Black & Decker 2010 Annual Report Download - page 102

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The tables below detail pre-tax amounts reclassified from Accumulated other comprehensive loss into earnings
for active derivative financial instruments during the periods in which the underlying hedged transactions
affected earnings for the twelve months ended January 1, 2011 and January 2, 2010 (in millions):
Year-to-date 2010
(In millions)
Gain (Loss)
Recorded in OCI
Classification of
Gain (Loss)
Reclassified from
OCI to Income
Gain (Loss)
Reclassified from
OCI to Income
(Effective Portion)
Gain (Loss)
Recognized in
Income
(Ineffective Portion*)
Interest Rate Contracts ........ $(24.8) Interest expense $(1.6) $—
Foreign Exchange Contracts .... $(16.0) Cost of sales $(2.3) —
Foreign Exchange Contracts .... $ 6.8 Other-net $ 8.5 —
Year-to-date 2009
(In millions)
Gain (Loss)
Recorded in OCI
Classification of
Gain (Loss)
Reclassified from
OCI to Income
Gain (Loss)
Reclassified from
OCI to Income
(Effective Portion)
Gain (Loss)
Recognized in
Income
(Ineffective Portion*)
Interest Rate Contracts ........ $7.2 Interest expense $(4.6) $—
Foreign Exchange Contracts .... $(0.5) Cost of sales $ 4.7 —
Foreign Exchange Contracts .... $(7.7) Other-net $(3.5) —
* Includes ineffective portion and amount excluded from effectiveness testing on derivatives.
For 2010, the hedged items’ impact to the consolidated statement of operations was a gain of $2.3 million in
Cost of Sales and a loss of $8.5 million, in Other, net. For 2009, the hedged items’ impact to the consolidated
statement of operations was a loss of $4.7 million in Cost of Sales and a gain of $4.5 million, in Other, net.
There was no impact related to the interest rate contracts’ hedged items for any period presented. The impact
of de-designated hedges was immaterial for all periods presented.
During 2010, 2009 and 2008, an after-tax loss of $2.9 million, an after-tax loss of $1.1 million and an after-
tax gain of $42.9 million, respectively, was reclassified from Accumulated other comprehensive loss into
earnings (inclusive of the gain/loss amortization on terminated derivative financial instruments) during the
periods in which the underlying hedged transactions affected earnings.
Interest Rate Contract: The Company enters into interest rate swap agreements in order to obtain the lowest
cost source of funds within a targeted range of variable to fixed-rate debt proportions. At January 1, 2011, the
Company had $400 million of forward starting swaps outstanding fixing the interest rate on the expected
refinancing of debt in 2012 as discussed below. At January 2, 2010, the Company had outstanding contracts
fixing the interest rate on its $320.0 million floating rate convertible notes and $400 million of forward
starting swaps outstanding fixing the interest rate on the expected refinancing of debt in 2012.
In May 2010, the Company executed forward starting interest rate swaps with an aggregate notional amount of
$400 million fixing interest at 3.95%. The objective of the hedge was to offset the expected variability on
future payments associated with the interest rate on debt instruments. In connection with the August 31, 2010
issuance of the $400 million of senior unsecured 2040 Term Bonds, as discussed in Note H, Long Term Debt
and Financing Arrangements, these forward-starting interest rate swaps were terminated. The terminations
resulted in cash payments of $48.4 million. This loss ($30.0 million on an after-tax basis) was recorded in
Accumulated other comprehensive loss and will be amortized to earnings over the first ten years in which the
interest expense related to the 2040 Term Bonds is recognized. The cash flows stemming from the termination
of such interest rate swaps designated as cash flow hedges are presented within financing activities in the
consolidated statement of cash flows.
In December 2009, the Company executed forward starting interest rate swaps with an aggregate notional
amount of $400 million fixing 10 years of interest payments at 4.78% beginning in November 2012. The
objective of the hedge is to offset the expected variability on future payments associated with the interest rate
on debt instruments expected to be issued in November 2012. Gains or losses on the swaps are recorded in
Accumulated other comprehensive loss and will be subsequently reclassified into earnings as the future interest
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