Derivative Instruments and Hedging Activities

12 Months Ended

Jul. 29, 2016

Derivative Instruments and Hedging Activities [Abstract]

Derivative Instruments and Hedging Activities

6. Derivative Instruments and Hedging Activities

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 credit spread at both July 29, 2016 and July 31, 2015 was 1.25%.  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 July 29, 2016 is as follows:

Trade Date	Effective Date	Term (in Years)		Notional Amount		Fixed Rate
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	%
June 18, 2014	May 3, 2015		4		80,000		2.51	%
June 24, 2014	May 3, 2015		4		60,000		2.51	%
July 1, 2014	May 5, 2015		4		60,000		2.43	%
January 30, 2015	May 3, 2019		2		80,000		2.15	%
January 30, 2015	May 3, 2019		2		60,000		2.16	%
January 30, 2015	May 4, 2021		3		120,000		2.41	%
January 30, 2015	May 3, 2019		2		60,000		2.15	%
January 30, 2015	May 4, 2021		3		80,000		2.40	%

The notional amount for the interest rate swap entered into on June 18, 2014 increases by $40,000 each May over the four-year term of the interest rate swap until the notional amount reaches $160,000 in May 2018.  The notional amounts for the interest rate swaps entered into on June 24, 2014 and July 1, 2014 increase by $30,000 each May over the four-year terms of the interest rate swaps until the notional amounts each reach $120,000 in May 2018.

The estimated fair values of the Company’s derivative instruments were as follows:

(See Note 3)	Balance Sheet Location	July 29, 2016		July 31, 2015
Interest rate swaps	Other assets	$	--	$	3,759
Interest rate swaps	Current interest rate swap liability	$	180	$	1,117
Interest rate swaps	Long-term interest rate swap liability		22,070		8,704
Total liabilities		$	22,250	$	9,821

The following table summarizes the offsetting of the Company’s derivative assets in the Consolidated Balance Sheets at July 29, 2016 and July 31, 2015:

	Gross Asset Amounts				Liability Amount Offset					Net Asset Amount Presented in the Balance Sheets
(See Note 3)	July 29, 2016		July 31, 2015		July 29, 2016		July 31, 2015			July 29, 2016		July 31, 2015
Interest rate swaps	$	--	$	3,878	$	--	$	(119	)	$	--	$	3,759

The following table summarizes the offsetting of the Company’s derivative liabilities in the Consolidated Balance Sheets at July 29, 2016 and July 31, 2015:

	Gross Liability Amounts				Asset Amount Offset				Net Liability Amount Presented in the Balance Sheets
(See Note 3)	July 29, 2016		July 31, 2015		July 29, 2016		July 31, 2015		July 29, 2016		July 31, 2015
Interest rate swaps	$	22,250	$	9,821	$	--	$	--	$	22,250	$	9,821

The estimated fair values of the Company’s interest rate swap assets and liabilities incorporate the Company’s non-performance risk.  The adjustment related to the Company’s non-performance risk at July 29, 2016 and July 31, 2015 resulted in reductions of $1,035 and $209, respectively, in the total fair value of the interest rate swap asset and liabilities.  The offset to the interest rate swap asset and liabilities is recorded in accumulated other comprehensive loss (“AOCL”), net of the deferred tax assets, and will be reclassified into earnings over the term of the underlying debt.  As of July 29, 2016, the estimated pre-tax portion of AOCL that is expected to be reclassified into earnings over the next twelve months is $3,227.  Cash flows related to the interest rate swaps 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 each of the three years:

	Amount of (Loss) Income Recognized in AOCL on Derivatives (Effective Portion)
	2016			2015		2014
Cash flow hedges:
Interest rate swaps	$	(16,188	)	$	1,641	$	3,058

The following table summarizes the changes in AOCL, net of tax, related to the Company’s interest rate swaps for the years ended July 29, 2016, July 31, 2015 and August 1, 2014:

	July 29, 2016			July 31, 2015			August 1, 2014
Beginning AOCL balance	$	(3,725	)	$	(4,733	)	$	(6,612	)
Other comprehensive (loss) income before reclassifications		(6,683	)		5,955			6,836
Amounts reclassified from AOCL into earnings		(3,332	)		(4,947	)		(4,957	)
Other comprehensive (loss) income, net of tax		(10,015	)		1,008			1,879
Ending AOCL balance	$	(13,740	)	$	(3,725	)	$	(4,733	)

The following table summarizes the pre-tax effects of the Company’s derivative instruments on income for each of the three years:

Location of Loss Reclassified from AOCL into Income (Effective Portion)		Amount of Loss Reclassified from AOCL into Income (Effective Portion)
		2016		2015		2014
Cash flow hedges:
Interest rate swaps	Interest expense	$	5,395	$	8,052	$	8,068

The following table summarizes the amounts reclassified out of AOCL related to the Company’s interest rate swaps for the years ended July 29, 2016, July 31, 2015 and August 1, 2014:

Details about AOCL	July 29, 2016			July 31, 2015			August 1, 2014			Affected Line Item in the Consolidated Statement of Income
Loss on cash flow hedges:
Interest rate swaps	$	(5,395	)	$	(8,052	)	$	(8,068	)	Interest expense
Tax benefit		2,063			3,105			3,111		Provision for income taxes
	$	(3,332	)	$	(4,947	)	$	(4,957	)	Net of tax

Any portion of the fair value of the interest rate swaps determined to be ineffective will be recognized currently in earnings.  No ineffectiveness has been recorded in 2016, 2015 and 2014.