Derivative Financial Instruments

The Company manages some of its foreign currency exchange rate risk through the purchase of foreign currency exchange contracts that hedge against the short-term effect of currency fluctuations. The Company’s policy is to enter into foreign currency forward contracts with maturities less than 12 months which mitigates the effect of rate fluctuations on certain local currency denominated operating expenses. All derivative instruments are recorded at fair value in either prepaid expenses and other current assets or accrued liabilities. The Company reports cash flows from derivative instruments in cash flows from operating activities. The Company uses quoted prices to value its derivative instruments. There were no outstanding forward contracts at May 5, 2018 and February 3, 2018.

Cash Flow Hedges. The Company designates and documents its foreign currency forward exchange contracts as cash flow hedges for certain operating expenses. The Company evaluates and calculates the effectiveness of each hedge at least quarterly. The effective change is recorded in accumulated other comprehensive income and is subsequently reclassified to operating expense when the hedged expense is recognized. Ineffectiveness is recorded in interest and other income, net.

The following table provides information about gains (losses) associated with the Company’s derivative financial instruments (in thousands):



		Amount of Gains (Losses) in Statements of Operations
		Three Months Ended
	Location of Gains (Losses) in Statements of Operations	May 5, 2018		April 29, 2017
Derivatives designated as cash flow hedges:
Forward contracts:	Research and development	$	—	$	475
	Selling, general and administrative	—		63
		$	—	$	538

The amounts of gains (losses) associated with the Company's derivative financial instruments reclassified from accumulated other comprehensive loss are presented in the following table (in thousands):



	Three Months Ended
Affected Line Item in the Statements of Operations:	May 5, 2018		April 29, 2017
Operating costs and expenses:
Cash flow hedges:
Research and development	$	—	$	71
Selling, general and administrative	—		9
Total	$	—	$	80

The portion of gains (losses) excluded from the assessment of hedge effectiveness is included in interest and other income, net. These amounts were not material in the three months ended April 29, 2017. The Company did not have hedge ineffectiveness from derivative financial instruments in the three months ended April 29, 2017. No cash flow hedges were terminated as a result of forecasted transactions that did not occur.