v3.25.2
Financial Instruments and Risk Management
 3 Months Ended
May 31, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Financial Instruments and Risk Management
Note 12 - Financial Instruments and Risk Management

Foreign Currency Risk

The U.S. Dollar is the functional currency for the Company and all of its subsidiaries and is also the reporting currency for the Company. By operating internationally, we are subject to foreign currency risk from transactions denominated in currencies other than the U.S. Dollar (“foreign currencies”). Such transactions include sales and operating expenses. As a result of such transactions, portions of our cash, accounts receivable and accounts payable are denominated in foreign currencies. Approximately 16% of our net sales revenue was denominated in foreign currencies during both the three month periods ended May 31, 2025 and 2024, respectively. These sales were primarily denominated in Euros, Canadian Dollars and British Pounds. We make most of our inventory purchases from manufacturers in Asia and primarily use the U.S. Dollar for such purchases.

In our condensed consolidated statements of (loss) income, foreign currency exchange rate gains and losses resulting from the remeasurement of foreign income tax receivables and payables, and deferred income tax assets and liabilities are recognized in income tax expense, and all other foreign currency exchange rate gains and losses are recognized in SG&A. During the three month periods ended May 31, 2025 and 2024, we recorded foreign currency exchange rate net gains of $6.6 million and net losses of $0.1 million, respectively, in income tax expense. During the three month periods ended May 31, 2025 and 2024, we recorded foreign currency exchange rate net gains of $1.7 million and an immaterial amount, respectively, in SG&A. We mitigate certain foreign currency exchange rate risk by using forward contracts to protect against the foreign currency exchange rate risk inherent in our transactions denominated in foreign currencies. We do not enter into any derivatives or similar instruments for trading or other speculative purposes. Certain of our forward contracts are designated as cash flow hedges (“foreign currency contracts”) and are recorded on the balance sheet at fair value with changes in fair value recorded in Other Comprehensive Income (Loss) (“OCI”) until the hedge transaction is settled, at which point amounts are reclassified from Accumulated Other Comprehensive Income (Loss) (“AOCI”) to our condensed consolidated statements of (loss) income. Foreign currency derivatives for which we have not elected hedge accounting consist of certain forward contracts, and any changes in the fair value of these derivatives are recorded in our condensed consolidated statements of (loss) income. These undesignated derivatives are used to hedge monetary net asset and liability positions. Cash flows from our foreign currency derivatives are classified as cash flows from operating activities in our condensed
consolidated statements of cash flows, which is consistent with the classification of the cash flows from the underlying hedged item. We evaluate our derivatives designated as cash flow hedges each quarter to assess hedge effectiveness.

Interest Rate Risk

Interest on our outstanding debt as of May 31, 2025 and February 28, 2025 is based on floating interest rates. If short-term interest rates increase, we will incur higher interest expense on any future outstanding balances of floating rate debt. Floating interest rates are hedged with interest rate swaps to effectively fix interest rates on a portion of our outstanding principal balance under the Credit Agreement, which totaled $876.8 million and $921.9 million as of May 31, 2025 and February 28, 2025, respectively. As of May 31, 2025 and February 28, 2025, $750 million and $550 million of the outstanding principal balance under the Credit Agreement, respectively, was hedged with interest rate swaps to fix the interest rate we pay. Our interest rate swaps are designated as cash flow hedges and are recorded on the balance sheet at fair value with changes in fair value recorded in OCI until the hedge transaction is settled, at which point amounts are reclassified from AOCI to our condensed consolidated statements of (loss) income. Cash flows from our interest rate swaps are classified as cash flows from operating activities in our condensed consolidated statements of cash flows, which is consistent with the classification of the cash flows from the underlying hedged item. We evaluate our derivatives designated as cash flow hedges each quarter to assess hedge effectiveness.

