CHS 2014 Annual Report Download - page 59

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Interest Rate Contracts: Interest Rate Contracts:
CHS Capital, our wholly-owned finance subsidiary, has In fiscal 2013, we entered into derivative contracts des-
interest rate swaps that lock the interest rates of the ignated as cash flow hedging instruments that were ter-
underlying loans with a combined notional amount of minated in February 2014 as the issuance of the
$5.0 million expiring at various times through fiscal 2018, underlying debt was no longer probable. As a result, a
with $0.4 million of the notional amount expiring during $13.5 million gain was reclassified from accumulated
fiscal 2015. None of CHS Capital’s interest rate swaps other comprehensive loss into net income. This pre-tax
qualify for hedge accounting and as a result, changes in gain is included as a component of interest, net in our
fair value are recorded in earnings within interest, net in Consolidated Statement of Operations for the year
our Consolidated Statements of Operations. Long-term ended August 31, 2014.
debt used to finance non-current assets carries various
fixed interest rates and is payable at various dates to In fiscal 2014, we entered into interest rate swaps with a
minimize the effects of market interest rate changes. The notional amount of $260.0 million designated as fair
weighted-average interest rate on fixed rate debt out- value hedges of portions of our fixed-rate debt. Our
standing on August 31, 2014 was approximately 5.6%. objective is to offset changes in the fair value of the debt
associated with the risk of variability in the 3-month U.S.
Dollar LIBOR interest rate, in essence converting the
fixed-rate debt to variable-rate debt. Offsetting changes
As of August 31, 2014 and 2013, we have certain derivatives in the fair values of both the swap instruments and the
designated as cash flow hedges. As of August 31, 2014 we hedged debt are recorded contemporaneously each
have certain derivatives designated as fair value hedges. period and only create an impact to earnings to the
extent that the hedge is ineffective. During fiscal 2014 we
recorded offsetting fair value adjustments of $4.2 mil-
lion, with no ineffectiveness recorded in earnings.
CHS 2014 57
Derivatives Designated as Cash Flow or
Fair Value Hedging Strategies