Supercuts 2010 Annual Report Download - page 122
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Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
prior to the maturity dates in conjunction with the repayments of debt and were settled for a loss of less than $0.1 million during the twelve
months ended June 30, 2010 and recorded within interest expense in the Consolidated Statement of Operations.
The Company uses forward foreign currency contracts to manage foreign currency rate fluctuations associated with certain forecasted
intercompany transactions. The Company's primary forward foreign currency contracts hedge approximately $0.6 million of monthly payments
in Canadian dollars for intercompany transactions. The Company's forward foreign currency contracts hedge transactions through fiscal year
2011.
These cash flow hedges were designed and are effective as cash flow hedges. They were recorded at fair value within other noncurrent
liabilities or other current assets in the Consolidated Balance Sheet, with corresponding offsets primarily recorded in other comprehensive
income (loss), net of tax.
Fair Value Hedges
In the past, the Company had two interest rate swaps designated as fair value hedges. The Company paid variable rates of interest and
received fixed rates of interest under these contracts. The contracts and related debt matured during the twelve months ended June 30, 2009.
Freestanding Derivative Forward Contracts
The Company uses freestanding derivative forward contracts to offset the Company's exposure to the change in fair value of certain
foreign currency denominated investments and intercompany assets and liabilities. These derivatives are not designated as hedges and
therefore, changes in the fair value of these forward contracts are recognized currently in earnings, thereby offsetting the current earnings effect
of the related foreign currency denominated assets and liabilities.
In November 2009, the Company terminated its freestanding derivative contract on its remaining payments on the MY Style Note and
recorded a gain of $0.7 million. The contract was settled in cash, discounted to present value. Gains and losses were the life of the contract and
are recognized currently in earnings in conjunction with marking the contract to fair value. A net loss of $0.2 million was recognized during
fiscal year 2010. A net gain of $0.9 million was recognized during fiscal year 2009.
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