Dollar Tree 2010 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 independent pricing services
refl ecting broker market quotes.
Diesel Fuel Cost Risk
In order to manage fl uctuations in cash fl ows resulting
from changes in diesel fuel costs, we entered into
fuel derivative contracts with third parties which
included approximately 0.6 million gallons of diesel
fuel, or approximately 20% of the our fuel needs
from February 2011 through April 2011. Under these
contracts, we pay the third party a fi 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 fi xed rate
obligation. These derivative contracts do not qualify
for hedge accounting and therefore all changes in fair
value for these derivatives are included in earnings. The
fair value of these contracts at January 29, 2011 was an
asset of $0.2 million. In March 2011, we entered into
fuel derivative contracts for approximately 2.8 million
gallons of diesel fuel, or approximately 50% of our fuel
needs from August 2011 through January 2012.
Management’s Discussion And Analysis
Of Financial Condition And Results Of Operations
The following table summarizes the fi nancial terms of our interest rate swap agreements and the fair value of
the interest rate swaps at January 29, 2011:
Hedging Instrument
Receive
Variable Pay Fixed Expiration
Fair Value
(Liability)
Two $75.0 million interest rate swaps LIBOR 2.80% 3/31/11 ($0.6 million)
26 DOLLAR TREE, INC. ♦ 2010 Annual Report