Annual report pursuant to section 13 and 15(d)

Derivative Financial Instruments

v2.4.0.6
Derivative Financial Instruments
12 Months Ended
Jan. 28, 2012
Derivative Financial Instruments [Abstract]  
DERIVATIVE FINANCIAL INSTRUMENTS
13.

DERIVATIVE FINANCIAL INSTRUMENTS

We are exposed to market risk associated with foreign currency exchange rate fluctuations as a result of our direct sourcing programs and our operations in foreign countries. In connection with our direct sourcing programs, we may enter into merchandise purchase commitments that are denominated in a currency different from the functional currency of the operating entity. Our risk management policy is to hedge a significant portion of forecasted merchandise purchases for our direct sourcing programs that bear foreign exchange risk using foreign exchange forward contracts. The Company has not elected to apply hedge accounting to these transactions denominated in a foreign currency.

 

Our derivative financial instruments are recorded in the consolidated balance sheet at fair value determined by comparing the cost of the foreign currency to be purchased under the contracts using the exchange rates obtained under the contracts (adjusted for forward points) to the hypothetical cost using the spot rate at period end.

The table below discloses the fair value of the derivative financial instruments included in the consolidated balance sheet as of January 28, 2012 and January 29, 2011 (in thousands):

 

                         
   

Asset Derivatives

   

Liability Derivatives

 
   

Balance Sheet
Location

  Fair Value    

Balance Sheet

Location

  Fair Value  

Derivatives not designated as hedging instruments:

                       

At January 28, 2012 —
Foreign exchange forward contracts

  Other current assets   $ 14     Accrued expenses and other current liabilities   $ 142  
       

 

 

       

 

 

 

At January 29, 2011 —
Foreign exchange forward contracts

  Other current assets   $ 361     Accrued expenses and other current liabilities   $ 35  
       

 

 

       

 

 

 

At January 28, 2012, we had 10 contracts maturing in varying increments to purchase euros for an aggregate notional amount of US$1.7 million maturing at various dates through June 2012, nine contracts maturing in varying increments to purchase USD for an aggregate notional amount of Canadian dollars (“CAD”) $5.9 million maturing at various dates through June 2012 and 22 contracts maturing in varying increments to purchase USD for an aggregate notional amount of pounds Sterling (“GBP”) £10.5 million maturing at various dates through May 2012. For the fiscal year ended January 28, 2012, we recognized a net pre-tax loss of $0.7 million in cost of sales in the consolidated statement of earnings for our derivative financial instruments not designated as hedging instruments.

At January 29, 2011, we had six contracts maturing in varying increments to purchase euros for an aggregate notional amount of US$3.8 million maturing at various dates through October 2011, 10 contracts maturing in varying increments to purchase USD for an aggregate notional amount of CAD $5.8 million maturing at various dates through May 2011 and 70 contracts maturing in varying increments to purchase USD for an aggregate notional amount of GBP £27.6 million maturing at various dates through September 2011. For the fiscal year ended January 29, 2011, we recognized a net pre-tax gain of $0.6 million in cost of sales in the consolidated statement of earnings for our derivative financial instruments not designated as hedging instruments. No amounts were recognized in our results of operations during fiscal 2009.

We had no derivative financial instruments with credit-risk-related contingent features underlying the agreements as of January 28, 2012 or January 29, 2011.