Edgar Filing: GUESS INC

10-Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2015

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 1-11893

GUESS?, INC.

(Exact name of registrant as specified in its charter)



Delaware	95-3679695
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

1444 South Alameda Street
Los Angeles, California	90021
(Address of principal executive offices)	(Zip Code)

(213) 765-3100

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer x	Accelerated filer o

Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of December 1, 2015 the registrant had 83,770,874 shares of Common Stock, $.01 par value per share, outstanding.

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GUESS?, INC.

FORM 10-Q

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PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	1

	Condensed Consolidated Balance Sheets as of October 31, 2015 and January 31, 2015	1

	Condensed Consolidated Statements of Income — Three and Nine Months Ended October 31, 2015 and November 1, 2014	2

	Condensed Consolidated Statements of Comprehensive Income (Loss) — Three and Nine Months Ended October 31, 2015 and November 1, 2014	3

	Condensed Consolidated Statements of Cash Flows — Nine Months Ended October 31, 2015 and November 1, 2014	4

	Notes to Condensed Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48

Item 4.	Controls and Procedures	49
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	50

Item 1A.	Risk Factors	51

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51

Item 6.	Exhibits	52

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PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements.

GUESS?, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data)

	Oct 31, 2015			Jan 31, 2015
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	402,386		$	483,483
Accounts receivable, net	195,825			216,205
Inventories	373,103			319,078
Other current assets	78,831			92,593
Total current assets	1,050,145			1,111,359
Property and equipment, net	240,058			259,524
Goodwill	33,811			34,133
Other intangible assets, net	7,794			9,745
Long-term deferred tax assets	66,117			68,747
Other assets	124,547			117,897
	$	1,522,472		$	1,601,405
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of capital lease obligations	$	4,450		$	1,548
Accounts payable	175,976			159,924
Accrued expenses	146,624			140,494
Total current liabilities	327,050			301,966
Long-term debt and capital lease obligations	2,189			6,165
Deferred rent and lease incentives	78,160			81,761
Other long-term liabilities	96,128			117,630
	503,527			507,522
Redeemable noncontrolling interests	4,698			4,437

Commitments and contingencies (Note 12)

Stockholders’ equity:
Preferred stock, $.01 par value. Authorized 10,000,000 shares; no shares issued and outstanding	—			—
Common stock, $.01 par value. Authorized 150,000,000 shares; issued 139,977,240 and 139,559,000 shares, outstanding 83,773,648 and 85,323,154 shares, as of October 31, 2015 and January 31, 2015, respectively	838			853
Paid-in capital	465,105			453,546
Retained earnings	1,240,981			1,265,524
Accumulated other comprehensive loss	(142,239		)	(127,065		)
Treasury stock, 56,203,592 and 54,235,846 shares as of October 31, 2015 and January 31, 2015, respectively	(562,744		)	(519,002		)
Guess?, Inc. stockholders’ equity	1,001,941			1,073,856
Nonredeemable noncontrolling interests	12,306			15,590
Total stockholders’ equity	1,014,247			1,089,446
	$	1,522,472		$	1,601,405

See accompanying notes to condensed consolidated financial statements.

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GUESS?, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) (unaudited)

	Three Months Ended						Nine Months Ended
	Oct 31, 2015			Nov 1, 2014			Oct 31, 2015			Nov 1, 2014
Product sales	$	493,214		$	557,862		$	1,467,110		$	1,636,569
Net royalties	27,750			31,972			78,942			84,377
Net revenue	520,964			589,834			1,546,052			1,720,946
Cost of product sales	337,300			375,876			998,786			1,113,980
Gross profit	183,664			213,958			547,266			606,966
Selling, general and administrative expenses	162,826			189,093			495,874			554,220
Earnings from operations	20,838			24,865			51,392			52,746
Other income (expense):
Interest expense	(292		)	(596		)	(1,456		)	(1,893		)
Interest income	273			351			784			1,076
Other income, net	247			7,484			6,581			11,131
	228			7,239			5,909			10,314

Earnings before income tax expense	21,066			32,104			57,301			63,060
Income tax expense	8,005			10,594			21,774			21,465
Net earnings	13,061			21,510			35,527			41,595
Net earnings attributable to noncontrolling interests	617			722			1,453			954
Net earnings attributable to Guess?, Inc.	$	12,444		$	20,788		$	34,074		$	40,641

Net earnings per common share attributable to common stockholders (Note 2):
Basic	$	0.15		$	0.24		$	0.40		$	0.48
Diluted	$	0.15		$	0.24		$	0.40		$	0.47

Weighted average common shares outstanding attributable to common stockholders (Note 2):
Basic	83,985			84,624			84,651			84,565
Diluted	84,373			84,832			84,847			84,789

Dividends declared per common share	$	0.225		$	0.225		$	0.675		$	0.675

See accompanying notes to condensed consolidated financial statements.

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GUESS?, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) (unaudited)

	Three Months Ended						Nine Months Ended
	Oct 31, 2015			Nov 1, 2014			Oct 31, 2015			Nov 1, 2014
Net earnings	$	13,061		$	21,510		$	35,527		$	41,595
Other comprehensive income (loss) (“OCI”):
Foreign currency translation adjustment
Gains (losses) arising during the period	2,230			(47,100		)	(19,406		)	(44,558		)
Derivative financial instruments designated as cash flow hedges
Gains arising during the period	409			4,356			4,835			3,544
Less income tax effect	(79		)	(551		)	(847		)	(445		)
Reclassification to net earnings for (gains) losses realized	(2,467		)	800			(8,226		)	1,615
Less income tax effect	309			(87		)	1,121			283
Marketable securities
Losses arising during the period	(2		)	(13		)	(16		)	(79		)
Less income tax effect	1			5			7			30
Reclassification to net earnings for gains realized	—			—			—			(87		)
Less income tax effect	—			—			—			33
Defined benefit plans
Actuarial gain	—			—			11,378			—
Less income tax effect	—			—			(4,352		)	—
Actuarial loss amortization	116			234			1,059			703
Prior service credit amortization	—			(58		)	(97		)	(174		)
Curtailment	—			—			(1,651		)	—
Less income tax effect	(14		)	(67		)	359			(202		)
Total comprehensive income (loss)	13,564			(20,971		)	19,691			2,258
Less comprehensive income attributable to noncontrolling interests:
Net earnings	617			722			1,453			954
Foreign currency translation adjustment	(62		)	(479		)	(662		)	(362		)
Amounts attributable to noncontrolling interests	555			243			791			592
Comprehensive income (loss) attributable to Guess?, Inc.	$	13,009		$	(21,214	)	$	18,900		$	1,666

See accompanying notes to condensed consolidated financial statements.

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GUESS?, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)

	Nine Months Ended
	Oct 31, 2015			Nov 1, 2014
Cash flows from operating activities:
Net earnings	$	35,527		$	41,595
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization of property and equipment	52,370			61,870
Amortization of intangible assets	1,643			2,332
Share-based compensation expense	13,327			11,374
Unrealized forward contract gains	(1,697		)	(5,267		)
Net (gain) loss on disposition of long-term assets and property and equipment	(1,254		)	16,825
Other items, net	1,707			384
Changes in operating assets and liabilities:
Accounts receivable	16,094			30,000
Inventories	(59,330		)	(73,709		)
Prepaid expenses and other assets	(1,902		)	(6,822		)
Accounts payable and accrued expenses	25,934			(72,154		)
Deferred rent and lease incentives	(3,147		)	(1,827		)
Other long-term liabilities	(14,545		)	(9,485		)
Net cash provided by (used in) operating activities	64,727			(4,884		)
Cash flows from investing activities:
Purchases of property and equipment	(40,293		)	(53,208		)
Changes in other assets	3,470			261
Proceeds from maturity and sale of investments	—			5,598
Acquisition of businesses, net of cash acquired	(1,263		)	(887		)
Net cash settlement of forward contracts	7,557			181
Net cash used in investing activities	(30,529		)	(48,055		)
Cash flows from financing activities:
Payment of debt issuance costs	(1,072		)	—
Proceeds from borrowings	948			1,256
Repayment of capital lease obligations and borrowings	(1,160		)	(4,022		)
Dividends paid	(57,734		)	(57,652		)
Noncontrolling interest capital distributions	(4,075		)	—
Issuance of common stock, net of tax withholdings on vesting of stock awards	(983		)	703
Excess tax benefits from share-based compensation	135			181
Purchase of treasury stock	(44,053		)	—
Net cash used in financing activities	(107,994		)	(59,534		)
Effect of exchange rates on cash and cash equivalents	(7,301		)	(15,597		)
Net change in cash and cash equivalents	(81,097		)	(128,070		)
Cash and cash equivalents at the beginning of the year	483,483			502,945
Cash and cash equivalents at the end of the period	$	402,386		$	374,875

Supplemental cash flow data:
Interest paid	$	771		$	1,205
Income taxes paid	$	17,692		$	62,000

See accompanying notes to condensed consolidated financial statements.

