Dollar Tree 2009 Annual Report Download - page 28

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Hypothetically,฀a฀1%฀change฀in฀interest฀rates฀results฀
in an approximate $1.5 million change in the amount
paid or received under the terms of the interest rate swap
agreement฀on฀an฀annual฀basis.฀Due฀to฀many฀factors,฀
management is not able to predict the changes in the
fair values of our interest rate swaps. These fair values are
obtained฀from฀our฀outside฀nancial฀institutions.
Diesel Fuel Cost Risk
In฀order฀to฀manage฀uctuations฀in฀cash฀ows฀resulting฀
from changes in diesel fuel costs, we entered into fuel
derivative contracts with a third party in the fourth
quarter฀of฀2009฀for฀2.4฀million฀gallons฀of฀diesel฀fuel,฀or฀
approximately฀25%฀of฀our฀fuel฀needs฀from฀May฀2010฀
through฀January฀2011.฀Under฀these฀contracts,฀we฀pay฀
the฀third฀party฀a฀xed฀price฀for฀diesel฀fuel฀and฀receive฀
variable diesel fuel prices at amounts approximating
current diesel fuel costs, thereby creating the economic
equivalent฀of฀a฀xed-rate฀obligation.฀These฀derivative฀
contracts do not qualify for hedge accounting and
therefore all changes in fair value for this derivative
will be included directly in earnings. The fair value of
these฀contracts฀at฀January฀30,฀2010฀was฀a฀liability฀of฀
$0.2฀million.
Management’s Discussion And Analysis Of Financial Condition
And Results Of Operations
The฀following฀table฀summarizes฀the฀nancial฀terms฀of฀our฀interest฀rate฀swap฀agreements฀and฀the฀fair฀value฀of฀
the฀interest฀rate฀swaps฀at฀January฀30,฀2010:
Hedging Instrument
Receive
Variable
Pay Fixed
Knock-out
Rate
Expiration
Fair Value
(Liability)
Two฀$75.0฀million฀interest฀rate฀
swaps LIBOR 2.80% N/A 3/31/11 ($4.1฀million)
26฀฀฀DOLLAR฀TREE,฀INC.฀•฀2009฀Annual฀Report