Derivative Financial Instruments

9 Months Ended

Nov. 03, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

Our derivative instruments primarily consist of interest rate swaps, which we use to mitigate interest rate risk. As a result of our use of derivative instruments, we have counterparty credit exposure to large global financial institutions. We monitor this concentration of counterparty credit risk on an ongoing basis. Note 4 provides the fair value and classification of these instruments.

During the nine months ended November 3, 2018, we entered into two interest rate swaps, each with a notional amount of $250 million, under which we pay a variable rate and receive a fixed rate. We designated these swaps as fair value hedges. With the addition of these swaps, as of November 3, 2018, four interest rate swaps with notional amounts totaling $1,500 million were designated as fair value hedges.As of October 28, 2017, two interest rate swaps with notional amounts totaling $1,000 million were designated as fair value hedges. No ineffectiveness was recognized during the three and nine months ended November 3, 2018 or October 28, 2017.

We recorded expense of $1 million and $2 million during the three and nine months ended November 3, 2018, and income of $2 million and $8 million during the three and nine months ended October 28, 2017, respectively, within Net Interest Expense on our Consolidated Statements of Operations related to periodic payments, valuation adjustments, and amortization of gains or losses on our interest rate swaps.