Kroger 2015 Annual Report Download - page 126

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A-52
The Company reviews compliance with these guidelines annually with the Financial Policy
Committee of the Board of Directors. These guidelines may change as the Company’s needs dictate.
Fair Value Interest Rate Swaps
The table below summarizes the outstanding interest rate swaps designated as fair value hedges as
of January 30, 2016 and January 31, 2015.
2015 2014
Pay
Floating
Pay
Fixed
Pay
Floating
Pay
Fixed
Notional amount $ 100 $— $ 100 $—
Number of contracts 2 — 2 —
Duration in years 2.92 — 3.94 —
Average variable rate 6.00% — 5.83% —
Average fixed rate 6.80% — 6.80% —
Maturity December 2018 December 2018
The gain or loss on these derivative instruments as well as the offsetting gain or loss on the hedged
items attributable to the hedged risk is recognized in current earnings as “Interest expense.” These gains
and losses for 2015 and 2014 were as follows:
Year-To-Date
January 30, 2016 January 31, 2015
Consolidated Statements of
Operations Classification
Gain/
(Loss) on
Swaps
Gain/
(Loss) on
Borrowings
Gain/
(Loss) on
Swaps
Gain/
(Loss) on
Borrowings
Interest Expense $1 $(1) $2 $(2)
The following table summarizes the location and fair value of derivative instruments designated as
fair value hedges on the Company’s Consolidated Balance Sheets:
Asset Derivatives
Fair Value
Derivatives Designated as Fair Value Hedging
Instruments
January
30, 2016
January
31, 2015
Balance Sheet
Location
Interest Rate Hedges $1 $— (Other long-term
liabilities)/Other
assets
Cash Flow Forward-Starting Interest Rate Swaps
As of January 30, 2016, the Company had seven forward-starting interest rate swap agreements
with maturity dates of August 2017 with an aggregate notional amount totaling $400. A forward-starting
interest rate swap is an agreement that effectively hedges the variability in future benchmark interest
payments attributable to changes in interest rates on the forecasted issuance of fixed-rate debt. The
Company entered into these forward-starting interest rate swaps in order to lock in fixed interest rates
on its forecasted issuance of debt in August 2017. Accordingly, the forward-starting interest rate swaps
were designated as cash-flow hedges as defined by GAAP. As of January 30, 2016, the fair value
of the interest rate swaps was recorded in other long-term liabilities for $27 and accumulated other
comprehensive loss for $17 net of tax.