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Interest Rate Derivative Agreement
 9 Months Ended
Oct. 28, 2012
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Interest Rate Derivative Agreement
Interest Rate Derivative Agreement
In June 2012, the Company entered into an interest rate cap agreement with a $175 million notional amount and an upfront payment of $1.1 million. The agreement matures on February 22, 2016 and caps interest rates on one-month LIBOR at 1.00%.
The interest rate cap agreement has been designated as a cash flow hedge of interest rate risk in accordance with ASC Topic 815, Derivatives and Hedging, and is recorded at estimated fair value as of October 28, 2012. 
The Company determined that the interest rate cap agreement is highly effective in offsetting future variable interest payments associated with the hedged portion of the Company’s term loans. No ineffectiveness was recorded during the three and nine months ended October 28, 2012. The Company did not have any active interest contracts outstanding prior to June 2012.
The following table sets forth the net impact of the effective portion of the cash flow hedge on accumulated other comprehensive income for the three and nine months ended October 28, 2012:
 
 
Three Months Ended
 
Nine Months Ended
(in thousands)
 
October 28, 2012
 
October 28, 2012
Beginning balance
 
$
(194
)
 
$
—

Change in unrealized loss on interest rate cap, before tax
 
(194
)
 
(499
)
Benefit for tax related to change in unrealized loss on interest rate cap
 
71

 
182

Ending balance
 
$
(317
)
 
$
(317
)


The amount of unrealized losses on interest rate cap recorded in other comprehensive loss at October 28, 2012 that is expected to be reclassified into interest expense in the next twelve months, if interest rates remain unchanged, is approximately $50,000.
The fair value of the interest rate cap at October 28, 2012 is determined based on assumptions that management believes market participants would use in pricing. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. Based on the inputs used in the valuation, the Company has determined that the derivative valuation is classified in Level 2 of the fair value hierarchy.