Black & Decker 2015 Annual Report Download - page 88

74
A summary of the fair value of the Company’s derivatives recorded in the Consolidated Balance Sheets at January 2, 2016 and
January 3, 2015 follows:
(Millions of Dollars) Balance Sheet Classification 2015 2014 Balance Sheet Classification 2015 2014
Derivatives designated as
hedging instruments:
Interest Rate Contracts Cash
Flow............................................ LT other assets.............. $ — $ — LT other liabilities........ $ 41.1 $ 34.3
Interest Rate Contracts Fair
Value........................................... Other current assets...... 14.9 13.2 Accrued expenses......... 2.5 1.1
LT other assets.............. 1.4 — LT other liabilities........ 5.2 19.1
Foreign Exchange Contracts
Cash Flow................................... Other current assets...... 21.9 43.3 Accrued expenses......... 1.8 1.7
LT other assets.............. 3.7 — LT other liabilities........ ——
Net Investment Hedge ................ Other current assets...... 30.3 75.4 Accrued expenses......... 4.8 0.1
$ 72.2 $ 131.9 $ 55.4 $ 56.3
Derivatives not designated as
hedging instruments:
Foreign Exchange Contracts....... Other current assets...... $ 7.1 $ 12.3 Accrued expenses......... $ 40.7 $ 92.1
$ 7.1 $ 12.3 $ 40.7 $ 92.1
The counterparties to all of the above mentioned financial instruments are major international financial institutions. The
Company is exposed to credit risk for net exchanges under these agreements, but not for the notional amounts. The credit risk is
limited to the asset amounts noted above. The Company limits its exposure and concentration of risk by contracting with
diverse financial institutions and does not anticipate non-performance by any of its counterparties. Further, as more fully
discussed in Note M, Fair Value Measurements, the Company considers non-performance risk of its counterparties at each
reporting period and adjusts the carrying value of these assets accordingly. The risk of default is considered remote.
In 2015 and 2014, significant cash flows related to derivatives including those that are separately discussed in Cash Flow
Hedges, Fair Value Hedges and Net Investment Hedges below resulted in net cash received of $144.4 million and net cash paid
of $14.6 million, respectively.
CASH FLOW HEDGES — There was a $52.1 million and a $50.9 million after-tax loss as of January 2, 2016 and January 3,
2015, respectively, reported for cash flow hedge effectiveness in Accumulated other comprehensive loss. An after-tax gain of
$12.7 million is expected to be reclassified to earnings as the hedged transactions occur or as amounts are amortized within the
next twelve months. The ultimate amount recognized will vary based on fluctuations of the hedged currencies and interest rates
through the maturity dates.
The tables below detail pre-tax amounts reclassified from Accumulated other comprehensive loss into earnings for active
derivative financial instruments during the periods in which the underlying hedged transactions affected earnings for the twelve
months ended January 2, 2016 and January 3, 2015 (in millions):
Year-to-date 2015 (Loss) Gain Recorded in OCI
Classification of
Gain (Loss)
Reclassified from
OCI to Income
Gain (Loss)
Reclassified from
OCI to Income
(Effective Portion)
Gain (Loss)
Recognized in
Income
(Ineffective Portion*)
Interest Rate Contracts............................... $(6.8)Interest Expense $ — $ —
Foreign Exchange Contracts...................... $ 52.5 Cost of sales $ 57.4 $ —
Year-to-date 2014 (Loss) Gain Recorded in OCI
Classification of
Gain (Loss)
Reclassified from
OCI to Income
Gain (Loss)
Reclassified from
OCI to Income
(Effective Portion)
Gain (Loss)
Recognized in
Income
(Ineffective Portion*)
Interest Rate Contracts............................... $(34.3)Interest Expense $ — $ —
Foreign Exchange Contracts...................... $ 40.6 Cost of sales $ 0.2 $ —
* Includes ineffective portion and amount excluded from effectiveness testing on derivatives.