Interest Rate Derivatives

6 Months Ended

Jul. 30, 2011

Interest Rate Derivatives [Abstract]

INTEREST RATE DERIVATIVES

4. INTEREST RATE DERIVATIVES

It is the policy of the Company to identify on a continuing basis the need for debt capital and evaluate financial risks inherent in funding the Company with debt capital. In conjunction with this ongoing review, the debt portfolio and hedging program of the Company is managed to: (1) reduce funding risk with respect to borrowings made or to be made by the Company to preserve the Company’s access to debt capital and provide debt capital as required for funding and liquidity purposes, and (2) control the aggregate interest rate risk of the debt portfolio. The Company has previously entered and may in the future enter into interest rate swap agreements to change the fixed/variable interest rate mix of the debt portfolio in order to maintain an appropriate balance of fixed-rate and variable-rate debt and to mitigate the impact of volatile interest rates. These derivatives are accounted for in accordance with ASC 815, Derivatives and Hedging (“ASC 815”).

On the date the derivative instrument is entered into, the Company designates the derivative as a hedge of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”). Changes in the fair value of a derivative that is designated as, and meets all required criteria for, a cash flow hedge are recorded in other comprehensive income or loss and reclassified into the statement of operations as the underlying hedged item affects earnings, such as when quarterly settlements are made on the hedged forecasted transaction. The portion of the change in fair value of a derivative associated with hedge ineffectiveness or the component of a derivative instrument excluded from the assessment of hedge effectiveness, if any, is recorded in the current statement of operations. Also, changes in the fair value of a derivative that is not designated as a hedge, if any, are entirely recorded in the statement of operations. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions; this process includes relating all derivatives that are designated as cash flow hedges to specific balance sheet assets or liabilities. The Company also formally assesses, both at the inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in cash flows of the hedged item. If it is determined that a derivative is not highly effective as a hedge, or if a derivative ceases to be a highly effective hedge, the Company will discontinue hedge accounting prospectively for the respective derivative. In addition, if the forecasted transaction is no longer probable of occurring, any amounts in accumulated other comprehensive income or loss (“AOCI”) related to the derivative are recorded in the statement of operations for the current period.

The Company had two interest rate swap contracts to effectively convert a portion of its variable-rate debt to fixed-rate debt, both of which were entered into on July 14, 2006 and expired on July 14, 2011. These contracts entailed the exchange of fixed-rate and floating-rate interest payments periodically over the life of the agreement. The floating-rate interest payments were based on three-month LIBOR rates. The following indicates the notional amounts and the range of fixed-rates associated with these expired interest rate swap contracts:

Fixed swaps (notional amount)	$	100,000
Range of pay rate		5.48%-5.49	%

The following table summarizes the fair value (see Note 3) and presentation of the interest rate swap contracts in the consolidated balance sheet prior to their expiration on July 14, 2011:

	Balance Sheet Location	Derivative Assets		Derivative Liabilities
January 29, 2011	Accrued expenses	$	—	$	2,288

On December 4, 2009, the Company amended and restated its prior senior secured credit facility, at which time the Company de-designated and re-measured its two interest rate swaps and discontinued hedge accounting prospectively in accordance with ASC 815. Specifically, ASC 815 requires the immediate recognition of the expected cumulative ineffectiveness, with the remaining amount to remain in AOCI and be reclassified into the statement of operations as the originally hedged forecasted transactions affect the statement of operations. All changes in fair value after December 4, 2009 were recognized in interest expense.

The following table summarizes the effect of the interest rate swaps on the consolidated statement of operations and AOCI, after being de-designated on December 4, 2009:

					Amount of
	Location of Loss	Amount of Loss			Loss
	Reclassified from	Reclassified		Location of Loss	Recognized
	AOCI to the	from AOCI to		Recognized in	in the
	Statement of	the Statement of		the Statement of	Statement of
	Operations	Operations		Operations	Operations
13 Weeks Ended July 30, 2011	Interest expense, net	$	754	Interest expense, net	$	37
13 Weeks Ended July 31, 2010	Interest expense, net	$	995	Interest expense, net	$	437
26 Weeks Ended July 30, 2011	Interest expense, net	$	1,206	Interest expense, net	$	93
26 Weeks Ended July 31, 2010	Interest expense, net	$	1,966	Interest expense, net	$	843

Due to the interest rate swap contracts expiring on July 14, 2011, there is no remaining balance in AOCI related to the swaps.