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GUESS?, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

October 31, 2015

(unaudited)


(1)	Basis of Presentation

In the opinion of management, the accompanying unaudited condensed consolidated financial statements of Guess?, Inc. and its subsidiaries (the “Company”) contain all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the condensed consolidated balance sheets as of October 31, 2015 and January 31, 2015, the condensed consolidated statements of income and comprehensive income (loss) for the three and nine months ended October 31, 2015 and November 1, 2014 and the condensed consolidated statements of cash flows for the nine months ended October 31, 2015 and November 1, 2014. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information and the instructions to Rule 10-01 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they have been condensed and do not include all of the information and footnotes required by GAAP for complete financial statements. The results of operations for the three and nine months ended October 31, 2015 are not necessarily indicative of the results of operations to be expected for the full fiscal year. These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended January 31, 2015.

The three and nine months ended October 31, 2015 had the same number of days as the three and nine months ended November 1, 2014. All references herein to “fiscal 2016,” “fiscal 2015” and “fiscal 2014” represent the results of the 52-week fiscal year ending January 30, 2016 and the 52-week fiscal years ended January 31, 2015 and February 1, 2014, respectively.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Guess?, Inc., its wholly-owned direct and indirect subsidiaries and its non wholly-owned subsidiaries and joint ventures in which the Company has a controlling financial interest and is determined to be the primary beneficiary. Accordingly, all references herein to “Guess?, Inc.” include the consolidated results of the Company, its wholly-owned subsidiaries and its joint ventures. All intercompany accounts and transactions are eliminated during the consolidation process.

Reclassifications

The Company has made certain reclassifications to prior year amounts to conform to the current period presentation within the accompanying notes to the condensed consolidated financial statements.

New Accounting Guidance

In April 2014, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance which raises the threshold for disposals to qualify as discontinued operations. Under this new guidance, a discontinued operation is (1) a component of an entity or group of components that have been disposed of or are classified as held for sale and represent a strategic shift that has or will have a major effect on an entity’s operations and financial results, or (2) an acquired business that is classified as held for sale on the acquisition date. This guidance also requires expanded or new disclosures for discontinued operations, individually material disposals that do not meet the definition of a discontinued operation, an entity’s continuing involvement with a discontinued operation following disposal and retained equity method investments in a discontinued operation. The Company adopted this guidance effective February 1, 2015. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements for the three and nine months ended October 31, 2015.

In May 2014, the FASB issued a comprehensive new revenue recognition standard which will supersede previous existing revenue recognition guidance. The standard creates a five-step model for revenue recognition that requires companies to exercise judgment when considering contract terms and relevant facts and

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circumstances. The five-step model includes (1) identifying the contract, (2) identifying the separate performance obligations in the contract, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations and (5) recognizing revenue when each performance obligation has been satisfied. The standard also requires expanded disclosures surrounding revenue recognition. The standard is effective for fiscal periods beginning after December 15, 2017, which will be the Company’s first quarter of fiscal 2019, and allows for either full retrospective or modified retrospective adoption. Early adoption is permitted for fiscal periods beginning after December 15, 2016, which will be the Company’s first quarter of fiscal 2018. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements, including the choice of application method upon adoption.

In August 2014, the FASB issued authoritative guidance that requires an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern and requires additional disclosures if certain criteria are met. This guidance is effective for fiscal periods ending after December 15, 2016, which will be the Company’s fourth quarter of fiscal 2017, with early adoption permitted. The adoption of this guidance is not expected to impact the Company’s consolidated financial statements or related disclosures.

In February 2015, the FASB issued authoritative guidance which modifies existing consolidation guidance for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. This guidance is effective for fiscal periods beginning after December 15, 2015, which will be the Company’s first quarter of fiscal 2017, and allows for either full retrospective or modified retrospective adoption, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements, including the choice of application method upon adoption.

In April 2015, the FASB issued authoritative guidance to simplify the presentation of debt issuance costs by requiring such costs to be presented as a deduction from the corresponding debt liability. This guidance is effective for fiscal years beginning after December 15, 2015, which will be the Company’s first quarter of fiscal 2017, and requires retrospective adoption, with early adoption permitted. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures.

In April 2015, the FASB issued authoritative guidance which would permit an entity to measure its defined benefit plan assets and obligations using the calendar month-end that is closest to the entity’s fiscal period-end for interim and annual periods. This guidance is effective for fiscal years beginning after December 15, 2015, which will be the Company’s first quarter of fiscal 2017, and requires prospective adoption, with early adoption permitted. The Company is currently evaluating whether it will adopt this guidance, but if adopted, this guidance is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures.

In April 2015, the FASB issued authoritative guidance which provides clarification on accounting for cloud computing arrangements which include a software license. This guidance is effective for fiscal years beginning after December 15, 2015, which will be the Company’s first quarter of fiscal 2017, and allows for either prospective or retrospective adoption, with early adoption permitted. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures.

In July 2015, the FASB issued authoritative guidance to simplify the subsequent measurement of inventories by replacing the lower of cost or market test with a lower of cost and net realizable value test. This guidance is effective for fiscal years beginning after December 15, 2016, which will be the Company’s first quarter of fiscal 2018, and requires prospective adoption, with early adoption permitted. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures.

In September 2015, the FASB issued authoritative guidance that eliminates the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. This guidance is effective for fiscal years beginning after December 15, 2015, which will be the Company’s first quarter of fiscal 2017, and requires prospective adoption, with early adoption permitted. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures.

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In November 2015, the FASB issued authoritative guidance to simplify the presentation of deferred income taxes by requiring that all deferred tax liabilities and assets be classified as long-term on the balance sheet. This guidance is effective for fiscal years beginning after December 15, 2016, which will be the Company’s first quarter of fiscal 2018, and allows for either prospective or retrospective adoption, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements, including the choice of application method upon adoption.


(2)	Earnings Per Share

Basic earnings per share represents net earnings attributable to common stockholders divided by the weighted average number of common shares outstanding during the period. The weighted average number of common shares outstanding does not include restricted stock units with forfeitable dividend rights that have been classified as issued and outstanding but are considered contingently returnable as a result of certain service conditions. These restricted stock units are considered common equivalent shares outstanding and are excluded from the basic earnings per share calculation until the respective service conditions have been met. Diluted earnings per share represents net earnings attributable to common stockholders divided by the weighted average number of common shares outstanding, inclusive of the dilutive impact of common equivalent shares outstanding during the period. However, nonvested restricted stock awards (referred to as participating securities) are excluded from the dilutive impact of common equivalent shares outstanding in accordance with authoritative guidance under the two-class method since the nonvested restricted stockholders are entitled to participate in dividends declared on common stock as if the shares were fully vested and hence are deemed to be participating securities. Under the two-class method, earnings attributable to nonvested restricted stockholders are excluded from net earnings attributable to common stockholders for purposes of calculating basic and diluted earnings per common share. However, net losses are not allocated to nonvested restricted stockholders since they are not contractually obligated to share in the losses of the Company.

In addition, the Company has granted certain nonvested stock units that are subject to certain performance-based or market-based vesting conditions as well as continued service requirements through the respective vesting periods. These nonvested stock units are included in the computation of diluted net earnings per common share attributable to common stockholders only to the extent that the underlying performance-based or market-based vesting conditions are satisfied as of the end of the reporting period, or would be considered satisfied if the end of the reporting period were the end of the related contingency period, and the results would be dilutive under the treasury stock method.

The computation of basic and diluted net earnings per common share attributable to common stockholders is as follows (in thousands, except per share data):



	Three Months Ended				Nine Months Ended
	Oct 31, 2015		Nov 1, 2014		Oct 31, 2015		Nov 1, 2014
Net earnings attributable to Guess?, Inc.	$	12,444	$	20,788	$	34,074	$	40,641
Less net earnings attributable to nonvested restricted stockholders	137		135		363		415
Net earnings attributable to common stockholders	$	12,307	$	20,653	$	33,711	$	40,226

Weighted average common shares used in basic computations	83,985		84,624		84,651		84,565
Effect of dilutive securities:
Stock options and restricted stock units	388		208		196		224
Weighted average common shares used in diluted computations	84,373		84,832		84,847		84,789

Net earnings per common share attributable to common stockholders:
Basic	$	0.15	$	0.24	$	0.40	$	0.48
Diluted	$	0.15	$	0.24	$	0.40	$	0.47

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For the three months ended October 31, 2015 and November 1, 2014, equity awards granted for 2,357,138 and 1,633,245, respectively, of the Company’s common shares and for the nine months ended October 31, 2015 and November 1, 2014, equity awards granted for 2,530,121 and 1,558,532, respectively, of the Company’s common shares were outstanding but were excluded from the computation of diluted weighted average common shares and common equivalent shares outstanding because the assumed proceeds, as calculated under the treasury stock method, resulted in these awards being antidilutive. For the three and nine months ended October 31, 2015, the Company also excluded 425,866 nonvested stock units which are subject to the achievement of performance-based or market-based vesting conditions from the computation of diluted weighted average common shares and common equivalent shares outstanding because these conditions were not achieved as of October 31, 2015. For the three and nine months ended November 1, 2014, the Company excluded 259,700 nonvested stock units which were subject to the achievement of performance-based vesting conditions from the computation of diluted weighted average common shares and common equivalent shares outstanding because these conditions were not achieved as of November 1, 2014.

