Derivative Instruments and Hedging Activities

9 Months Ended

May 03, 2013

Derivative Instruments and Hedging Activities [Abstract]

Derivative Instruments and Hedging Activities

5.            Derivative Instruments and Hedging Activities

The Company has interest rate risk relative to its outstanding borrowings (see Note 4).  The Company's policy has been to manage interest cost using a mix of fixed and variable rate debt.  To manage this risk in a cost efficient manner, the Company uses derivative instruments, specifically interest rate swaps.

For each of the Company's interest rate swaps, the Company has agreed to exchange with a counterparty the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount.  The interest rates on the portion of the Company's outstanding debt covered by its interest rate swaps are fixed at the rates in the table below plus the Company's credit spread.  The Company's weighted average credit spread at May 3, 2013 was 1.75%.  All of the Company's interest rate swaps are accounted for as cash flow hedges.

A summary of the Company's interest rate swaps at May 3, 2013 is as follows:

Trade Date	Effective Date	Term (in Years)		Notional Amount		Fixed Rate
August 10, 2010	May 3, 2013		2	$	200,000		2.73	%
July 25, 2011	May 3, 2013		2		50,000		2.00	%
July 25, 2011	May 3, 2013		3		50,000		2.45	%
September 19, 2011	May 3, 2013		2		25,000		1.05	%
September 19, 2011	May 3, 2013		2		25,000		1.05	%
December 7, 2011	May 3, 2013		3		50,000		1.40	%
March 18, 2013	May 3, 2015		3		50,000		1.51	%
April 8, 2013	May 3, 2015		2		50,000		1.05	%
April 15, 2013	May 3, 2015		2		50,000		1.03	%
April 22, 2013	May 3, 2015		3		25,000		1.30	%
April 25, 2013	May 3, 2015		3		25,000		1.29	%

The Company's interest rate swap with a notional amount of $525,000 and a fixed rate of 5.57% expired on May 3, 2013.

The Company does not hold or use derivative instruments for trading purposes.  The Company also does not have any derivatives not designated as hedging instruments and has not designated any non-derivatives as hedging instruments.

The estimated fair values of the Company's derivative instruments as of May 3, 2013 and August 3, 2012 were as follows:

	Balance Sheet Location	May 3, 2013		August 3, 2012
Interest rate swap	Current interest rate swap liability	$	--	$	20,215
Interest rate swaps	Long-term interest rate swap liability		16,888		14,166
Total (See Note 2)		$	16,888	$	34,381

The estimated fair value of the Company's interest rate swap liabilities incorporates the Company's non-performance risk (see Note 2).  The adjustment related to the Company's non-performance risk at May 3, 2013 and August 3, 2012 resulted in reductions of $360 and $851, respectively, in the fair value of the interest rate swap liabilities.  The offset to the interest rate swap liabilities is recorded in accumulated other comprehensive loss ("AOCL"), net of the deferred tax asset, and will be reclassified into earnings over the term of the underlying debt.  As of May 3, 2013, the estimated pre-tax portion of AOCL that is expected to be reclassified into earnings over the next twelve months is $5,959.  Cash flows related to the interest rate swap are included in interest expense and in operating activities.

The following table summarizes the pre-tax effects of the Company's derivative instruments on AOCL for the nine-month period ended May 3, 2013 and the year ended August 3, 2012:

	Amount of Income Recognized in AOCL on Derivatives (Effective Portion)
	Nine Months Ended		Year Ended
	May 3, 2013		August 3, 2012
Cash flow hedges:
Interest rate swaps	$	17,493	$	17,223

The following table summarizes the pre-tax effects of the Company's derivative instruments on income for the quarters and nine-month periods ended May 3, 2013 and April 27, 2012:

	Location of Loss Reclassified from AOCL into Income (Effective Portion)	Amount of Loss Reclassified from AOCL into Income (Effective Portion)
		Quarter Ended				Nine Months Ended
		May 3, 2013		April 27 2012		May 3, 2013		April 27, 2012
Cash flow hedges:
Interest rate swaps	Interest expense	$	13,743	$	7,222	$	20,773	$	22,134

Any portion of the fair value of the swaps determined to be ineffective will be recognized currently in earnings.  No ineffectiveness has been recorded in the nine-month periods ended May 3, 2013 and April 27, 2012.