Dollar Tree 2014 Annual Report Download - page 52

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36
we believe our expenses could increase unless we are able to offset the increase in payroll costs by operating more effectively
or efficiently.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to various types of market risk in the normal course of our business, including the impact of interest rate
changes and diesel fuel cost changes. We may enter into interest rate or diesel fuel swaps to manage exposure to interest rate
and diesel fuel price changes. We do not enter into derivative instruments for any purpose other than cash flow hedging and we
do not hold derivative instruments for trading purposes.
Diesel Fuel Cost Risk
In order to manage fluctuations in cash flows resulting from changes in diesel fuel costs, we entered into fuel derivative
contracts with third parties. We hedged 1.6 million, 2.8 million and 4.8 million gallons of diesel fuel in 2014, 2013 and 2012,
respectively. These hedges represented approximately 10%, 20% and 35% of our total domestic truckload fuel needs in 2014,
2013 and 2012, respectively. We currently have fuel derivate contracts to hedge 6.6 million gallons of diesel fuel, or
approximately 40% of our domestic truckload fuel needs from February 2015 through January 2016. Under these contracts, we
pay the third party a fixed price for diesel fuel and receive variable diesel fuel prices at amounts approximating current diesel
fuel costs, thereby creating the economic equivalent of a fixed-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 as of January 31, 2015 was a liability of $5.7 million.