Share Repurchase Program

On June 26, 2012, the Company’s Board of Directors authorized a program to repurchase, from time-to-time and as market and business conditions warrant, up to $500 million of the Company’s common stock. Repurchases under the program may be made on the open market or in privately negotiated transactions, pursuant to Rule 10b5-1 trading plans or other available means. There is no minimum or maximum number of shares to be repurchased under the program, which may be discontinued at any time, without prior notice. During the three and nine months ended October 31, 2015, the Company repurchased 2,000,000 shares under the program at an aggregate cost of $44.0 million. There were no share repurchases during the three and nine months ended November 1, 2014. As of October 31, 2015, the Company had remaining authority under the program to purchase $451.8 million of its common stock.

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(3)	Stockholders’ Equity and Redeemable Noncontrolling Interests

A reconciliation of common stock outstanding, treasury stock and the total carrying amount of total stockholders’ equity, Guess?, Inc. stockholders’ equity and stockholders’ equity attributable to nonredeemable and redeemable noncontrolling interests for the fiscal year ended January 31, 2015 and nine months ended October 31, 2015 is as follows (in thousands, except share data):



	Shares				Stockholders’ Equity
	Common Stock		Treasury Stock		Guess?, Inc. Stockholders’ Equity			Nonredeemable Noncontrolling Interests			Total			Redeemable Noncontrolling Interests
Balance at February 1, 2014	84,962,345		54,283,384		$	1,154,514		$	15,472		$	1,169,986		$	5,830
Net earnings	—		—		94,570			2,614			97,184			—
Foreign currency translation adjustment	—		—		(114,566		)	(2,141		)	(116,707		)	(788		)
Gain on derivative financial instruments designated as cash flow hedges, net of income tax of ($721)	—		—		7,270			—			7,270			—
Loss on marketable securities, net of income tax of $61	—		—		(106		)	—			(106		)	—
Prior service credit amortization and actuarial valuation loss and related amortization on defined benefit plans, net of income tax of $2,335	—		—		(5,862		)	—			(5,862		)	—
Issuance of common stock under stock compensation plans, net of tax effect	313,271		—		(1,937		)	—			(1,937		)	—
Issuance of stock under Employee Stock Purchase Plan	47,538		(47,538	)	1,008			—			1,008			—
Share-based compensation	—		—		15,342			—			15,342			—
Dividends	—		—		(76,982		)	—			(76,982		)	—
Noncontrolling interest capital distribution	—		—		—			(355		)	(355		)	—
Redeemable noncontrolling interest redemption value adjustment	—		—		605			—			605			(605		)
Balance at January 31, 2015	85,323,154		54,235,846		$	1,073,856		$	15,590		$	1,089,446		$	4,437
Net earnings	—		—		34,074			1,453			35,527			—
Foreign currency translation adjustment	—		—		(18,744		)	(662		)	(19,406		)	(389		)
Loss on derivative financial instruments designated as cash flow hedges, net of income tax of $274	—		—		(3,117		)	—			(3,117		)	—
Loss on marketable securities, net of income tax of $7	—		—		(9		)	—			(9		)	—
Actuarial valuation gain (loss) and related amortization, curtailment and prior service credit amortization on defined benefit plans, net of income tax of ($3,993)	—		—		6,696			—			6,696			—
Issuance of common stock under stock compensation plans, net of tax effect	418,240		—		(1,921		)	—			(1,921		)	—
Issuance of stock under Employee Stock Purchase Plan	32,254		(32,254	)	518			—			518			—
Share-based compensation	—		—		13,327			—			13,327			—
Dividends	—		—		(58,036		)	—			(58,036		)	—
Share repurchases	(2,000,000	)	2,000,000		(44,053		)	—			(44,053		)	—
Noncontrolling interest capital distribution	—		—		—			(4,075		)	(4,075		)	—
Redeemable noncontrolling interest redemption value adjustment	—		—		(650		)	—			(650		)	650
Balance at October 31, 2015	83,773,648		56,203,592		$	1,001,941		$	12,306		$	1,014,247		$	4,698

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Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss), net of related income taxes, for the three and nine months ended October 31, 2015 and November 1, 2014 are as follows (in thousands):



	Three Months Ended Oct 31, 2015
	Foreign Currency Translation Adjustment			Derivative Financial Instruments Designated as Cash Flow Hedges			Marketable Securities			Defined Benefit Plans			Total
Balance at August 1, 2015	$	(142,605	)	$	5,868		$	(11	)	$	(6,056	)	$	(142,804	)
Gains (losses) arising during the period	2,292			330			(1		)	—			2,621
Reclassification to net earnings for (gains) losses realized	—			(2,158		)	—			102			(2,056		)
Net other comprehensive income (loss)	2,292			(1,828		)	(1		)	102			565
Balance at October 31, 2015	$	(140,313	)	$	4,040		$	(12	)	$	(5,954	)	$	(142,239	)



	Nine Months Ended Oct 31, 2015
	Foreign Currency Translation Adjustment			Derivative Financial Instruments Designated as Cash Flow Hedges			Marketable Securities			Defined Benefit Plans			Total
Balance at January 31, 2015	$	(121,569	)	$	7,157		$	(3	)	$	(12,650	)	$	(127,065	)
Gains (losses) arising during the period	(18,744		)	3,988			(9		)	7,026			(7,739		)
Reclassification to net earnings for gains realized	—			(7,105		)	—			(330		)	(7,435		)
Net other comprehensive income (loss)	(18,744		)	(3,117		)	(9		)	6,696			(15,174		)
Balance at October 31, 2015	$	(140,313	)	$	4,040		$	(12	)	$	(5,954	)	$	(142,239	)



	Three Months Ended Nov 1, 2014
	Foreign Currency Translation Adjustment			Derivative Financial Instruments Designated as Cash Flow Hedges		Marketable Securities			Defined Benefit Plans			Total
Balance at August 2, 2014	$	(4,578	)	$	366	$	8		$	(6,570	)	$	(10,774	)
Gains (losses) arising during the period	(46,621		)	3,805		(8		)	—			(42,824		)
Reclassification to net earnings for losses realized	—			713		—			109			822
Net other comprehensive income (loss)	(46,621		)	4,518		(8		)	109			(42,002		)
Balance at November 1, 2014	$	(51,199	)	$	4,884	$	—		$	(6,461	)	$	(52,776	)



	Nine Months Ended Nov 1, 2014
	Foreign Currency Translation Adjustment			Derivative Financial Instruments Designated as Cash Flow Hedges			Marketable Securities			Defined Benefit Plans			Total
Balance at February 1, 2014	$	(7,003	)	$	(113	)	$	103		$	(6,788	)	$	(13,801	)
Gains (losses) arising during the period	(44,196		)	3,099			(49		)	—			(41,146		)
Reclassification to net earnings for (gains) losses realized	—			1,898			(54		)	327			2,171
Net other comprehensive income (loss)	(44,196		)	4,997			(103		)	327			(38,975		)
Balance at November 1, 2014	$	(51,199	)	$	4,884		$	—		$	(6,461	)	$	(52,776	)

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Details on reclassifications out of accumulated other comprehensive income (loss) to net earnings during the three and nine months ended October 31, 2015 and November 1, 2014 are as follows (in thousands):



	Three Months Ended						Nine Months Ended						Location of (Gain) Loss Reclassified from Accumulated OCI into Earnings
	Oct 31, 2015			Nov 1, 2014			Oct 31, 2015			Nov 1, 2014
Derivative financial instruments designated as cash flow hedges:
Foreign exchange currency contracts	$	(2,507	)	$	800		$	(7,450	)	$	1,559		Cost of product sales
Foreign exchange currency contracts	40			—			(776		)	56			Other income/expense
Less income tax effect	309			(87		)	1,121			283			Income tax expense
	(2,158		)	713			(7,105		)	1,898
Marketable securities:
Available-for-sale securities	—			—			—			(87		)	Other income/expense
Less income tax effect	—			—			—			33			Income tax expense
	—			—			—			(54		)
Defined benefit plans:
Actuarial loss amortization	116			234			1,059			703			₍₁₎
Prior service credit amortization	—			(58		)	(97		)	(174		)	₍₁₎
Curtailment	—			—			(1,651		)	—			₍₁₎
Less income tax effect	(14		)	(67		)	359			(202		)	Income tax expense
	102			109			(330		)	327
Total reclassifications during the period	$	(2,056	)	$	822		$	(7,435	)	$	2,171

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(1)	These accumulated other comprehensive income (loss) components are included in the computation of net periodic defined benefit pension cost. Refer to Note 13 for further information.

