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 was 1.25% at both August 3, 2018 and July 28, 2017. 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 August 3, 2018 is as follows:

Trade Date	Effective Date	Term (in Years)		Notional Amount		Fixed Rate
June 18, 2014	May 3, 2015		4	$	160,000		2.51	%
June 24, 2014	May 3, 2015		4		120,000		2.51	%
July 1, 2014	May 5, 2015		4		120,000		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 estimated fair values of the Company’s derivative instruments were as follows:

(See Note 3)	Balance Sheet Location	August 3, 2018		July 28, 2017
Interest rate swaps	Prepaid expenses and other current assets	$	169	$	32
Interest rate swaps	Other assets		6,086		--
Total assets		$	6,255	$	32

Interest rate swaps	Other current liabilities	$	--	$	47
Interest rate swaps	Long-term interest rate swap liability		--		6,833
Total liabilities		$	--	$	6,880

**These interest rate swap assets and liabilities are recorded at gross at both August 3, 2018 and July 28, 2017 since there were no offsetting assets and liabilities under the Company’s master netting agreements.

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 August 3, 2018 and July 28, 2017 resulted in reductions of $213 and $103, respectively, in the total fair value of the interest rate swap assets and liabilities. The offset to the interest rate swap assets and liabilities is recorded in accumulated other comprehensive income (loss) (“AOCIL”), net of the deferred tax assets, and will be reclassified into earnings over the term of the underlying debt. As of August 3, 2018, the estimated pre-tax portion of AOCIL that is expected to be reclassified into earnings over the next twelve months is $533. 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 AOCIL for each of the three years:

	Amount of Income (Loss) Recognized in AOCIL on Derivatives (Effective Portion)
	2018		2017		2016
Cash flow hedges:
Interest rate swaps	$	13,103	$	15,402	$	(16,188	)

The following table summarizes the changes in AOCIL, net of tax, related to the Company’s interest rate swaps for the years ended August 3, 2018, July 28, 2017 and July 29, 2016:

	August 3, 2018			July 28, 2017			July 29, 2016
Beginning AOCIL balance	$	(4,229	)	$	(13,740	)	$	(3,725	)

Other comprehensive income (loss) before reclassifications		11,274			12,082			(6,683	)
Amounts reclassified from AOCIL into earnings		(2,360	)		(2,571	)		(3,332	)
Other comprehensive income (loss), net of tax		8,914			9,511			(10,015	)
Ending AOCIL balance	$	4,685		$	(4,229	)	$	(13,740	)

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 AOCIL into Income (Effective Portion)		Amount of Loss Reclassified from AOCIL into Income (Effective Portion)
		2018		2017		2016
Cash flow hedges:
Interest rate swaps	Interest expense	$	3,398	$	4,163	$	5,395

The following table summarizes the amounts reclassified out of AOCIL related to the Company’s interest rate swaps for the years ended August 3, 2018, July 28, 2017 and July 29, 2016:

Details about AOCIL	August 3, 2018			July 28, 2017			July 29, 2016			Affected Line Item in the Consolidated Statement of Income

Loss on cash flow hedges:
Interest rate swaps	$	(3,398	)	$	(4,163	)	$	(5,395	)	Interest expense
Tax benefit		1,038			1,592			2,063		Provision for income taxes
	$	(2,360	)	$	(2,571	)	$	(3,332	)	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 2018, 2017 and 2016.