XML 29 R18.htm IDEA: XBRL DOCUMENT
v3.21.2

Financial Instruments and Risk Management | 3 Months Ended
--- | ---
May 31, 2021
Financial Instruments, Owned, at Fair Value [Abstract] |
Financial Instruments and Risk Management | Note 11 - 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, certain inventory purchases 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 12% and 15% of our net sales revenue was denominated in foreign currencies during the three month periods ended May 31, 2021 and 2020, respectively. These sales were primarily denominated in British Pounds, Euros, Mexican Pesos and Canadian Dollars. We make most of our inventory purchases from vendors in the Asia Pacific market and primarily use the U.S. Dollar for such purchases. In our condensed consolidated statements of income, foreign currency exchange rate gains and losses resulting from the remeasurement of foreign taxes receivable, taxes payable, deferred tax assets, and deferred tax liabilities are recognized in their respective income tax lines, and all other foreign currency exchange rate gains and losses are recognized in SG&A. During the three month period ended May 31, 2021, we recorded foreign currency exchange rate net gains of $0.4 million in SG&A compared to foreign currency exchange rate net losses of $1.7 million for the same period last year. We mitigate certain foreign currency exchange rate risk by using a series of foreign currency contracts, which can include forward contracts and zero-cost collars, designated as cash flow hedges, and mark-to-market cross-currency debt swaps to protect against the foreign currency exchange rate risk inherent in our forecasted transactions denominated in foreign currencies. We do not enter into any derivatives or similar instruments for trading or other speculative purposes. Our foreign currency contracts are designated as cash flow hedges and are recorded on the balance sheet at fair value with changes in fair value recorded in Other Comprehensive Loss (“OCI”) until the hedge transaction is settled, at which point amounts are reclassified from Accumulated Other Comprehensive Loss (“AOCI”) to our condensed consolidated statements of income. Derivatives for which we have not elected hedge accounting consist of our cross-currency debt swaps, and any changes in the fair value of the derivatives are recorded in our condensed consolidated statements of income. We evaluate our derivatives designated as cash flow hedges each quarter to assess hedge effectiveness. Any ineffectiveness, which is not material for any year presented, is immediately recognized in our condensed consolidated statements of income. Interest Rate Risk Interest on our outstanding debt as of May 31, 2021 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 $225.0 million of the outstanding principal balance under the Credit Agreement, which totaled $498.0 million as of May 31, 2021. 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 condensed consolidated statements of income. We evaluate our derivatives designated as cash flow hedges each quarter to assess hedge effectiveness. Any ineffectiveness, which is not material for any year presented, is immediately recognized in our condensed consolidated statements of income. The following tables summarize the fair values of our derivative instruments as of the end of the periods presented:
(in thousands) | May 31, 2021
Derivatives designated as hedging instruments | Hedge Type |  | Final Settlement Date |  | Notional Amount |  | Prepaid Expenses and Other Current Assets |  | Other Assets |  | Accrued Expenses and Other Current Liabilities |  | Other Liabilities, Non- current
Forward contracts - sell Euro | Cash flow |  | 2/2023 |  | € | 43,750 |  |  | — |  |  | — |  |  | 1,867 |  |  | 241 |
Forward contracts - sell Canadian Dollars | Cash flow |  | 2/2023 |  | $ | 46,750 |  |  | — |  |  | — |  |  | 1,857 |  |  | 251 |
Forward contracts - sell Pounds | Cash flow |  | 2/2023 |  | £ | 38,800 |  |  | — |  |  | — |  |  | 2,399 |  |  | 274 |
Forward contracts - Sell Australian Dollars | Cash flow |  | 11/2021 |  | A$ | 4,000 |  |  | — |  |  | — |  |  | 20 |  |  | — |
Interest rate swaps | Cash flow |  | 1/2024 |  | $ | 225,000 |  |  | — |  |  | — |  |  | 4,011 |  |  | 4,936 |
Subtotal |  |  |  |  |  |  | — |  |  | — |  |  | 10,154 |  |  | 5,702 |
Derivatives not designated under hedge accounting |  |  |  |  |  |  |  |  |  |  |  |  |
