Dell 2007 Annual Report Download - page 66

Table of Contents
DELL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Changes in the aggregate unrealized net gain (loss) of Dell's cash flow hedges that are recorded as a component of comprehensive income
(loss), net of tax are presented in the table below. Dell expects to reclassify substantially all of the unrealized net loss recorded in
accumulated other comprehensive income (loss) at February 1, 2008 into earnings during the next fiscal year providing an offsetting
economic impact against the underlying transactions.
Fiscal Year Ended
February 1, February 2, February 3,
2008 2007 2006
(in millions)
Aggregate unrealized net gain (loss) at beginning of year $ 13 $ (17) $ (26)
Net (losses) gains reclassified to earnings (392) (260) 225
Change in fair value of cash flow hedges 354 290 (216)
Aggregate unrealized net (loss) gain at end of year $ (25) $ 13 $ (17)
Other Foreign Currency Derivative Instruments
Dell uses forward contracts to hedge monetary assets and liabilities, primarily receivables and payables, denominated in a foreign
currency. The change in the fair value of these instruments represents a natural hedge as their gains and losses offset the changes in the
underlying fair value of the monetary assets and liabilities due to movements in currency exchange rates. These contracts generally expire
in three months or less. These contracts are not designated as hedges under SFAS 133, and therefore, the change in the instrument's fair
value is recognized currently in earnings as a component of investment and other income, net.
The gross notional value of foreign currency derivative financial instruments and the related net asset or liability were as follows:
February 1, 2008 February 2, 2007
Gross Gross
Notional Net Asset (Liability) Notional Net Asset (Liability)
(in millions)
Cash flow hedges $ 7,772 $ (9) $ 7,443 $ 80
Other derivatives (1,338) 8 (1,125) (5)
$ 6,434 $ (1) $ 6,318 $ 75
Commercial Paper
On June 1, 2006, Dell implemented a $1.0 billion commercial paper program with a supporting $1.0 billion senior unsecured revolving
credit facility. This program allows Dell to obtain favorable short-term borrowing rates. Dell pays facility commitment and letter of credit
participation fees at rates based upon Dell's credit rating. Unless extended, this facility expires on June 1, 2011, at which time any
outstanding amounts under the facility will be due and payable. The facility requires compliance with conditions that must be satisfied
prior to any borrowing, as well as ongoing compliance with specified affirmative and negative covenants, including maintenance of a
minimum interest coverage ratio. Amounts outstanding under the facility may be accelerated for typical defaults, including failure to pay
principal or interest, breaches of covenants, non-payment of judgments or debt obligations in excess of $200 million, occurrence of a
change of control, and certain bankruptcy events. Dell believes it will be able to access the capital markets to increase the size of its
existing commercial paper program.
There were no outstanding advances under the commercial paper program as of February 1, 2008. At February 2, 2007, $100 million was
outstanding under the program, and the weighted-average interest rate on those outstanding short-term borrowings was 5.3%. Dell uses
the proceeds of the program and facility for general corporate purposes.
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