Sallie Mae 2006 Annual Report Download - page 168

10. Derivative Financial Instruments (Continued)
2006 2005 2004 2006 2005 2004 2006 2005 2004 2006 2005 2004
Cash Flow Fair Value Trading Total
Years Ended December 31,
(Dollars in millions)
Changes to accumulated other
comprehensive income, net of tax
Hedge ineffectiveness reclassified to
earnings . ..................... $— $— $ 9 $— $— $— $ — $ — $ — $ — $ — $ 9
Change in fair value of cash flow hedges . . (7) (27) 22 — — — — — — (7) (27) 22
Amortization of effective hedges
(1)
...... 12 25 26 — — — — — — 12 25 26
Discontinued hedges ................ — 15 1 — — — — — — — 15 1
Change in accumulated other comprehensive
income, net .................... $ 5 $13 $58 $— $— $— $ — $ — $ — $ 5 $ 13 $ 58
Earnings Summary
Amortization of closed futures contracts’
gains/losses in interest expense
(2)
...... $(19) $(39) $(40) $— $— $ — $ — $ — $ — $ (19) $ (39) $ (40)
Recognition of hedge losses related to GSE
Wind-Down ..................... — — (10) — — — — — — — — (10)
Gains (losses) on derivative and hedging
activities — Realized
(3)
............. — — (4) — — — (109) (387) (709) (109) (387) (713)
Gains (losses) on derivative and hedging
activities — Unrealized . ........... — — — 13
(4)
(3)
(4)
(15)
(4)
(243) 637 1,577 (230) 634 1,562
Total earnings impact ............... $(19) $(39) $(54) $13 $ (3) $(15) $(352) $ 250 $ 868 $(358) $ 208 $ 799
(1)
The Company expects to amortize $2 million of after-tax net losses from accumulated other comprehensive income to earnings during
the next 12 months related to closed futures contracts that were hedging the forecasted issuance of debt instruments that are outstand-
ing as of December 31, 2006.
(2)
For futures contracts that qualify as SFAS No. 133 hedges where the hedged transaction occurs.
(3)
Includes net settlement income/expense related to trading derivatives and realized gains and losses related to derivative dispositions.
(4)
The change in fair value of cash flow and fair value hedges represents amounts related to ineffectiveness.
11. Acquisitions
Upromise, Inc.
On August 22, 2006, the Company acquired 100 percent of the outstanding shares of Upromise for an
initial purchase price of $308 million including cash consideration and certain acquisition costs. The
acquisition was accounted for under the purchase method of accounting as defined in SFAS No. 141, and the
purchase price has been preliminarily allocated to the fair values of the acquired tangible assets, liabilities and
identifiable intangible assets as of the acquisition date as determined by an independent appraiser. This initial
purchase price allocation resulted in excess purchase price over the fair value of net assets acquired, or
goodwill, of approximately $151 million. Upromise markets and administers saving-for-college plans and also
provides administration services for college savings plans. In conjunction with this transaction, the Company
acquired all of Upromise’s operations, technology, and membership base.
Goodwill resulting from this transaction reflects the benefits the Company expects to derive from
Upromise’s experienced management team and direct marketing channels for student loans and loan consoli-
dations. Goodwill will be reviewed for impairment at least annually in accordance with SFAS No. 142, as
discussed further in Note 6, “Goodwill and Acquired Intangible Assets.”
F-49
SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts, unless otherwise stated)