DERIVATIVE FINANCIAL INSTRUMENTS

12 Months Ended

Feb. 01, 2020

DERIVATIVE FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS

19. DERIVATIVE FINANCIAL INSTRUMENTS

Effective February 3, 2019, we adopted ASU 2017-12, Derivatives and Hedging:  Targeted Improvements to Accounting for Hedging Activities.  The adoption of ASU 2017-12 did not have an impact on our financial position, results of operations or cash flows.

In April 2017, we entered into an interest rate swap contract on an initial notional amount of $260.0 million that matures in June 2021 with periodic interest settlements. At February 1, 2020, the notional amount totaled $320.0 million. Under this interest rate swap contract, we receive a floating rate based on 1-month LIBOR and pay a fixed rate of 5.31% (including the applicable margin of 3.25%) on the outstanding notional amount.

In June 2018, we entered into an interest rate swap contract on an initial notional amount of $320.0 million that matures in April 2025 with periodic interest settlements. At February 1, 2020, the notional amount totaled $385.0 million. Under this interest rate swap contract, we receive a floating rate based on 1-month LIBOR and pay a fixed rate of 6.18% (including the applicable margin of 3.25%) on the outstanding notional amount.

We have designated each interest rate swap as a cash flow hedge of the variability of interest payments under the Term Loan due to changes in the LIBOR benchmark rate and the fair value of the swaps is reported as a component of accumulated other comprehensive (loss) income.  For both swaps, changes in fair value are reclassified from accumulated other comprehensive (loss) income into earnings in the same period that the hedged item affects earnings.  Over the next 12 months, $7.7 million of the amounts related to the interest rate swaps is expected to be reclassified from accumulated other comprehensive (loss) income into earnings within interest expense.  

Historically, we also utilized derivative instruments to hedge our foreign exchange risk, specifically related to the British pound and Euro.  As a result of the sale of our corporate apparel business, these instruments were cancelled during the third quarter of 2019 and any amounts included in accumulated other comprehensive (loss) income were reclassified to expense and included within loss from discontinued operations.

In addition, we are exposed to market risk associated with foreign currency exchange rate fluctuations as a result of our direct sourcing programs, specifically related to the Canadian dollar.  As a result, from time to time, we may enter into derivative instruments to hedge this foreign exchange risk.  We have not elected to apply hedge accounting to these derivative instruments. At February 1, 2020, the notional amount of these instruments totaled $5.3 million. Amounts related to these transactions were immaterial to our consolidated financial statements.  

The following table provides details on our derivative instruments recorded in the consolidated balance sheets as of February 1, 2020 and February 2, 2019 (in thousands):

	February 1, 2020			February 2, 2019
	Balance	Estimated		Balance	Estimated
	Sheet Location	Fair Value		Sheet Location	Fair Value
Interest rate contracts	Other current assets	$	—	Other current assets	$	1,610
Interest rate contracts	Other assets		—	Other assets		1,355
Foreign exchange contracts	Other current assets		7	Other current assets		—
Total assets		$	7		$	2,965
Interest rate contracts	Accrued expenses and other current liabilities	$	7,701	Accrued expenses and other current liabilities	$	1,625
Interest rate contracts	Deferred taxes, net and other liabilities		26,885	Deferred taxes, net and other liabilities		7,605
Foreign exchange contracts	Accrued expenses and other current liabilities		—	Accrued expenses and other current liabilities		77
Total liabilities		$	34,586		$	9,307

The following table provides details on our derivative instruments recorded in the consolidated statements of (loss) earnings and comprehensive (loss) income during fiscal 2019 and 2018 (in thousands):

	Amount of Gain/(Loss) Recognized in Other Comprehensive Loss, net of tax				Location of Gain/(Loss) Reclassified from Accumulated Other Comprehensive Loss into Earnings	Amount of Gain/(Loss) Reclassified from Accumulated Other Comprehensive Loss into Earnings
	For the Year Ended					For the Year Ended
	February 1, 2020		February 2, 2019			February 1, 2020		February 2, 2019
Derivatives in Cash Flow Hedging Relationships:
Interest rate contracts	$	(22,931)	$	(8,296)	Interest expense	$	1,692	$	818