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10-K
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Derivative financial instruments (Continued)
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 February 1, 2013 and February 3, 2012:
February 1, February 3,
(in thousands) 2013 2012
Derivatives Designated as Hedging Instruments
Interest rate swaps classified in current liabilities as
Accrued expenses and other ................................... $ — $10,820
Interest rate swaps classified in noncurrent liabilities as Other liabilities ..... $4,822 $ —
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) 2012 2011 2010
Derivatives in Cash Flow Hedging Relationships
Loss related to effective portion of derivative recognized in OCI ..... $ 9,626 $ 3,836 $19,717
Loss related to effective portion of derivative reclassified from
Accumulated OCI to Interest expense ....................... $13,327 $28,633 $42,994
(Gain) loss related to ineffective portion of derivative recognized in
Other (income) expense ................................. $(2,392) $ 312 $ 526
Credit-risk-related contingent features
The Company has agreements with all of its interest rate swap counterparties that contain a
provision providing 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 February 1, 2013, 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 $5.0 million. If the Company had breached any of these provisions at February 1,
2013, it could have been required to post full collateral or settle its obligations under the agreements at
an estimated termination value of $5.0 million. As of February 1, 2013, the Company had not breached
any of these provisions or posted any collateral related to these agreements.
9. Commitments and contingencies
Leases
As of February 1, 2013, the Company was committed under operating lease agreements for most
of its retail stores. Many of the Company’s stores are subject to build-to-suit arrangements with
landlords which typically carry a primary lease term of 10-15 years with multiple renewal options. The
Company also has stores subject to shorter-term leases and many of these leases have renewal options.
Certain of the Company’s leased stores have provisions for contingent rentals based upon a specified
percentage of defined sales volume.
77