Target 2009 Annual Report Download - page 62

Additionally, during 2008, we de-designated certain ‘‘pay floating’’ interest rate swaps, and upon
de-designation, these swaps no longer qualified for hedge accounting treatment. As a result of the
de-designation, the unrealized gains on these swaps determined at the date of de-designation will be
amortized into earnings over the remaining lives of the previously hedged items.
In 2009, 2008, and 2007, total net gains amortized into net interest expense for terminated and
de-designated swaps were $60 million, $55 million, and $6 million, respectively. The amount remaining on
unamortized hedged debt valuation gains from terminated and de-designated interest rate swaps that will be
amortized into earnings over the remaining lives totaled $197 million, $263 million, and $14 million, at the end
of 2009, 2008, and 2007, respectively.
Simultaneous to the de-designations during 2008, we entered into ‘‘pay fixed’’ swaps to economically
hedge the risks associated with the de-designated ‘‘pay floating’’ swaps. These swaps are not designated as
hedging instruments and along with the de-designated ‘‘pay floating’’ swaps are measured at fair value on a
quarterly basis. Changes in fair value measurements are a component of net interest expense on the
Consolidated Statements of Operations.
At January 30, 2010, a characteristic summary of interest rate swaps outstanding was:
Outstanding Interest Rate Swap Characteristic Summary Pay Floating Pay Fixed
Weighted average rate:
Pay one-month LIBOR 2.6% fixed
Receive 5.0% fixed one-month LIBOR
Weighted average maturity 4.4 years 4.4 years
Notional $1,250 $1,250
Derivative Contracts – Types, Balance Sheet Classifications and Fair Values
(millions)
Asset Liability
Fair Value At Fair Value At
Jan. 30, Jan. 31, Jan. 30, Jan. 31,
Type Classification 2010 2009 Classification 2010 2009
Not designated as hedging
instruments:
Interest rate swaps Other noncurrent Other noncurrent
assets $131 $163 liabilities $23 $30
Total $131 $163 $23 $30
During 2007, we entered into a series of interest rate lock agreements that effectively fixed the interest
payments on our anticipated issuance of debt that would be affected by interest-rate fluctuations on the U.S.
Treasury benchmark between the beginning date of the interest rate locks and the date of the issuance of the
debt. Upon our issuance of fixed-rate debt in fiscal 2007, we terminated these rate lock agreements with a
combined notional amount of $2.5 billion for cash payment of $79 million, which is classified within other
operating cash flows on the Consolidated Statements of Cash Flows. The loss of $48 million, net of taxes of
$31 million, has been recorded in accumulated other comprehensive loss and is being recognized as an
adjustment to net interest expense over the same period in which the related interest costs on the debt are
recognized in earnings. During 2007, the amount reclassified into earnings was not material. During 2008 and
2009, the amount reclassified into earnings as an increase to interest expense from accumulated other
comprehensive income was $3 million ($5 million pre tax) and $3 million ($5 million pre tax). The amount
expected to be reclassified into earnings from accumulated other comprehensive income for 2010 is
$3 million ($5 million pre tax).
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PART II