7.	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 1.00% and 1.25%, respectively, at August 2, 2019 and August 3, 2018. 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 2, 2019 is as follows:

Trade Date	Effective Date	Term (in Years)		Notional Amount		Fixed Rate
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	%
January 16, 2019	May 3, 2019		3		115,000		2.63	%
January 16, 2019	May 3, 2019		2		115,000		2.68	%

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

(See Note 4)	Balance Sheet Location	August 2, 2019		August 3, 2018
Interest rate swaps	Prepaid expenses and other current assets	$	—	$	169
Interest rate swaps	Other assets		—		6,086
Total assets		$	—	$	6,255

Interest rate swaps	Long-term interest rate swap liability	$	10,483		—
Total liabilities		$	10,483	$	—

**These interest rate swap assets and liabilities are recorded at gross at both August 2, 2019 and August 3, 2018 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 2, 2019 and August 3, 2018 resulted in reductions of $399 and $213, 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 2, 2019, the estimated pre-tax portion of AOCIL that is expected to be reclassified into earnings over the next twelve months is $685. 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)
	2019			2018		2017
Cash flow hedges:
Interest rate swaps	$	(15,466	)	$	13,103	$	15,402

The following table summarizes the changes in AOCIL, net of tax, related to the Company’s interest rate swaps for the years ended August 2, 2019, August 3, 2018 and July 28, 2017:

	August 2, 2019			August 3, 2018			July 28, 2017
Beginning AOCIL balance	$	4,685		$	(4,229	)	$	(13,740	)

Other comprehensive income (loss) before reclassifications		(11,752	)		11,274			12,082
Amounts reclassified from AOCIL into earnings		154			(2,360	)		(2,571	)
Other comprehensive income (loss), net of tax		(11,598	)		8,914			9,511
Ending AOCIL balance	$	(6,913	)	$	4,685		$	(4,229	)

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

	Location of (Income) Loss Reclassified from AOCIL into Income (Effective Portion)	Amount of (Income) Loss Reclassified from AOCIL into Income (Effective Portion)
		2019			2018		2017
Cash flow hedges:
Interest rate swaps	Interest expense	$	(206	)	$	3,398	$	4,163

The following table summarizes the amounts reclassified out of AOCIL related to the Company’s interest rate swaps for the years ended August 2, 2019, August 3, 2018 and July 28, 2017:

Details about AOCIL	August 2, 2019			August 3, 2018			July 28, 2017			Affected Line Item in the Consolidated Statement of Income
Loss on cash flow hedges:
Interest rate swaps	$	206		$	(3,398	)	$	(4,163	)	Interest expense
Tax benefit		(52	)		1,038			1,592		Provision for income taxes
	$	154		$	(2,360	)	$	(2,571	)	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 2019, 2018 and 2017.