DERIVATIVE INSTRUMENTS

12 Months Ended

Jan. 28, 2018

DERIVATIVE INSTRUMENTS

DERIVATIVE INSTRUMENTS

NOTE 7—DERIVATIVE INSTRUMENTS

Cash Flow Hedge

On October 24, 2018, the Company entered into an interest rate swap agreement with a notional amount of $750 million, designated as a cash flow hedge in accordance with ASC 815, Derivatives and Hedging, to hedge the variability of cash flows in interest payments associated with the Company’s variable-rate debt. The interest rate swap agreement swaps a LIBOR rate for a fixed rate of 3.07% and matures on October 17, 2023. The swap effectively converts $750 million of the Company’s Term B-5 Loans from a rate of LIBOR plus 1.75% to a 4.82% fixed rate.

As of February 3, 2019, the fair value of the Company’s interest rate swap was a liability of $20 million, which was reflected as $4 million in Other current liabilities and $16 million in Other liabilities in the Consolidated Balance Sheet. Changes in the fair value of interest rate swap agreements designated as cash flow hedges are recorded as a component of Accumulated Other Comprehensive Income (“OCI”) within Stockholders’ Equity in the Consolidated Balance Sheets and are reclassified into earnings in the same period or periods during which the hedged transactions affect earnings. During fiscal 2018, the Company recognized $21 million of unrealized loss in OCI and reclassified $1 million of the unrealized loss from OCI into Interest expense.  As of February 3, 2019, Accumulated OCI related to the interest rate swap agreement was a net unrealized loss of approximately $15 million, net of $5 million of tax.