Derivative Financial Instruments and Risk Management

9 Months Ended

Nov. 02, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments and Risk Management

Note 9 – Derivative Financial Instruments and Risk Management

The Company has entered into a cross-currency interest rate swap to manage the interest rate risk and foreign currency exchange risk associated with the floating-rate foreign currency-denominated term loan borrowing by our Danish Subsidiary and an interest rate swap to manage the interest rate risk associated with the variable rate term loan borrowing by the Company. Both swaps have been designated as cash flow hedges of floating-rate borrowings.

The cross-currency interest rate swap agreement utilized by the Company effectively modifies the Company’s exposure to interest rate risk and foreign currency exchange rate risk by converting the Company’s floating-rate debt denominated in U.S. Dollars on our Danish subsidiary’s books to a fixed-rate debt denominated in Danish Kroner for the term of the loan, thus reducing the impact of interest-rate and foreign currency exchange rate changes on future interest expense and principal repayments. This swap involves the receipt of floating rate amounts in U.S. Dollars in exchange for fixed-rate interest payments in Danish Kroner, as well as exchanges of principal at the inception spot rate, over the life of the term loan.

The interest rate swap agreement utilized by the Company on its term loan effectively modifies the Company’s exposure to interest rate risk by converting the Company’s floating-rate debt to fixed-rate debt for the next five years, thus reducing the impact of interest-rate changes on future interest expense. This swap involves the receipt of floating rate amounts in U.S. Dollars in exchange for fixed rate payments in U.S. dollars over the life of the term loan.

The following table summarizes the notional amount and fair value of the Company’s derivative instrument:


Cash Flow Hedges	November 2, 2019						January 31, 2019
(In thousands)			Fair Value Derivatives						Fair Value Derivatives
	Notional Amount		Asset		Liability		Notional Amount		Asset		Liability
Cross-currency Interest Rate Swap	$	4,949	$	—	$	329	$	6,329	$	—	$	600
Interest Rate Swap	$	9,000	$	—	$	88	$	11,250	$	85	$	—

The following table presents the impact of the Company’s derivative instruments in our condensed consolidated financial statements for the three and

nine

months ended November 2, 2019 and October 27, 2018:


	Three Months Ended
	Amount of Gain (Loss) Recognized in OCI on Derivative				Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Expense)	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Expense)
Cash Flow Hedge (In thousands)	November 2, 2019		October 27, 2018			November 2, 2019			October 27, 2018
Swap Contracts	$	80	$	283	Other Income (Expense)	$	(3	)	$	192


	Nine Months Ended
	Amount of Gain (Loss) Recognized in OCI on Derivative				Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Expense)	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Expense)
Cash Flow Hedge (In thousands)	November 2, 2019		October 27, 2018			November 2, 2019		October 27, 2018
Swap Contracts	$	82	$	981	Other Income (Expense)	$	259	$	775

At November 2, 2019, the Company expects to reclassify approximately $0.2 million of net gains on the swap contracts from accumulated other comprehensive loss to earnings during the next 12 months due to changes in foreign exchange rates and the payment of variable interest associated with the floating-rate debt.