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10-K
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. Derivative financial instruments (Continued)
All of the amounts reflected in Accumulated other comprehensive income (loss) in the
consolidated balance sheets for the periods presented are related to the cash flow hedges described
above.
During the next 52-week period, the Company estimates that approximately $2.5 million will be
reclassified as an increase to interest expense for its interest rate swaps and treasury locks.
Non-designated hedges of commodity risk
Derivatives not designated as hedges are not speculative and are used to manage the Company’s
exposure to commodity price risk but do not meet strict hedge accounting requirements. Changes in
the fair value of derivatives not designated in hedging relationships are recorded directly in earnings.
As of January 30, 2015, the Company had no such non-designated hedges.
The table below presents the fair value of the Company’s derivative financial instruments as well as
their classification on the consolidated balance sheets as of January 30, 2015 and January 31, 2014:
January 30, January 31,
(in thousands) 2015 2014
Derivatives Designated as Hedging Instruments
Interest rate swaps classified as noncurrent Other liabilities . $ — $4,109
Interest rate swaps classified as Accrued expenses and other
current liabilities ............................... $1,173 $ —
The tables below present the pre-tax effect of the Company’s derivative financial instruments as
reflected in the consolidated statements of comprehensive income and shareholders’ equity, as
applicable:
(in thousands) 2014 2013 2012
Derivatives in Cash Flow Hedging Relationships
Loss related to effective portion of derivative recognized in OCI ...... $ 876 $16,036 $ 9,626
Loss related to effective portion of derivative reclassified from
Accumulated OCI to Interest expense ....................... $5,130 $ 4,604 $13,327
Gain related to ineffective portion of derivative recognized in Other
(income) expense ...................................... $ — $ — $(2,392)
Credit-risk-related contingent features
The Company has agreements with all of its interest rate swap counterparties that provide that the
Company could be declared in default on its derivative obligations if repayment of the underlying
indebtedness is accelerated by the lender due to the Company’s default on such indebtedness.
As of January 30, 2015, the fair value of interest rate swaps in a net liability position, which
includes accrued interest but excludes any adjustment for nonperformance risk related to these
agreements, was $1.2 million. If the Company had breached any of these provisions at January 30,
2015, it could have been required to post full collateral or settle its obligations under the agreements at
an estimated termination value of $1.2 million. As of January 30, 2015, the Company had not breached
any of these provisions or posted any collateral related to these agreements.
72