Redeemable Noncontrolling Interests

The Company is party to a put arrangement with respect to the common securities that represent the remaining noncontrolling interest from the acquisition of its majority-owned subsidiary, Guess Sud SAS (“Guess Sud”). The put arrangement for Guess Sud, representing 40% of the total outstanding equity interest of that subsidiary, may be exercised at the discretion of the noncontrolling interest holders by providing written notice to the Company any time after January 30, 2012. The put arrangement is recorded on the balance sheet at its expected redemption value based on a method which approximates fair value and is classified as a redeemable noncontrolling interest outside of permanent equity. The redemption value of the Guess Sud redeemable put arrangement was $4.0 million and $3.4 million as of October 31, 2015 and January 31, 2015, respectively.

The Company is also party to a put arrangement with respect to the common securities that represent the remaining noncontrolling interest for its majority-owned subsidiary, Guess Brasil Comércio e Distribuição S.A. (“Guess Brazil”), which was established through a majority-owned joint venture during fiscal 2014. The put arrangement for Guess Brazil, representing 40% of the total outstanding equity interest of that subsidiary, may be exercised at the discretion of the noncontrolling interest holder by providing written notice to the Company beginning in the sixth year of the agreement, or sooner in certain limited circumstances, and every third anniversary from the end of the sixth year thereafter subject to certain time restrictions. The redemption value of the Guess Brazil put arrangement is based on a multiple of Guess Brazil’s earnings before interest, taxes, depreciation and amortization subject to certain adjustments. The carrying value of the redeemable noncontrolling interest related to Guess Brazil was $0.7 million and $1.0 million as of October 31, 2015 and January 31, 2015, respectively.

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(4)	Accounts Receivable

Accounts receivable is summarized as follows (in thousands):



	Oct 31, 2015		Jan 31, 2015
Trade	$	206,000	$	229,618
Royalty	11,163		10,118
Other	9,920		8,389
	227,083		248,125
Less allowance for doubtful accounts	31,258		31,920
	$	195,825	$	216,205

Accounts receivable consists of trade receivables relating primarily to the Company’s wholesale business in Europe, and to a lesser extent, to its wholesale businesses in the Americas and Asia, royalty receivables relating to its licensing operations, and certain other receivables. Other receivables generally relate to amounts due to the Company that result from activities that are not related to the direct sale of the Company’s products or collection of royalties. The accounts receivable allowance includes allowances for doubtful accounts, wholesale sales returns and wholesale markdowns. Retail sales returns allowances are included in accrued expenses.


(5)	Inventories

Inventories consist of the following (in thousands):



	Oct 31, 2015		Jan 31, 2015
Raw materials	$	2,492	$	4,548
Work in progress	55		77
Finished goods	370,556		314,453
	$	373,103	$	319,078

The above balances include an allowance to write down inventories to the lower of cost or market of $19.5 million and $19.7 million as of October 31, 2015 and January 31, 2015, respectively.


(6)	Restructuring Charges

During the first quarter of fiscal 2014, the Company implemented plans to streamline its structure and reduce expenses in both Europe and North America. During the second quarter of fiscal 2014, the Company expanded these plans to include the consolidation and streamlining of certain operations in Europe and Asia. The Company incurred total restructuring charges of $12.4 million under these plans related primarily to severance, impairment and lease termination costs during fiscal 2014. There were no restructuring charges incurred during the three and nine months ended October 31, 2015 and November 1, 2014 related to these plans. The Company does not expect significant future cash-related charges to be incurred as the actions under these plans were substantially completed during fiscal 2014. As of October 31, 2015, the balance in accrued expenses for amounts expected to be paid during the remainder of fiscal 2016 were minimal. At January 31, 2015, the Company had a balance of approximately $0.3 million in accrued expenses related to these restructuring activities.

The following table summarizes restructuring activities related primarily to severance during the fiscal year ended January 31, 2015 and nine months ended October 31, 2015 (in thousands):



	Total
Balance at February 1, 2014	$	4,578
Cash payments	(2,952		)
Foreign currency and other adjustments	(1,350		)
Balance at January 31, 2015	$	276
Cash payments	(172		)
Foreign currency and other adjustments	(67		)
Balance at October 31, 2015	$	37

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(7)	Income Taxes

Income tax expense for the interim periods was computed using the effective tax rate estimated to be applicable for the full fiscal year. The Company’s effective income tax rate increased to 38.0% for the nine months ended October 31, 2015 from 34.0% for the nine months ended November 1, 2014. The increase in the effective income tax rate was due primarily to the distribution of earnings between quarters, a larger mix of taxable income in higher taxable jurisdictions and higher non-deductible compensation costs during the nine months ended October 31, 2015 compared to the same prior-year period.

From time-to-time, the Company is subject to routine compliance reviews on various tax matters around the world in the ordinary course of business. As of October 31, 2015, several income tax audits were underway for various periods in multiple jurisdictions. The Company accrues an amount for its estimate of additional income tax liability which the Company, more likely than not, could incur as a result of the ultimate resolution of income tax audits (“uncertain tax positions”). The Company reviews and updates the estimates used in the accrual for uncertain tax positions as more definitive information becomes available from taxing authorities, upon completion of tax audits, upon expiration of statutes of limitation, or upon occurrence of other events.

The Company had aggregate accruals for uncertain tax positions, including penalties and interest, of $13.9 million and $14.4 million as of October 31, 2015 and January 31, 2015, respectively.


(8)	Segment Information

The Company’s businesses are grouped into five reportable segments for management and internal financial reporting purposes: Americas Retail, Europe, Asia, Americas Wholesale and Licensing. In the second quarter of fiscal 2016, the Company changed the names of its “North American Retail” and “North American Wholesale” segments to “Americas Retail” and “Americas Wholesale” to better reflect that these segments are inclusive of its operations in North America as well as Central and South America. There have been no changes to the underlying reporting in either segment. The Company’s operating segments are the same as its reportable segments. Management evaluates segment performance based primarily on revenues and earnings (loss) from operations before restructuring charges, if any. The Company believes this segment reporting reflects how its five business segments are managed and how each segment’s performance is evaluated by the Company’s chief operating decision maker to assess performance and make resource allocation decisions. The Americas Retail segment includes the Company’s retail and e-commerce operations in North and Central America and its retail operations in South America. The Europe segment includes the Company’s wholesale, retail and e-commerce operations in Europe and the Middle East. The Asia segment includes the Company’s wholesale, retail and e-commerce operations in Asia. The Americas Wholesale segment includes the Company’s wholesale operations in the Americas. The Licensing segment includes the worldwide licensing operations of the Company. The business segment operating results exclude corporate overhead costs, which consist of shared costs of the organization, and restructuring charges. These costs are presented separately and generally include, among other things, the following unallocated corporate costs: accounting and finance, executive compensation, facilities, global advertising and marketing, human resources, information technology and legal.

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Net revenue and earnings (loss) from operations are summarized as follows for the three and nine months ended October 31, 2015 and November 1, 2014 (in thousands):



	Three Months Ended						Nine Months Ended
	Oct 31, 2015			Nov 1, 2014			Oct 31, 2015			Nov 1, 2014
Net revenue:
Americas Retail(1)	$	226,599		$	243,238		$	673,304		$	715,582
Europe	160,696			189,852			497,468			584,270
Asia	59,100			71,271			179,880			205,656
Americas Wholesale(1)	46,819			53,501			116,458			131,061
Licensing	27,750			31,972			78,942			84,377
Total net revenue	$	520,964		$	589,834		$	1,546,052		$	1,720,946
Earnings (loss) from operations:
Americas Retail(1)	$	(2,053	)	$	(10,517	)	$	(4,018	)	$	(23,578	)
Europe	6,150			7,660			20,668			25,541
Asia	2,794			2,126			8,294			7,743
Americas Wholesale(1)	9,583			13,940			21,202			26,860
Licensing	24,842			28,157			70,282			75,787
Corporate Overhead	(20,478		)	(16,501		)	(65,036		)	(59,607		)
Total earnings from operations	$	20,838		$	24,865		$	51,392		$	52,746

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(1)	In the second quarter of fiscal 2016, the Company changed the names of its “North American Retail” and “North American Wholesale” segments to “Americas Retail” and “Americas Wholesale” to better reflect that these segments are inclusive of its operations in North America as well as Central and South America. There have been no changes to the underlying reporting in either segment.

