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Table of Contents
79
Other
The fair value of long-term debt approximated $1,677 million and $1,690 million at January 31, 2015, and February 1, 2014,
respectively, based primarily on the quoted market prices, compared to carrying values of $1,621 million and $1,657 million,
respectively. If our long-term debt was recorded at fair value, it would be classified as Level 2 in the fair value hierarchy.
At January 31, 2015, the future maturities of long-term debt, including capitalized leases, consisted of the following ($ in
millions):
Fiscal Year
2016 $ 41
2017 375
2018 18
2019 511
2020 6
Thereafter 670
Total long-term debt $ 1,621
6. Derivative Instruments
We manage our economic and transaction exposure to certain risks through the use of foreign currency derivative instruments
and interest rate swaps. Our objective in holding derivatives is to reduce the volatility of net earnings, cash flows and net asset
value associated with changes in foreign currency exchange rates and interest rates. We do not hold derivative instruments for
trading or speculative purposes. We have no derivatives that have credit risk-related contingent features, and we mitigate our
credit risk by engaging with financial institutions with investment grade credit ratings as our counterparties.
We record all derivative instruments on our Consolidated Balance Sheet at fair value and evaluate hedge effectiveness
prospectively and retrospectively when electing to apply hedge accounting. We formally document all hedging relations at the
inceptions for derivative hedges and the underlying hedged items, as well as the risk management objectives and strategies for
undertaking the hedge transaction. In addition, we have derivatives which are not designated as hedging instruments.
Net Investment Hedges
In fiscal 2015, we entered into foreign exchange forward contracts to hedge against the effect of Canadian dollar exchange rate
fluctuations on a portion of our net investment in our Canadian operations. The contracts have terms up to 12 months. For a net
investment hedge, we recognize changes in the fair value of the derivative as a component of foreign currency translation
within other comprehensive income to offset a portion of the change in translated value of the net investment being hedged,
until the investment is sold or liquidated. We limit recognition in net earnings of amounts previously recorded in other
comprehensive income to circumstances such as complete or substantially complete liquidation of the net investment in the
hedged foreign operation. We report the ineffective portion of the gain or loss, if any, in net earnings. We had no net investment
hedge activity during fiscal 2014.
Interest Rate Swaps
In the fourth quarter of fiscal 2015, we entered into receive fixed-rate, pay variable-rate interest rate swaps to mitigate the effect
of interest rate fluctuations on a portion of our 2018 Notes. Our interest rate swap contracts are considered perfect hedges
because the critical terms and notional amounts match those of our fixed-rate debt being hedged and are therefore accounted as
a fair value hedge using the shortcut method. Under the shortcut method, we recognize the change in the fair value of the
derivatives with an offsetting change to the carrying value of the debt. Accordingly, there is no impact on our Consolidated
Statements of Earnings from the fair value of the derivatives. We had no interest rate swap activity in fiscal 2014.
Derivatives Not Designated as Hedging Instruments
We use foreign currency forward contracts to manage the impact of fluctuations in foreign currency exchange rates relative to
recognized receivable and payable balances denominated in non-functional currencies and on certain forecast inventory
purchases denominated in non-functional currencies. The contracts generally have terms of up to 12 months. These derivative