Black & Decker 2010 Annual Report Download - page 101

in place as an economic hedge only and account for them as undesignated. Net investment hedges were re-
designated.
A summary of the fair value of the Company’s derivatives recorded in the Consolidated Balance Sheets are as
follows (in millions):
Balance Sheet
Classification 1/1/11 1/2/10
Balance Sheet
Classification 1/1/11 1/2/10
Derivatives designated as hedging
instruments:
Interest Rate Contracts Cash Flow . . Other current assets $— $ — Accrued expenses $— $ 2.2
LT other assets —7.3 LT other liabilities 17.3 —
Interest Rate Contracts Fair Value . . Other current assets 5.5 4.5 Accrued expenses ——
LT other assets 10.7 0.1 LT other liabilities 11.9 2.7
Foreign Exchange Contracts Cash
Flow . . . . . . . . . . . . . . . . . . . . Other current assets 0.7 0.1 Accrued expenses 5.6 31.2
LT other assets —— LT other liabilities ——
Net Investment Hedge . . . . . . . . . . Other current assets 11.7 — Accrued expenses 17.7 29.1
$28.6 $12.0 $52.5 $65.2
Derivatives not designated as
hedging instruments:
Foreign Exchange Contracts . . . . . . Other current assets $26.4 $18.5 Accrued expenses $59.1 $19.5
LT other assets —2.8 LT other liabilities 4.1 —
$26.4 $21.3 $63.2 $19.5
The counterparties to all of the above mentioned financial instruments are major international financial
institutions. The Company is exposed to credit risk for net exchanges under these agreements, but not for the
notional amounts. The credit risk is limited to the asset amounts noted above. The Company limits its exposure
and concentration of risk by contracting with diverse financial institutions and does not anticipate non-
performance by any of its counterparties. Further, as more fully discussed in Note M, Fair Value Measure-
ments, the Company considers non-performance risk of its counterparties at each reporting period and adjusts
the carrying value of these assets accordingly. The risk of default is considered remote.
In 2010, significant cash flows related to derivatives including those that are separately discussed in Cash Flow
Hedges, Net Investment Hedges and Undesignated Hedges below resulted in net cash paid of $64.0 million.
The Company also received $30.1 million in March 2010 from the termination of $325.0 million notional of
fixed to variable interest rate swaps that became undesignated at the merger date and as a result the cash
inflow was reported within investing activities in the consolidated statement of cash flows.
In 2009, significant cash flows related to derivatives included cash payments of $15.5 million on a Great
Britain pound currency swap maturity and a Canadian dollar swap termination; both of these swaps were
classified as undesignated.
CASH FLOW HEDGES — There was a $50.2 million after-tax loss as of January 1, 2011 and a $4.8 million
after-tax gain as of January 2, 2010 and January 3, 2009 reported for cash flow hedge effectiveness in
Accumulated other comprehensive loss. An after-tax loss of $13.3 million is expected to be reclassified to
earnings as the hedged transactions occur or as amounts are amortized within the next twelve months. The
ultimate amount recognized will vary based on fluctuations of the hedged currencies and interest rates through
the maturity dates.
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