Dollar Tree 2012 Annual Report Download - page 27

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Interest Rate Risk
Weusevariable-ratedebttonancecertainofouropera-
tions and capital improvements. ese obligations expose
us to variability in interest payments due to changes in
interest rates. If interest rates increase, interest expense
increases. Conversely, if interest rates decrease, interest
expensealsodecreases.Webelieveitisbenecialtolimit
the variability of our interest payments.
Tomeetthisobjective,weenteredintoderivative
instrumentsintheformoftwo$75.0millioninterest
rateswapsinMarch2008tomanageuctuationsincash
flows resulting from changes in the variable-interest rates
onaportionofour2008$250.0milliontermloan.e
interest rate swaps reduced the interest rate exposure
on these variable-rate obligations. Under the interest
rateswaps,wepaidthebankataxed-rateandreceived
variable-interest at a rate approximating the variable-
rate on the obligation, thereby creating the economic
equivalentofaxed-rateobligation.eseswapsexpired
inMarch2011.
Management’s Discussion & Analysis of
Financial Condition and Results of Operations
2012AnnualReport25