Due to the seasonal nature of the Company’s business segments, the above net revenue and operating results are not necessarily indicative of the results that may be expected for the full fiscal year.


(9)	Borrowings and Capital Lease Obligations

Borrowings and capital lease obligations are summarized as follows (in thousands):



	Oct 31, 2015		Jan 31, 2015
European capital lease, maturing quarterly through May 2016	$	4,450	$	5,745
Other	2,189		1,968
	6,639		7,713
Less current installments	4,450		1,548
Long-term debt and capital lease obligations	$	2,189	$	6,165

Capital Lease

The Company leases a building in Florence, Italy under a capital lease which provides for minimum lease payments through May 1, 2016. As of October 31, 2015, the capital lease obligation was $4.5 million. The Company entered into a separate interest rate swap agreement designated as a non-hedging instrument that resulted in a swap fixed rate of 3.55%. This interest rate swap agreement matures on February 1, 2016 and converts the nature of the capital lease obligation from Euribor floating-rate debt to fixed-rate debt. The fair value of the interest rate swap liability as of October 31, 2015 was approximately $0.1 million.

Credit Facilities

On June 23, 2015, the Company entered into a five-year senior secured asset-based revolving credit facility with Bank of America, N.A. and the other lenders party thereto (the “Credit Facility”). The Credit Facility provides for a borrowing capacity in an amount up to $150 million, including a Canadian sub-facility up to $50 million, subject to a borrowing base. Based on applicable accounts receivable, inventory and eligible cash balances as of October 31, 2015, the Company could have borrowed up to $150 million under the Credit Facility. The Credit Facility has an option to expand the borrowing capacity by up to $150 million subject to certain terms and conditions, including the willingness of existing or new lenders to assume such increased amount. The Credit

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Facility is available for direct borrowings and the issuance of letters of credit, subject to certain letters of credit sublimits, and may be used for working capital and other general corporate purposes. The Credit Facility replaced the Company’s previous $300 million credit facility, which was scheduled to mature in July 2016. No principal or interest was outstanding or accrued and unpaid under the prior credit facility on its termination date.

All obligations under the Credit Facility are unconditionally guaranteed by the Company and the Company’s existing and future domestic and Canadian subsidiaries, subject to certain exceptions, and are secured by a first priority lien on substantially all of the assets of the Company and such domestic and Canadian subsidiaries, as applicable.

Direct borrowings under the Credit Facility made by the Company and its domestic subsidiaries shall bear interest at the U.S. base rate plus an applicable margin (varying from 0.25% to 0.75%) or at LIBOR plus an applicable margin (varying from 1.25% to 1.75%). The U.S. base rate is based on the greater of (i) the U.S. prime rate, (ii) the federal funds rate, plus 0.5%, and (iii) LIBOR for a 30 day interest period, plus 1.0%. Direct borrowings under the Credit Facility made by the Company’s Canadian subsidiaries shall bear interest at the Canadian prime rate plus an applicable margin (varying from 0.25% to 0.75%) or at the Canadian BA rate plus an applicable margin (varying from 1.25% to 1.75%). The Canadian prime rate is based on the greater of (i) the Canadian prime rate, (ii) the Bank of Canada overnight rate, plus 0.5%, and (iii) the Canadian BA rate for a one month interest period, plus 1.0%. The applicable margins are calculated quarterly and vary based on the average daily availability of the aggregate borrowing base. The Company is also obligated to pay certain commitment, letter of credit and other fees customary for a credit facility of this size and type. As of October 31, 2015, the Company had $1.7 million in outstanding standby letters of credit, no outstanding documentary letters of credit and no outstanding borrowings under the Credit Facility.

The Credit Facility requires the Company to comply with a fixed charge coverage ratio on a trailing four-quarter basis if a default or an event of default occurs under the Credit Facility or if the borrowing capacity falls below certain levels. In addition, the Credit Facility contains customary covenants, including covenants that limit or restrict the Company and certain of its subsidiaries’ ability to: incur liens, incur indebtedness, make investments, dispose of assets, make certain restricted payments, merge or consolidate and enter into certain transactions with affiliates. Upon the occurrence of an event of default under the Credit Facility, the lenders may cease making loans, terminate the Credit Facility and declare all amounts outstanding to be immediately due and payable. The Credit Facility specifies a number of events of default (some of which are subject to applicable grace or cure periods), including, among other things, non-payment defaults, covenant defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency defaults and material judgment defaults. The Credit Facility allows for both secured and unsecured borrowings outside of the Credit Facility up to specified amounts.

The Company, through its European subsidiaries, maintains short-term uncommitted borrowing agreements, primarily for working capital purposes, with various banks in Europe. The majority of the borrowings under these agreements are secured by specific accounts receivable balances. Based on the applicable accounts receivable balances as of October 31, 2015, the Company could have borrowed up to $68.0 million under these agreements. As of October 31, 2015, the Company had no outstanding borrowings and $1.9 million in outstanding documentary letters of credit under these agreements. The agreements are denominated primarily in euros and provide for annual interest rates ranging from 0.9% to 6.7%. The maturities of any short-term borrowings under these arrangements are generally linked to the credit terms of the underlying accounts receivable that secure the borrowings. With the exception of one facility for up to $38.5 million that has a minimum net equity requirement, there are no other financial ratio covenants.

Other

From time-to-time, the Company will obtain other financing in foreign countries for working capital to finance its local operations.

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(10)	Share-Based Compensation

The following table summarizes the share-based compensation expense recognized under all of the Company’s stock plans during the three and nine months ended October 31, 2015 and November 1, 2014 (in thousands):



	Three Months Ended				Nine Months Ended
	Oct 31, 2015		Nov 1, 2014		Oct 31, 2015		Nov 1, 2014
Stock options	$	575	$	542	$	1,495	$	1,618
Stock awards/units	4,670		3,187		11,707		9,564
Employee Stock Purchase Plan	30		32		125		192
Total share-based compensation expense	$	5,275	$	3,761	$	13,327	$	11,374

Unrecognized compensation cost, adjusted for estimated forfeitures, related to nonvested stock options and nonvested stock awards/units totaled approximately $4.9 million and $25.2 million, respectively, as of October 31, 2015. This cost is expected to be recognized over a weighted average period of 1.7 years. The weighted average grant date fair value of options granted was $3.74 and $6.23 during the nine months ended October 31, 2015 and November 1, 2014, respectively.

Grants

On July 7, 2015, in connection with a new employment agreement entered into between the Company and Victor Herrero (the “Herrero Employment Agreement”), who became the Company’s Chief Executive Officer on August 1, 2015, the Company granted Mr. Herrero 600,000 stock options and 250,000 nonvested stock units. Mr. Herrero was also granted 150,000 restricted stock units which are considered contingently returnable as a result of certain service conditions set forth in the Herrero Employment Agreement.

On April 2, 2015, the Company made an annual grant of 577,700 stock options and 401,700 nonvested stock awards/units to its employees. On April 2, 2014, the Company made an annual grant of 365,600 stock options and 301,200 nonvested stock awards/units to its employees.

Performance-Based Awards

As discussed above, on July 7, 2015, the Company granted certain nonvested stock units to Mr. Herrero in connection with the Herrero Employment Agreement. The nonvested stock units are scheduled to vest in increments of one-fourth of the shares granted on each anniversary from the date of grant, subject to the achievement of certain performance-based vesting conditions during the last two quarters of fiscal 2016 as well as continued service requirements through each of the vesting periods.

The Company has granted certain nonvested stock units to Paul Marciano, the Company’s former Chief Executive Officer and current Executive Chairman of the Board and Chief Creative Officer, in connection with an employment agreement entered into between the Company and Mr. Marciano during fiscal 2014. Each award of nonvested stock units has an initial vesting period from the date of the grant through the end of the first fiscal year followed by two annual vesting periods. The nonvested stock units are subject to the achievement of certain performance-based vesting conditions during the first fiscal year of the grant as well as continued service requirements through each of the vesting periods.

The Company has also granted a target number of nonvested stock units to Mr. Marciano in connection with his employment agreement. The number of shares that may ultimately vest with respect to each award will equal 0% to 150% of the target number of shares, subject to the achievement of certain performance-based vesting conditions during the first fiscal year of the grant as well as continued service requirements through the vesting date. Any shares that are ultimately issued are scheduled to vest at the end of the third fiscal year following the grant date.

