Kroger 2013 Annual Report Download - page 126

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A-53
NO T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S , CO N T I N U E D
in order to lock in fixed interest rates on its forecasted issuances of debt in fiscal year 2013. Accordingly,
the forward-starting interest rate swaps were designated as cash-flow hedges as defined by GAAP. As of
February 2, 2013, the fair value of the interest rate swaps was recorded in other assets and other long-term
liabilities for $14 and $9, respectively, and AOCI and accumulated other comprehensive loss for $9 net of tax
and $6 net of tax, respectively.
During 2013, the Company terminated 29 forward-starting interest rate swap agreements with maturity
dates of April 2013 and January 2014 with an aggregate notional amount totaling $1,700. Twelve of these
forward-starting interest rate swap agreements, with an aggregate notional amount totaling $850, were
entered into and terminated in 2013. These forward-starting interest rate swap agreements were hedging the
variability in future benchmark interest payments attributable to changing interest rates on the forecasted
issuance of fixed-rate debt issued in 2013. As discussed in Note 6, the Company issued $3,500 of senior notes
in 2013. Since these forward-starting interest rate swap agreements were classified as cash flow hedges, the
unamortized loss of $15, $9 net of tax, has been deferred net of tax in AOCI and will be amortized to earnings
as the interest payments are made.
The following table summarizes the effect of the Company’s derivative instruments designated as cash
flow hedges for 2013 and 2012:
Year-To-Date
Derivatives in Cash Flow Hedging
Relationships
Amount of Gain/(Loss)
in AOCI on Derivative
(Effective Portion)
Amount of Gain/(Loss)
Reclassified from AOCI
into Income (Effective
Portion) Location of Gain/(Loss)
Reclassified into Income
(Effective Portion)2013 2012 2013 2012
Forward-Starting Interest Rate
Swaps, net of tax* . . . . . . . . . $(25) $(14) $(1) $(3) Interest expense
* The amounts of Gain/(Loss) in AOCI on derivatives include unamortized proceeds and payments from
forward-starting interest rate swaps once classified as cash flow hedges that were terminated prior to
end of 2013.
For the above fair value and cash flow interest rate swaps, the Company has entered into International
Swaps and Derivatives Association master netting agreements that permit the net settlement of amounts owed
under their respective derivative contracts. Under these master netting agreements, net settlement generally
permits the Company or the counterparty to determine the net amount payable for contracts due on the same
date and in the same currency for similar types of derivative transactions. These master netting agreements
generally also provide for net settlement of all outstanding contracts with a counterparty in the case of an
event of default or a termination event.
Collateral is generally not required of the counterparties or of the Company under these master netting
agreements. As of February 1, 2014 and February 2, 2013, no cash collateral was received or pledged under
the master netting agreements.