Dunkin' Donuts 2015 Annual Report Download - page 85

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consisting primarily of the write-off of the remaining original issuance discount and debt issuance costs related to the term
loans.
Maturities of long-term debt
Assuming repayment by the anticipated repayment dates and based on the leverage ratio as of December 26, 2015, the
aggregate contractual principal payments of the Class A-2 Notes for 2016 through 2020 are as follows (in thousands):
Class A-2-I
Notes
Class A-2-II
Notes Total
2016 $ 7,500 17,500 25,000
2017 7,500 17,500 25,000
2018 7,500 17,500 25,000
2019 721,875 17,500 739,375
2020 — 17,500 17,500
(9) Derivative instruments and hedging transactions
The Company’s hedging instruments have historically consisted solely of interest rate swaps to hedge the Company's variable-
rate term loans. In September 2012, the Company entered into variable-to-fixed interest rate swap agreements to hedge the risk
of increases in cash flows (interest payments) attributable to increases in three-month LIBOR above the designated benchmark
interest rate being hedged, through November 2017. As a result of the February 2014 amendment to the senior credit facility
(see note 8), the Company amended the interest rate swap agreements to align the embedded floors with the amended term
loans. As of the date of the amendment, a pre-tax gain of $5.8 million was recorded in accumulated other comprehensive loss,
which is amortized on a straight-line basis to interest expense in the consolidated statements of operations over the original
term of the swaps.
Effective December 23, 2014, the Company terminated all interest rate swap agreements with its counterparties in anticipation
of the securitization transaction and related repayment of the outstanding term loans (see note 8). The total fair value of the
interest rate swaps at the termination date was $6.3 million, excluding accrued interest owed to the counterparties of $1.0
million. The Company received cash proceeds, net of accrued interest, of $3.6 million in fiscal year 2014 and the remaining
$1.7 million in the first quarter of fiscal year 2015. Upon termination, cash flow hedge accounting was discontinued and the
cumulative pre-tax gain of $1.8 million was recorded in accumulated other comprehensive loss, which is being amortized on a
straight-line basis to interest expense in the consolidated statements of operations through November 23, 2017, the original
maturity date of the swaps.
As of December 27, 2014, a pre-tax gain of $6.2 million was recorded in accumulated other comprehensive loss, including the
gain related to both the February 2014 amendment and December 2014 termination. During fiscal years 2015 and 2014,
amortization of $2.1 million and $1.4 million, respectively was recorded as a reduction of interest expense in the consolidated
statements of operations. During the next twelve months, the Company estimates that $2.2 million will be reclassified from
accumulated other comprehensive loss as a reduction of interest expense.
The table below summarizes the effects of derivative instruments in the consolidated statements of operations and
comprehensive income for fiscal year 2015:
Derivatives designated as
cash flow hedging
instruments
Amount of gain
(loss) recognized in
other comprehensive
income (loss)
Amount of net gain
(loss) reclassified
into earnings
Consolidated statement of operations
classification
Total effect on other
comprehensive
income (loss)
Interest rate swaps $ — 2,140 Interest expense (2,140)
Income tax effect — (867) Provision for income taxes 867
Net of income taxes $ — 1,273 (1,273)