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The following table summarizes the activity for nonvested performance-based awards during the nine months ended October 31, 2015:



	Number of Units		Weighted Average Grant Date Fair Value
Nonvested at January 31, 2015	413,834		$	29.66
Granted	425,866		19.39
Vested	(33,333	)	27.86
Forfeited	(159,700	)	27.86
Nonvested at October 31, 2015	646,667		$	23.44

Market-Based Awards

On May 1, 2015, the Company also granted a target of 183,368 nonvested stock units to Mr. Marciano in connection with his employment agreement. The number of shares that may ultimately vest will equal 0% to 150% of the target number of shares, subject to the performance of the Company’s total stockholder return (“TSR”) relative to the TSR of a select group of peer companies over a three-year period. Vesting is also subject to continued service requirements through the vesting date. Any shares that are ultimately issued are scheduled to vest in fiscal 2019. The grant date fair value for such nonvested stock units was estimated using a Monte Carlo simulation that incorporates option-pricing inputs covering the period from the grant date through the end of the performance period. Compensation expense is recognized on a straight-line basis over the vesting period.


(11)	Related Party Transactions

The Company and its subsidiaries periodically enter into transactions with other entities or individuals that are considered related parties, including certain transactions with entities affiliated with trusts for the respective benefit of Paul Marciano, who is an executive of the Company, Maurice Marciano, Chairman Emeritus of the Board, Armand Marciano, their brother and former executive of the Company, and certain of their children (the “Marciano Trusts”).

Leases

The Company leases warehouse and administrative facilities, including the Company’s corporate headquarters in Los Angeles, California, from partnerships affiliated with the Marciano Trusts and certain of their affiliates. There were three of these leases in effect as of October 31, 2015 with expiration dates ranging from calendar years 2015 to 2020.

Due to excess capacity at the Company’s corporate headquarters, the lease was amended in August 2015 to reduce the square footage by 13,070 square feet to 341,739 square feet. The amendment also provided for a corresponding pro-rata reduction in aggregate rent, common area maintenance charges and property tax expense due to the lower square footage. All other terms of the existing corporate headquarters lease remain in full force and effect.

Aggregate rent, common area maintenance charges and property tax expense recorded under these related party leases for the nine months ended October 31, 2015 and November 1, 2014 was $4.0 million and $4.6 million, respectively. The Company believes the related party lease terms have not been significantly affected by the fact that the Company and the lessors are related.

Aircraft Arrangements

The Company periodically charters aircraft owned by MPM Financial, LLC (“MPM Financial”), an entity affiliated with the Marciano Trusts, through informal arrangements with MPM Financial and independent third party management companies contracted by MPM Financial to manage its aircraft. The total fees paid under these arrangements for the nine months ended October 31, 2015 and November 1, 2014 were approximately $0.3 million and $1.2 million, respectively.

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Consulting Arrangement

After serving for over 30 years as an executive and leader for Guess?, Inc., co-founder Maurice Marciano retired from his position as executive Chairman of the Board and as an employee of the Company upon the expiration of his employment agreement on January 28, 2012. In connection with his retirement and under the terms of his previously existing employment agreement, the Company and Mr. Marciano entered into a two-year consulting agreement, subsequently extended for a third year (the “Marciano Consulting Agreement”), under which Mr. Marciano provided certain consulting services to the Company. The Marciano Consulting Agreement provided for consulting fees of $500,000 per year and continued automobile use in a manner consistent with past practice. The Marciano Consulting Agreement expired on January 28, 2015 and was not renewed. However, Mr. Marciano continues to serve the Company as a director and the Chairman Emeritus of the Board. The Company elected to continue to provide for automobile use subsequent to the expiration of the term of the Marciano Consulting Agreement based on Mr. Marciano’s continuing substantial contributions to the Company. There were no expenses incurred related to the Marciano Consulting Agreement during the nine months ended October 31, 2015. Total expenses incurred with respect to the Marciano Consulting Agreement were approximately $0.4 million for the nine months ended November 1, 2014.

Other Transactions

From time-to-time, the Company utilizes a third party agent named Harmony Collection, LLC to produce specific apparel products on behalf of the Company. Armand Marciano, brother of Maurice and Paul Marciano, is part owner and an executive of the parent company of Harmony Collection, LLC. There were no payments made by the Company under this arrangement for the nine months ended October 31, 2015. The total payments made by the Company under this arrangement for the nine months ended November 1, 2014 were approximately $1.0 million.

These related party disclosures should be read in conjunction with the disclosure concerning related party transactions in the Company’s Annual Report on Form 10-K for the year ended January 31, 2015.


(12)	Commitments and Contingencies

Leases

The Company leases its showrooms, advertising, licensing, sales and merchandising offices, remote distribution and warehousing facilities and retail and factory outlet store locations under operating lease agreements expiring on various dates through September 2031. Some of these leases require the Company to make periodic payments for property taxes, utilities and common area operating expenses. Certain retail store leases provide for rents based upon the minimum annual rental amount and a percentage of annual sales volume, generally ranging from 2% to 12%, when specific sales volumes are exceeded. Some leases include lease incentives, rent abatements and fixed rent escalations, which are amortized and recorded over the initial lease term on a straight-line basis. The Company also leases some of its equipment under operating lease agreements expiring at various dates through July 2020. As discussed in further detail in Note 9, the Company leases a building in Florence, Italy under a capital lease which provides for minimum lease payments through May 1, 2016.

Litigation

On May 6, 2009, Gucci America, Inc. filed a complaint in the U.S. District Court for the Southern District of New York against Guess?, Inc. and certain third party licensees for the Company asserting, among other things, trademark and trade dress law violations and unfair competition. The complaint sought injunctive relief, compensatory damages, including treble damages, and certain other relief. Complaints similar to those in the above action have also been filed by Gucci entities against the Company and certain of its subsidiaries in the Court of Milan, Italy, the Intermediate People’s Court of Nanjing, China and the Court of Paris, France. The three-week bench trial in the U.S. matter concluded on April 19, 2012, with the court issuing a preliminary ruling on May 21, 2012 and a final ruling on July 19, 2012. Although the plaintiff was seeking compensation in the U.S. matter in the form of damages of $26 million and an accounting of profits of $99 million, the final ruling provided for monetary damages of $2.3 million against the Company and $2.3 million against certain of its licensees. The

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court also granted narrow injunctions in favor of the plaintiff for certain of the claimed infringements. On August 20, 2012, the appeal period expired without any party having filed an appeal, rendering the judgment final. On May 2, 2013, the Court of Milan ruled in favor of the Company in the Milan, Italy matter. In the ruling, the Court rejected all of the plaintiff’s claims and ordered the cancellation of three of the plaintiff’s Italian and four of the plaintiff’s European Community trademark registrations. On June 10, 2013, the plaintiff appealed the Court’s ruling in the Milan matter. On September 15, 2014, the Court of Appeal of Milan affirmed the majority of the lower Court’s ruling in favor of the Company, but overturned the lower Court’s finding with respect to an unfair competition claim. That portion of the matter is now in a damages phase based on the ruling. On October 16, 2015, the plaintiff appealed the remainder of the Court of Appeal of Milan’s ruling in favor of the Company to the Italian Supreme Court of Cassation. In the China matter, the Intermediate People’s Court of Nanjing, China issued a ruling on November 8, 2013 granting an injunction in favor of the plaintiff for certain of the claimed infringements on handbags and small leather goods and awarding the plaintiff statutory damages in the amount of approximately $80,000. The Company strongly disagrees with the Court’s decision and has appealed the ruling. The judgment in the China matter is stayed pending the appeal, which was heard in May 2014. On January 30, 2015, the Court of Paris ruled in favor of the Company, rejecting all of the plaintiff’s claims and partially canceling two of the plaintiff’s community trademark registrations and one of the plaintiff’s international trademark registrations. On February 17, 2015, the plaintiff appealed the Court of Paris’ ruling.

On August 25, 2006, Franchez Isaguirre, a former employee of the Company, filed a complaint in the Superior Court of California, County of Los Angeles alleging violations by the Company of California wage and hour laws. The complaint was subsequently amended, adding a second former employee as an additional named party. The plaintiffs purport to represent a class of similarly situated employees in California who allegedly had been injured by not being provided adequate meal and rest breaks. The complaint seeks unspecified compensatory damages, statutory penalties, attorney’s fees and injunctive and declaratory relief. On June 9, 2009, the Court certified the class but immediately stayed the case pending the resolution of a separate California Supreme Court case on the standards of class treatment for meal and rest break claims. Following the Supreme Court ruling, the Superior Court denied the Company’s motions to decertify the class and to narrow the class in January 2013 and June 2013, respectively. The Company subsequently petitioned to have the Court’s decision not to narrow the class definition reviewed. That petition was ultimately denied by the California Supreme Court in April 2014. In July 2015, the parties entered into a Memorandum of Understanding to settle the matter for $5.25 million, subject to certain limited offsets. The settlement was preliminarily approved by the Court in October 2015, but still remains subject to further review and final approval of the Court.