Cross-currency debt swaps - Euro | (1) |  | 04/2022 |  | € | 6,000 |  |  | — |  |  | — |  |  | 863 |  |  | — |
Cross-currency debt swaps - Pounds | (1) |  | 04/2022 |  | £ | 4,500 |  |  | — |  |  | — |  |  | 840 |  |  | — |
Subtotal |  |  |  |  |  |  | — |  |  | — |  |  | 1,703 |  |  | — |
Total fair value |  |  |  |  |  |  | $ | — |  |  | $ | — |  |  | $ | 11,857 |  |  | $ | 5,702 |
(in thousands) | February 28, 2021
Derivatives designated as hedging instruments | Hedge Type |  | Final Settlement Date |  | Notional Amount |  | Prepaid Expenses and Other Current Assets |  | Other Assets |  | Accrued Expenses and Other Current Liabilities |  | Other Liabilities, Non- current
Forward contracts - sell Euro | Cash flow |  | 2/2022 |  | € | 39,000 |  |  | — |  |  | — |  |  | 1,851 |  |  | — |
Forward contracts - sell Canadian Dollars | Cash flow |  | 2/2023 |  | $ | 34,000 |  |  | — |  |  | 33 |  |  | 1,061 |  |  | — |
Forward contracts - sell Pounds | Cash flow |  | 2/2023 |  | £ | 34,500 |  |  | — |  |  | — |  |  | 2,026 |  |  | 21 |
Forward contracts - sell Australian Dollars | Cash flow |  | 11/2021 |  | A$ | 4,000 |  |  | — |  |  | — |  |  | 18 |  |  | — |
Interest rate swaps | Cash flow |  | 1/2024 |  | $ | 225,000 |  |  | — |  |  | — |  |  | 4,407 |  |  | 5,534 |
Subtotal |  |  |  |  |  |  | — |  |  | 33 |  |  | 9,363 |  |  | 5,555 |
Derivatives not designated under hedge accounting |  |  |  |  |  |  |  |  |  |  |  |  |
Cross-currency debt swaps - Euro | (1) |  | 04/2022 |  | € | 6,000 |  |  | — |  |  | — |  |  | — |  |  | 817 |
Cross-currency debt swaps - Pounds | (1) |  | 04/2022 |  | £ | 4,500 |  |  | — |  |  | — |  |  | — |  |  | 756 |
Subtotal |  |  |  |  |  |  | — |  |  | — |  |  | — |  |  | 1,573 |
Total fair value |  |  |  |  |  |  | $ | — |  |  | $ | 33 |  |  | $ | 9,363 |  |  | $ | 7,128 |
(1)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 were as follows for the periods presented:
| Three Months Ended May 31,
| Gain (Loss) Recognized in AOCI |  | Gain (Loss) Reclassified from AOCI into Income
(in thousands) | 2021 |  |  |  | Location |  | 2021 |  |
Foreign currency contracts - cash flow hedges | $ | (3,191) |  |  |  |  | Sales revenue, net |  | $ | (1,226) |  |  |
Interest rate swaps - cash flow hedges | (290) |  |  |  |  | Interest expense |  | (1,284) |  |  |
Total | $ | (3,481) |  |  |  |  |  |  | $ | (2,510) |  |  |
|  |  | Three Months Ended May 31,
|  |  | Gain (Loss) Recognized in AOCI |  | Gain (Loss) Reclassified from AOCI into Income
(in thousands) |  |  | 2020 |  | Location |  |  |  |  | 2020
Foreign currency contracts - cash flow hedges |  |  | $ | 1,604 |  |  | SG&A |  |  |  |  | $ | 765 |
Interest rate swaps - cash flow hedges |  |  | (4,133) |  |  | Interest expense |  |  |  |  | (726) |
Total |  |  | $ | (2,529) |  |  |  |  |  |  |  | $ | 39 |
The pre-tax effects of derivative instruments not designated under hedge accounting were as follows for the periods presented:
| Three Months Ended May 31,
| Gain (Loss) Recognized in Income
(in thousands) | Location |  | 2021 |  | 2020
Cross-currency debt swaps - principal | SG&A |  | (129) |  |  | (149) |
Cross-currency debt swaps - interest | Interest expense |  | (2) |  |  | 74 |
Total |  |  | $ | (131) |  |  | $ | (75) |
We expect a net loss of $10.2 million associated with foreign currency contracts and interest rate swaps currently reported 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 10 and 12 to these condensed consolidated financial statements for more information. Counterparty Credit Risk Financial instruments, including foreign currency 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.

X
- Definition The entire disclosure for financial instruments. This disclosure includes, but is not limited to, fair value measurements of short and long term marketable securities, international currencies forward contracts, and auction rate securities. Financial instruments may include hedging and non-hedging currency exchange instruments, derivatives, securitizations and securities available for sale at fair value. Also included are investment results, realized and unrealized gains and losses as well as impairments and risk management disclosures. + References No definition available. + Details
Name: | us-gaap_FinancialInstrumentsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_FinancialInstrumentsOwnedAtFairValueAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration