Derivative Instruments and Hedging Activities

3 Months Ended

May 03, 2014

Derivative Instruments and Hedging Activities

6. Derivative Instruments and Hedging Activities

As of May 3, 2014, February 1, 2014 and May 4, 2013, the Company was party to two outstanding interest rate cap agreements to manage the interest rate risk associated with future interest payments on variable-rate debt.

The Company accounts for derivatives and hedging activities in accordance with ASC Topic No. 815 “Derivatives and Hedging” (Topic No. 815). The Company is exposed to certain risks relating to its ongoing business operations, including market risks relating to fluctuations in interest rates. The Company’s Term Loan Facility and ABL Line of Credit contain floating rate obligations and are subject to interest rate fluctuations. The Company uses interest rate cap agreements, which are designated as economic hedges, to manage interest rate risk associated with the Company’s variable-rate borrowings and to minimize the negative impact of interest rate fluctuations on its earnings and cash flows, thus reducing the Company’s exposure to variability in expected future cash flows. Topic No. 815 requires recognition of all derivative instruments as either assets or liabilities at fair value in the statement of financial position. Interest rate cap agreements are recorded at a fair value and adjusted to market on a quarterly basis. Gains or losses associated with the interest rate cap agreements are recorded in the line item “Interest Expense” on the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) and in the line item “Interest Rate Cap Agreement—Adjustment to Market” on the Company’s Condensed Consolidated Statements of Cash Flows. The Company’s two interest rate cap agreements each have a notional principal amount of $450.0 million, a cap rate of 7% and terminate on May 31, 2015.

	(in thousands)
	Fair Values of Derivative Instruments
	Asset Derivatives
	May 3, 2014			February 1, 2014			May 4, 2013
Derivatives Not Designated as Hedging Instruments Under Topic No. 815	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Interest Rate Cap Agreements	Other Assets	$	—	Other Assets	$	1	Other Assets	$	9

	(in thousands)
	Fair Values of Derivative Instruments
	Liability Derivatives
	May 3, 2014			February 1, 2014			May 4, 2013
Derivatives Not Designated as Hedging Instruments Under Topic No. 815	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Interest Rate Cap Agreements	Other Liabilities	$	—	Other Liabilities	$	—	Other Liabilities	$	—

	(in thousands)
	(Gain) or Loss on Derivative Instruments
Derivatives Not Designated as Hedging Instruments Under Topic No. 815	Location of Loss (Gain) Recognized in Comprehensive Income (Loss)  related to Derivatives	Amount of Loss (Gain) Recognized in Comprehensive Income (Loss) related to Derivatives
		Three Months Ended
		May 3, 2014		May 4, 2013
Interest Rate Cap Agreements	Interest Expense	$	1	$	60