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Derivative Financial Instruments and Risk Management
 3 Months Ended
May 02, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments and Risk Management
Note 9 – Derivative Financial Instruments and Risk Management
We 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 our variable rate term loan borrowing. Both swaps have been designated as cash flow hedges of floating-rate borrowings.
Our cross-currency interest rate swap agreement effectively modifies our exposure to interest rate risk and foreign currency exchange rate risk by converting our 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 we utilize on our term loan effectively modifies our exposure to interest rate risk by converting our 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 our derivative instruments:
 
 
  
May 2, 2020
 
  
January 31, 2020
 
Cash Flow Hedges
  
 
 
  
Fair Value Derivatives
 
  
 
 
  
Fair Value Derivatives
 
(In thousands)       
  
Notional Amount
 
  
Asset
 
  
Liability
 
  
Notional Amount
 
  
Asset
 
  
Liability
 
Cross-currency Interest Rate Swap
  $4,489   $—    $192   $4,489   $—    $250 
Interest Rate Swap
  $8,250   $—    $202   $8,250   $—     $96
 
The fair value of both the Cross-currency Interest Rate Swap and the Interest Rate swap are included in other long-term liabilities on the condensed consolidated balance sheets for the periods ended May 2, 2020 and January 31, 2020.
 
The following table presents the impact of our derivative instruments in our condensed consolidated financial statements for the three months ended May 2, 2020 and May 4, 2019:
 
 
  
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)
  
May 2,

2020
 
 
May 4,

2019
 
 
May 2,

2020
 
  
May 4,

2019
 
Swap Contracts
  
$
(58
) 
 
$
149
 
  
 
Other Income (Expense
) 
 
$
43
 
  
$
185
 
 
  
 
 
 
 
 
 
 
  
   
 
 
 
 
  
 
 
At May 2, 2020, 
we
expect to reclassify approximately $30 thousand 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.