Derivative Instruments

12 Months Ended

Jan. 31, 2016

Derivative Instruments [Abstract]

Derivative Instruments

Note 20 — Derivative Instruments 

We are exposed to certain risks relating to our ongoing business operations.The primary risk managed by using derivative instruments is commodity price risk.We do not hold or issue derivative instruments for trading purposes.Additional disclosure about the fair value of derivative instruments is included in Note 19.

Commodity Price Risk

We are exposed to the effects of commodity price fluctuations in the cost of ingredients of our products, of which flour, sugar and shortening are the most significant.In order to bring greater stability to the cost of ingredients, from time to time we purchase exchange-traded commodity futures contracts, and options on such contracts, for raw materials which are ingredients of our products or which are components of such ingredients, including wheat and soybean oil.We are also exposed to the effects of commodity price fluctuations in the cost of gasoline used by our delivery vehicles.To mitigate the risk of fluctuations in the price of our gasoline purchases, we may purchase exchange-traded commodity futures contracts and options on such contracts.The difference between the cost, if any, and the fair value of commodity derivatives is reflected in earnings because we have not designated any of these instruments as hedges.Gains and losses on these contracts are intended to offset losses and gains on the hedged transactions in an effort to reduce the earnings volatility resulting from fluctuating commodity prices.The settlement of commodity derivative contracts is reported in the consolidated statement of cash flows as a cash flow from operating activities.We had no commodity derivative contracts outstanding as of January 31, 2016.

Interest Rate Risk

We are exposed to market risk from increases in interest rates on any borrowings outstanding under our 2013 Facility.As of January 31, 2016, there were no borrowings outstanding under such facility.During the second quarter of fiscal 2014, we repaid in full the remaining balance of our 2011 Term Loan.

On March 3, 2011, we entered into an interest rate derivative contract having an aggregate notional principal amount of $17.5 million. The derivative contract entitled us to receive from the counterparty the excess, if any, of the three-month LIBOR rate over 3.00% for each of the calendar quarters in the period beginning April 2012 and ending December 2015. We accounted for this derivative contract as a cash flow hedge. In the second quarter of fiscal 2014, as a result of the termination of the contract, the $516,000 unrealized loss on the contract previously included in accumulated other comprehensive income was reclassified to earnings in the consolidated statement of income because the hedged forecasted transaction (interest on the 2011 Term Loan) would not occur.

Quantitative Summary of Derivative Positions and Their Effect on Results of Operations 

The following table presents the fair values of derivative instruments included in the consolidated balance sheet as of January 31, 2016 and February 1, 2015:

		Liability Derivatives
		Fair Value
Derivatives Not Designated as		January 31,		February 1,
Hedging Instruments	Balance Sheet Location	2016		2015
		(In thousands)
Agricultural commodity futures contracts	Accrued liabilities	$	-	$	874
Gasoline commodity futures contracts	Accrued liabilities		-		937
		$	-	$	1,811

The effect of derivative instruments on the consolidated statement of income for the year ended January 31, 2016, February 1, 2015 and February 2, 2014, was as follows:

		Amount of Derivative Gain or (Loss)
		Recognized in Income
		Year Ended
Derivatives Not Designated as Hedging	Location of Derivative Gain or (Loss)	January 31,			February 1,			February 2,
Instruments	Recognized in Income	2016			2015			2014
		(In thousands)
Agricultural commodity futures contracts	Gains and losses on commodity derivatives, net	$	(661	)	$	(903	)	$	(1,459	)
Gasoline commodity futures contracts	Gains and losses on commodity derivatives, net		(239	)		(1,221	)		-
Total		$	(900	)	$	(2,124	)	$	(1,459	)
		Amount of Derivative Gain or (Loss)
		Recognized in Income
		Year Ended
	Location of Derivative Gain or (Loss)	January 31,			February 1,			February 2,
Derivatives Designated as a Cash Flow Hedge	Recognized in Income	2016			2015			2014
		(In thousands)
Interest rate derivative	Interest expense	$	-		$	-		$	(39	)
Interest rate derivative	Loss on retirement of debt	$	-		$	-		$	(516	)

The effect of derivative instruments on other comprehensive income for the years ended January 31, 2016, February 1, 2015 and February 2, 2014, was as follows:

		Amount of Derivative Gain
		or (Loss) Recognized in OCI
		Year Ended
	Derivative Gain or (Loss) Recognized in	January 31,		February 1,		February 2,
Derivatives Designated as a Cash Flow Hedge	OCI	2016		2015		2014
		(In thousands)
Interest rate derivative	Change in fair value of derivative	$	-	$	-	$	36
	Less-income tax effect		-		-		(14	)
			-		-		22
	Loss on cash flow hedge
	reclassified to net income,
	previously charged to other
	comprehensive income		-		-		516
	Less - income tax effect		-		-		(200	)
			-		-		316
	Net change in amount recognized
	in OCI	$	-	$	-	$	338