The Company has received customs tax assessment notices from the Italian Customs Agency regarding its customs tax audit of one of the Company’s European subsidiaries for the period from July 2010 through December 2012. Such assessments totaled €9.8 million ($10.8 million), including potential penalties and interest. The Company strongly disagrees with the positions that the Italian Customs Agency has taken and therefore filed appeals with the Milan First Degree Tax Court (“MFDTC”). On May 5, 2015, the MFDTC issued a judgment in favor of the Company in relation to the first set of appeals (covering the period through September 2010) and canceled the related assessments totaling €1.7 million ($1.8 million). In November 2015, the Italian Customs Agency notified the Company of its intent to appeal the MFDTC judgment. While the initial judgment was favorable to the Company, there can be no assurances that the Company’s remaining appeals for October 2010 through December 2012 will be successful or that the Italian Customs Agency will not be successful in its appeal of the MFDTC judgment. It also continues to be possible that the Company will receive similar or even larger assessments for periods subsequent to December 2012 or other claims or charges related to the matter in the future.

Although the Company believes that it has a strong position and will continue to vigorously defend each of the remaining matters, it is unable to predict with certainty whether or not these efforts will ultimately be successful or whether the outcomes will have a material impact on the Company’s financial position or results of operations.

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The Company is also involved in various other claims and other matters incidental to the Company’s business, the resolutions of which are not expected to have a material adverse effect on the Company’s financial position or results of operations.


(13)	Defined Benefit Plans

Supplemental Executive Retirement Plan

On August 23, 2005, the Board of Directors of the Company adopted a Supplemental Executive Retirement Plan (“SERP”) which became effective January 1, 2006. The SERP provides select employees who satisfy certain eligibility requirements with certain benefits upon retirement, termination of employment, death, disability or a change in control of the Company, in certain prescribed circumstances.

In July 2015, the SERP was amended in connection with Paul Marciano’s planned transition from Chief Executive Officer to Executive Chairman of the Board and Chief Creative Officer. The amendment effectively eliminated any future salary progression by finalizing compensation levels for future benefits. Mr. Marciano will continue to be eligible to receive SERP benefits in the future in accordance with the amended terms of the SERP. Subsequent to the amendment, there are no employees considered actively participating under the terms of the SERP.

As a result, the Company included an actuarial gain of $11.4 million before taxes in accumulated other comprehensive income (loss) during the nine months ended October 31, 2015. In addition, the Company also recognized a curtailment gain of $1.7 million before taxes related to the accelerated amortization of the remaining prior service credit during the nine months ended October 31, 2015. The actuarial and curtailment gains were recorded during the three months ended August 1, 2015.

As a non-qualified pension plan, no dedicated funding of the SERP is required; however, the Company has made periodic payments into insurance policies held in a rabbi trust to fund the expected obligations arising under the non-qualified SERP. The amount of any future payments into the insurance policies, if any, may vary depending on investment performance of the trust. The cash surrender values of the insurance policies were $55.1 million and $53.6 million as of October 31, 2015 and January 31, 2015, respectively, and were included in other assets in the Company’s condensed consolidated balance sheets. As a result of changes in the value of the insurance policy investments, the Company recorded unrealized gains (losses) of $(0.8) million and $0.8 million in other income and expense during the three and nine months ended October 31, 2015, respectively, and unrealized gains of $0.8 million and $3.0 million in other income during the three and nine months ended November 1, 2014, respectively. During the nine months ended October 31, 2015, the Company also recorded realized gains of $0.7 million in other income resulting from payout on the insurance policies. The realized gains were recorded during the three months ended May 2, 2015. The projected benefit obligation was $50.7 million and $61.9 million as of October 31, 2015 and January 31, 2015, respectively, and was included in accrued expenses and other long-term liabilities in the Company’s condensed consolidated balance sheets depending on the expected timing of payments. SERP benefit payments of $0.4 million and $1.3 million were made during the three and nine months ended October 31, 2015, respectively. SERP benefit payments of $0.6 million and $0.8 million were made during the three and nine months ended November 1, 2014.

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The components of net periodic defined benefit pension cost for the three and nine months ended October 31, 2015 and November 1, 2014 related to the SERP are as follows (in thousands):



	Three Months Ended					Nine Months Ended
	Oct 31, 2015		Nov 1, 2014			Oct 31, 2015			Nov 1, 2014
Interest cost	$	498	$	573		$	1,489		$	1,717
Net amortization of unrecognized prior service credit	—		(58		)	(97		)	(174		)
Net amortization of actuarial losses	11		234			729			703
Curtailment gain	—		—			(1,651		)	—
Net periodic defined benefit pension cost	$	509	$	749		$	470		$	2,246

Swiss Pension Plan

In accordance with local regulations, the Company also maintains a pension plan in Switzerland for certain of its employees. The plan is a government-mandated defined contribution plan that provides employees with a minimum investment return determined annually by the Swiss government, and as such, is treated under pension accounting in accordance with authoritative guidance. Under the plan, both the Company and certain of its employees with annual earnings in excess of government determined amounts are required to make contributions into a fund managed by an independent investment fiduciary. The Company’s contributions must be made in an amount at least equal to the employee’s contribution. Minimum employee contributions are based on the respective employee’s age, salary and gender. As of October 31, 2015 and January 31, 2015, the plan had a projected benefit obligation of CHF14.8 million (US$15.0 million) and CHF13.9 million (US$15.1 million), respectively, and plan assets held at the independent investment fiduciary of CHF12.4 million (US$12.6 million) and CHF11.5 million (US$12.5 million), respectively. The net liability of CHF2.4 million (US$2.4 million) and CHF2.4 million (US$2.6 million) was included in other long-term liabilities in the Company’s condensed consolidated balance sheets as of October 31, 2015 and January 31, 2015, respectively. During the three and nine months ended October 31, 2015, the Company recognized net periodic defined benefit pension cost of CHF0.4 million (US$0.4 million) and CHF1.3 million (US$1.3 million), respectively, resulting from service cost and net amortization of actuarial losses related to the Swiss pension plan.


(14)	Fair Value Measurements

Authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into three broad levels as follows:

Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that can be accessed at the measurement date.

Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e. interest rates, yield curves, etc.) and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

Level 3—Unobservable inputs that reflect assumptions about what market participants would use in pricing the asset or liability. These inputs would be based on the best information available, including the Company’s own data.

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The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of October 31, 2015 and January 31, 2015 (in thousands):



	Fair Value Measurements at Oct 31, 2015								Fair Value Measurements at Jan 31, 2015
Recurring Fair Value Measures	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Foreign exchange currency contracts	$	—	$	6,280	$	—	$	6,280	$	—	$	15,542	$	—	$	15,542
Available-for-sale securities	20		—		—		20		36		—		—		36
Total	$	20	$	6,280	$	—	$	6,300	$	36	$	15,542	$	—	$	15,578
Liabilities:
Foreign exchange currency contracts	$	—	$	145	$	—	$	145	$	—	$	—	$	—	$	—
Interest rate swap	—		118		—		118		—		270		—		270
Deferred compensation obligations	—		10,656		—		10,656		—		9,133		—		9,133
Total	$	—	$	10,919	$	—	$	10,919	$	—	$	9,403	$	—	$	9,403

There were no transfers of financial instruments between the three levels of fair value hierarchy during the nine months ended October 31, 2015 or during the year ended January 31, 2015.

The fair values of the Company’s available-for-sale securities are based on quoted prices. The fair value of the interest rate swaps are based upon inputs corroborated by observable market data. Foreign exchange forward contracts are entered into by the Company principally to hedge the future payment of inventory and intercompany transactions by non-U.S. subsidiaries. Periodically, the Company may also use foreign currency forward contracts to hedge the translation and economic exposures related to its net investments in certain of its international subsidiaries. The fair values of the Company’s foreign exchange forward contracts are based on quoted foreign exchange forward rates at the reporting date. Deferred compensation obligations to employees are adjusted based on changes in the fair value of the underlying employee-directed investments. Fair value of these obligations is based upon inputs corroborated by observable market data.

Available-for-sale securities, which consist of marketable equity securities, are recorded at fair value and are included in other assets in the accompanying condensed consolidated balance sheets. As of October 31, 2015 and January 31, 2015, available-for-sale securities were minimal. Unrealized gains (losses), net of taxes, are included as a component of stockholders’ equity and comprehensive income (loss). As of October 31, 2015 and January 31, 2015, the accumulated unrealized losses, net of taxes, included in accumulated other comprehensive income (loss) related to available-for-sale securities owned by the Company were minimal. During the nine months ended November 1, 2014, the Company received proceeds of $0.6 million from the sale of marketable equity securities which were classified as available-for-sale securities. The sale of marketable equity securities was made during the three months ended May 3, 2014. The cost of securities sold was based on the specific identification method. Gains recognized during the nine months ended November 1, 2014 were $0.1 million as a result of this sale and were included in other income.

