Tech Data 2013 Annual Report Download - page 39

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Table of Contents
to finance working capital needs. To the extent that there are changes in interest rates, the fair value of the Company's fixed rate debt may fluctuate.
In order to provide an assessment of the Company’s foreign currency exchange rate and interest rate risk, the Company performed a sensitivity
analysis using a value-at-risk (“VaR”) model. The VaR model consisted of using a Monte Carlo simulation to generate 1,000 random market price
paths. The VaR model determines the potential impact of the fluctuation in foreign exchange rates and interest rates assuming a one-day holding
period, normal market conditions and a 95% confidence level. The VaR is the maximum expected loss in fair value for a given confidence interval
to the Company’
s foreign exchange portfolio due to adverse movements in the rates. The model is not intended to represent actual losses but is used
as a risk estimation and management tool. Firm commitments, assets and liabilities denominated in foreign currencies were excluded from the
model.
The following table represents the estimated maximum potential one-day loss in fair value at a 95% confidence level, calculated using the VaR
model at January 31, 2013 and 2012. We believe that the hypothetical loss in fair value of our foreign exchange derivatives would be offset by the
gains in the value of the underlying transactions being hedged.
Actual future gains and losses associated with the Company’s derivative positions may differ materially from the analyses performed as of
January 31, 2013, due to the inherent limitations associated with predicting the changes in the timing and amount of interest rates, foreign currency
exchanges rates, and the Company’s actual exposures and positions.
36
VaR
as of January 31,
2013
2012
(In thousands)
Foreign currency exchange rate sensitive financial instruments
$
(2,205
)
$
(2,322
)
Interest rate sensitive financial instruments
(1)
(661
)
0
Combined portfolio
$
(2,866
)
$
(2,322
)
(1)
As of January 31, 2013, approximately 68% of our outstanding debt had fixed interest rates and as of January 31, 2012, none of our outstanding debt had fixed interest rates.