The following tables summarize the fair values of our derivative instruments as of the end of the periods presented:
(in thousands)May 31, 2025

Derivatives designated as hedging instruments		Hedge
Type		Final
Settlement Date		Notional AmountPrepaid
Expenses
and Other
Current Assets		Other AssetsAccrued
Expenses
and Other
Current Liabilities		Other
Liabilities, Non- Current
Forward contracts - sell EuroCash flow2/2027€97,800 $84 $177 $3,418 $260 
Forward contracts - sell Canadian DollarsCash flow2/2027$52,900 — — 821 316 
Forward contracts - sell PoundsCash flow12/2027£49,400 — 5 1,369 945 
Forward contracts - sell Norwegian KronerCash flow2/2027kr35,000 — — 51 6 
Interest rate swaps (1)
Cash flow8/2027$850,000 1,537 992 — — 
Subtotal   1,621 1,174 5,659 1,527 
Derivatives not designated under hedge accounting       
Forward contracts - sell Euro
(2)6/2025€4,080 — — 67 — 
Forward contracts - sell Pounds
(2)6/2025£5,000 — — 103 — 
Subtotal   — — 170 — 
Total fair value$1,621 $1,174 $5,829 $1,527 
(in thousands)February 28, 2025

Derivatives designated as hedging instruments		Hedge TypeFinal
Settlement Date		Notional AmountPrepaid
Expenses
and Other
Current Assets		Other AssetsAccrued
Expenses
and Other
Current Liabilities		Other
Liabilities Non- Current
Forward contracts - sell EuroCash flow2/2026€35,000 $1,266 $— $— $— 
Forward contracts - sell Canadian DollarsCash flow2/2026$8,000 38 — — — 
Forward contracts - sell PoundsCash flow2/2026£24,950 788 — 99 — 
Forward contracts - sell Norwegian KronerCash flow8/2025kr10,000 71 — — — 
Interest rate swapsCash flow8/2026$550,000 763 302 221 — 
Subtotal   2,926 302 320 — 
Derivatives not designated under hedge accounting       
Forward contracts - sell Euro
(2)3/2025€680 — — 2 — 
Forward contracts - sell Pounds
(2)3/2025£1,280 — — 18 — 
Subtotal   — — 20 — 
Total fair value   $2,926 $302 $340 $— 
(1)Includes a forward-starting interest rate swap agreement with a notional amount of $100 million that becomes effective on March 1, 2026.
(2)These forward contracts, for which we have not elected hedge accounting, hedge monetary net asset and liability positions for the notional amounts reported, creating an economic hedge against currency movements.

The pre-tax effects of derivative instruments designated as cash flow hedges were as follows for the periods presented:
 Three Months Ended May 31,
 Gain (Loss)
Recognized in AOCI		Gain (Loss) Reclassified
from AOCI into Income
(in thousands)20252024Location20252024
Foreign currency contracts - cash flow hedges$(9,707)$(108)Sales revenue, net$(723)$184 
Interest rate swaps - cash flow hedges2,613 2,292 Interest expense928 1,084 
Total$(7,094)$2,184  $205 $1,268 

The pre-tax effects of derivative instruments not designated under hedge accounting were as follows for the periods presented:
 Gain (Loss) 
Recognized in Income
Three Months Ended May 31,
(in thousands)Location20252024
Forward contractsSG&A$(336)$22 
Total $(336)$22 

We expect a net loss of $4.0 million associated with foreign currency contracts and interest rate swaps currently recorded in AOCI to be reclassified into income over the next twelve months. The amount ultimately realized, however, will differ as exchange rates and interest rates change and the underlying contracts settle. See Notes 11 and 13 for more information.
Counterparty Credit Risk

Financial instruments, including foreign currency contracts, forward contracts, and interest rate swaps, expose us to counterparty credit risk for non-performance. We manage our exposure to counterparty credit risk by only dealing with counterparties who are substantial international financial institutions with significant experience using such derivative instruments. We believe that the risk of incurring credit losses is remote.