Financial Instruments and Risk Management

12 Months Ended

Feb. 29, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Financial Instruments and Risk Management

Note 15 - 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, accounts receivable and accounts payable are denominated in foreign currencies. Approximately

14%, 13%, and 10% of our net sales revenue was denominated in foreign currencies during fiscal 2024, 2023 and 2022, 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.

In our consolidated statements of income, foreign currency exchange rate gains and losses resulting from the remeasurement of foreign income taxes receivables and payables, and deferred income tax assets and liabilities are recognized in income tax expense, and all other foreign currency exchange rate gains and losses are recognized in SG&A. We recorded in income tax expense foreign currency exchange rate net gains of $0.3 million during fiscal 2024 and net losses of $0.4 million and $0.5 million during fiscal 2023 and 2022, respectively. We recorded in SG&A foreign currency exchange rate net losses of $0.5 million, $1.7 million and $0.2 million during fiscal 2024, 2023 and 2022, 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”). Foreign currency derivatives for which we have not elected hedge accounting consist of certain forward contracts and our cross-currency debt swaps. These undesignated derivatives are used to hedge monetary net asset and liability positions. We evaluate our derivatives designated as cash flow hedges each quarter to assess hedge effectiveness. For additional information on our accounting for derivatives see Note 1.

Interest Rate Risk

Interest on our outstanding debt as of February 29, 2024 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 and Prior Credit Agreement, which totaled $672.0 million and $936.9 million as of February 29, 2024 and February 28, 2023, respectively. As of February 29, 2024 and February 28, 2023, $500 million and $425 million of the outstanding principal balance under the Credit Agreement and Prior 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 we evaluate our derivatives designated as cash flow hedges each quarter to assess hedge effectiveness. For additional information on our accounting for derivatives see Note 1.

The following tables summarize the fair values of our derivative instruments at the end of fiscal 2024 and 2023:


(in thousands)	February 29, 2024
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	2/2025	€36,500		$	377	$	—	$	90	$	—
Forward contracts - sell Canadian Dollars	Cash flow	2/2025	$20,750		151		—		57		—

Forward contracts - sell Pounds	Cash flow	2/2025	£20,250		59		—		234		—


Forward contracts - sell Norwegian Kroner	Cash flow	8/2024	kr	5,000	5		—		—		—
Interest rate swaps	Cash flow	2/2026	$500,000		1,314		1,190		—		—
Subtotal					1,906		1,190		381		—

Derivatives not designated under hedge accounting
Forward contracts - sell Euro	(1)	3/2024	€430		—		—		3		—
Forward contracts - sell Pounds	(1)	3/2024	£735		—		—		2		—
Subtotal					—		—		5		—
Total fair value					$	1,906	$	1,190	$	386	$	—


(in thousands)	February 28, 2023
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	2/2024	€29,310		$	257	$	—	$	—	$	—
Forward contracts - sell Canadian Dollars	Cash flow	2/2024	$30,000		962		11		—		—

Forward contracts - sell Pounds	Cash flow	1/2024	£19,400		—		—		711		—


Forward contracts - sell Norwegian Kroner	Cash flow	2/2024	kr	40,000	185		—		—		—
Interest rate swaps	Cash flow	2/2026	$425,000		3,941		1,805		—		—
Subtotal					5,345		1,816		711		—

Derivatives not designated under hedge accounting
Forward contracts - buy Euro	(1)	3/2023	€500		6		—		—		—
Forward contracts - buy Pounds	(1)	3/2023	£400		2		—		—		—
Subtotal					8		—		—		—
Total fair value					$	5,353	$	1,816	$	711	$	—

(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.

The pre-tax effects of derivative instruments designated as cash flow hedges for fiscal 2024 and 2023 were as follows:


	Fiscal Years Ended Last Day of February,
	Gain (Loss) Recognized in AOCI		Gain (Loss) Reclassified from AOCI into Income
(in thousands)	2024			2023		Location	2024		2023
Foreign currency contracts - cash flow hedges	$	(502)		$	8,289	Sales revenue, net	$	(9)	$	10,390
Interest rate swaps - cash flow hedges	4,373			8,382		Interest expense	7,615		(145)
Total	$	3,871		$	16,671		$	7,606	$	10,245

The pre-tax effects of derivative instruments not designated under hedge accounting for fiscal 2024 and 2023 were as follows:


	Fiscal Years Ended Last Day of February,
	Gain (Loss) Recognized in Income
(in thousands)	Location	2024		2023
Forward contracts	SG&A	$	(280)	$	(281)
Cross-currency debt swaps - principal	SG&A	—		875

Total		$	(280)	$	594

We expect a net gain of $1.5 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, 14 and 16 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.