The carrying amount of the Company’s remaining financial instruments, which principally include cash and cash equivalents, trade receivables, accounts payable and accrued expenses, approximates fair value due to the relatively short maturity of such instruments. The fair values of the Company’s debt instruments (see Note 9) are based on the amount of future cash flows associated with each instrument discounted using the Company’s incremental borrowing rate. As of October 31, 2015 and January 31, 2015, the carrying value of all financial instruments was not materially different from fair value, as the interest rates on variable-rate debt including the capital lease obligation approximated rates currently available to the Company.

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Long-Lived Assets

Long-lived assets, such as property and equipment, and purchased intangibles subject to amortization, are reviewed for impairment quarterly or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company considers each individual retail location as an asset group for impairment testing, which is the lowest level at which individual cash flows can be identified. The asset group includes leasehold improvements, furniture, fixtures and equipment, computer hardware and software and certain long-term security deposits and lease acquisition costs. The Company reviews retail locations in penetrated markets for impairment risk once the locations have been opened for at least one year in their current condition, or sooner as changes in circumstances require. The Company believes that waiting one year allows a retail location to reach a maturity level where a more comprehensive analysis of financial performance can be performed. The Company evaluates impairment risk for retail locations in new markets, where the Company is in the early stages of establishing its presence, once the locations have been opened for at least two years. The Company believes that waiting two years allows for brand awareness to be established. The Company also evaluates impairment risk for retail locations that are expected to be closed in the foreseeable future.

An asset is considered to be impaired if the Company determines that the carrying value may not be recoverable based upon its assessment of the asset’s ability to continue to generate earnings from operations and positive cash flow in future periods or if significant changes in the Company’s strategic business objectives and utilization of the assets occurred. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the estimated fair value, which is determined based on discounted future cash flows. The impairment loss calculations require management to apply judgment in estimating future cash flows and the discount rates that reflect the risk inherent in future cash flows. Future expected cash flows for assets in retail locations are based on management’s estimates of future cash flows over the remaining lease period or expected life, if shorter. For expected retail location closures, the Company will evaluate whether it is necessary to shorten the useful life for any of the assets within the respective asset group. The Company will use this revised useful life when estimating the asset group’s future cash flows. The Company considers historical trends, expected future business trends and other factors when estimating the future cash flow for each retail location. The Company also considers factors such as: the local environment for each retail location, including mall traffic and competition; the Company’s ability to successfully implement strategic initiatives; and the ability to control variable costs such as cost of sales and payroll and, in some cases, renegotiate lease costs. The estimated cash flows used for this nonrecurring fair value measurement are considered a Level 3 input as defined above. If actual results are not consistent with the assumptions and judgments used in estimating future cash flows and asset fair values, there may be additional exposure to future impairment losses that could be material to the Company’s results of operations.

The Company recorded impairment charges of $0.2 million and $2.0 million during the three and nine months ended October 31, 2015, respectively, and $9.8 million and $14.6 million during the three and nine months ended November 1, 2014, respectively. The impairment charges related primarily to the impairment of certain retail locations in North America and Europe resulting from under-performance or the exercise of kick-out options during each of the respective periods. These impairment charges were included in selling, general and administrative expenses in the Company’s condensed consolidated statements of income for each of the respective periods.


(15)	Derivative Financial Instruments

Hedging Strategy

The Company operates in foreign countries, which exposes it to market risk associated with foreign currency exchange rate fluctuations. The Company has entered into certain forward contracts to hedge the risk of foreign currency rate fluctuations. The Company has elected to apply the hedge accounting rules in accordance with authoritative guidance for certain of these hedges.

The Company’s primary objective is to hedge the variability in forecasted cash flows due to the foreign currency risk. Various transactions that occur primarily in Europe, Canada, South Korea and Mexico are

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denominated in U.S. dollars and British pounds and thus are exposed to earnings risk as a result of exchange rate fluctuations when converted to their functional currencies. These types of transactions include U.S. dollar denominated purchases of merchandise and U.S. dollar and British pound denominated intercompany liabilities. In addition, certain operating expenses, tax liabilities and pension-related liabilities are denominated in Swiss francs and are exposed to earnings risk as a result of exchange rate fluctuations when converted to the functional currency. The Company enters into derivative financial instruments, including forward exchange contracts, to offset some but not all of the exchange risk on certain of these anticipated foreign currency transactions.

Periodically, the Company may also use foreign currency forward contracts to hedge the translation and economic exposures related to its net investments in certain of its international subsidiaries.

The impact of the credit risk of the counterparties to the derivative contracts is considered in determining the fair value of the foreign currency forward contracts. As of October 31, 2015, credit risk has not had a significant effect on the fair value of the Company’s foreign currency contracts.

The Company also has interest rate swap agreements, which are not designated as hedges for accounting purposes, to effectively convert its floating-rate debt to a fixed-rate basis. The principal objective of these contracts is to eliminate or reduce the variability of the cash flows in interest payments associated with the Company’s variable-rate capital lease obligation, thus reducing the impact of interest rate changes on future interest payment cash flows. Refer to Note 9 for further information.

Hedge Accounting Policy

U.S. dollar forward contracts are used to hedge forecasted merchandise purchases over specific months. Changes in the fair value of these U.S. dollar forward contracts, designated as cash flow hedges, are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are recognized in cost of product sales in the period which approximates the time the hedged merchandise inventory is sold. The Company also hedges forecasted intercompany royalties over specific months. Changes in the fair value of these U.S. dollar forward contracts, designated as cash flow hedges, are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are recognized in other income and expense in the period in which the royalty expense is incurred.

The Company has also used U.S. dollar forward contracts to hedge the net investments of certain of the Company’s international subsidiaries over specific months. Changes in the fair value of these U.S. dollar forward contracts, designated as net investment hedges, are recorded in foreign currency translation adjustment as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are not recognized in earnings until the sale or liquidation of the hedged net investment.

The Company also has foreign currency contracts that are not designated as hedging instruments for accounting purposes. Changes in fair value of foreign currency contracts not designated as hedging instruments are reported in net earnings as part of other income and expense.

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Summary of Derivative Instruments

The fair value of derivative instruments in the condensed consolidated balance sheets as of October 31, 2015 and January 31, 2015 is as follows (in thousands):



	Derivative Balance Sheet Location	Fair Value at Oct 31, 2015		Fair Value at Jan 31, 2015
ASSETS:
Derivatives designated as hedging instruments:
Foreign exchange currency contracts:
Cash flow hedges	Other current assets/ Other assets	$	4,307	$	6,597
Derivatives not designated as hedging instruments:
Foreign exchange currency contracts	Other current assets	1,973		8,945
Total		$	6,280	$	15,542
LIABILITIES:
Derivatives designated as hedging instruments:
Foreign exchange currency contracts:
Cash flow hedges	Accrued expenses	$	36	$	—
Derivatives not designated as hedging instruments:
Foreign exchange currency contracts	Accrued expenses	109		—
Interest rate swaps	Accrued expenses/ Other long-term liabilities	118		270
Total derivatives not designated as hedging instruments		227		270
Total		$	263	$	270

Derivatives Designated as Hedging Instruments

Cash Flow Hedges

During the nine months ended October 31, 2015, the Company purchased U.S. dollar forward contracts in Europe and Canada totaling US$110.6 million and US$70.6 million, respectively, to hedge forecasted merchandise purchases and intercompany royalties that were designated as cash flow hedges. As of October 31, 2015, the Company had forward contracts outstanding for its European and Canadian operations of US$107.4 million and US$55.6 million, respectively, which are expected to mature over the next 18 months.

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The following table summarizes the gains (losses) before taxes recognized on the derivative instruments designated as cash flow hedges in OCI and net earnings for the three and nine months ended October 31, 2015 and November 1, 2014 (in thousands):



	Gain Recognized in OCI				Location of Gain (Loss) Reclassified from Accumulated OCI into Earnings(1)	Gain (Loss) Reclassified from Accumulated OCI into Earnings
	Three Months Ended					Three Months Ended
	Oct 31, 2015		Nov 1, 2014			Oct 31, 2015			Nov 1, 2014
Derivatives designated as cash flow hedges:
Foreign exchange currency contracts	$	363	$	3,869	Cost of product sales	$	2,507		$	(800	)
Foreign exchange currency contracts	$	46	$	487	Other income/expense	$	(40	)	$	—



	Gain Recognized in OCI				Location of Gain (Loss) Reclassified from Accumulated OCI into Earnings(1)	Gain (Loss) Reclassified from Accumulated OCI into Earnings
	Nine Months Ended					Nine Months Ended
	Oct 31, 2015		Nov 1, 2014			Oct 31, 2015		Nov 1, 2014
Derivatives designated as cash flow hedges:
Foreign exchange currency contracts	$	4,559	$	3,163	Cost of product sales	$	7,450	$	(1,559	)
Foreign exchange currency contracts	$	276	$	381	Other income/expense	$	776	$	(56	)

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(1)	The ineffective portion was immaterial during the three and nine months ended October 31, 2015