 |  | Apr 29, 2023
| Three Months Ended
Derivatives designated as cash flow hedges: |  |  |  |  |  |  |  |  |
Foreign exchange currency contracts | $ | 1,171 |  |  | $ | (1,072) |  |  | Cost of product sales |  | $ | (2,045) |  |  | $ | 5,893 |
Interest rate swap | 193 |  |  | 15 |  |  | Interest expense |  | 155 |  |  | 128 |
The following summarizes net after income tax derivative activity recorded in AOCL (in thousands):
| Three Months Ended |  |
| May 4, 2024 |  | Apr 29, 2023 |  |  |  |
Beginning balance loss | $ | (544) |  |  | $ | (1,584) |  |  |  |  |
Net gain (loss) from changes in cash flow hedges | 1,145 |  |  | (942) |  |  |  |  |
Net (gain) loss reclassified into earnings (loss) | 1,620 |  |  | (5,343) |  |  |  |  |
Ending balance gain (loss) | $ | 2,221 |  |  | $ | (7,869) |  |  |  |  |
Foreign Exchange Currency Contracts Not Designated as Hedging Instruments As of May 4, 2024, the Company had euro foreign exchange currency contracts to purchase US$73.0 million expected to mature over the next 10 months. As of February 3, 2024, the Company had euro foreign exchange currency contracts to purchase US$52.0 million. The following summarizes the gains (losses) before income taxes recognized on derivative instruments not designated as hedging instruments in other income (expense) (in thousands):
| Location of Gains (Losses) Recognized in Earnings (Loss) |  | Gains (Losses) Recognized in Earnings (Loss)
|  | Three Months Ended |  |
|  | May 4, 2024 |  | Apr 29, 2023 |  |  |  |
Foreign exchange currency contracts | Other income (expense) |  | $ | 521 |  |  | $ | (625) |  |  |  |  |
2028 Bond Hedge | Other income (expense) |  | $ | 45,813 |  |  | $ | — |  |  |  |  |
Embedded derivatives | Other income (expense) |  | $ | (7,302) |  |  | $ | — |  |  |  |  |

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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/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//815/tableOfContent + Details
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