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Note 10 — Derivatives
The Company is exposed to financial market risks arising from changes in interest rates and foreign exchange rates. Changes in
interest rates could affect the Company’s monetary assets and liabilities, and foreign exchange rate changes could affect the
Company’s foreign currency denominated monetary assets and liabilities and forecasted transactions. The Company enters into
derivative contracts with the intent of mitigating a portion of these risks.
Interest Rate Swaps: The Company has interest rate swaps with a total notional value of $500 million, that swap a total of $500
million of its 6.125% Senior Notes due December 2014 into floating interest rate debt through December 1, 2014. These swaps are
designated as fair value hedges.
At March 31, 2012, the fair value of these derivatives was an asset of approximately $27 million, of which approximately $11 million
is included in “Other current assets” and approximately $16 million is included in “Other noncurrent assets, net” in the Company’s
Consolidated Balance Sheet. At March 31, 2011, the fair value of these derivatives was an asset of approximately $15 million, of
which approximately $11 million is included in “Other current assets” and approximately $4 million is included in “Other noncurrent
assets, net” in the Company’s Consolidated Balance Sheet.
During fiscal year 2009, the Company entered into interest rate swaps with a total notional value of $250 million to hedge a portion
of its variable interest rate payments on the revolving credit facility. These derivatives were designated as cash flow hedges and
matured in October 2010. The effective portion of these cash flow hedges is recorded as “Accumulated other comprehensive loss”
and is reclassified into “Interest expense, net” in the Company’s Consolidated Statements of Operations in the same period during
which the hedged transaction affected earnings. Any ineffective portion of the cash flow hedges would have been recorded
immediately to “Interest expense, net;” however, no ineffectiveness existed for fiscal years 2011 and 2010.
Foreign Currency Contracts: The Company enters into foreign currency option and forward contracts to manage foreign currency
risks. The Company has not designated its foreign exchange derivatives as hedges. Accordingly, changes in fair value from these
contracts are recorded as “Other expenses, net” in the Company’s Consolidated Statements of Operations. At March 31, 2012, foreign
currency contracts outstanding consisted of purchase and sales contracts with a total notional value of approximately $893 million,
and durations of less than six months. These contracts included $257 million of contracts related to the fiscal year 2013 hedging
program. These contracts were entered into at the end of fiscal year 2012. The net fair value of these contracts at March 31, 2012 was
a net liability of approximately $2 million, of which approximately $2 million is included in “Other current assets” and approximately
$4 million is included in “Accrued expenses and other current liabilities” in the Company’s Consolidated Balance Sheet.
At March 31, 2011, foreign currency contracts outstanding consisted of purchase and sales contracts with a total notional value of
approximately $191 million, and durations of less than three months. The net fair value of these contracts at March 31, 2011 was
approximately $6 million, of which approximately $7 million is included in “Other current assets” and approximately $1 million is
included in “Accrued expenses and other current liabilities” in the Company’s Consolidated Balance Sheet.
A summary of the effect of the interest rate and foreign exchange derivatives in the Company’s Consolidated Statements of
Operations is as follows:
AMOUNT OF NET (GAIN)/LOSS RECOGNIZED IN THE
CONSOLIDATED STATEMENTS OF OPERATIONS
LOCATION OF AMOUNTS RECOGNIZED
(in millions) YEAR ENDED MARCH 31, 2012 YEAR ENDED MARCH 31, 2011 YEAR ENDED MARCH 31, 2010
Interest expense, net — interest rate swaps designated as cash
flow hedges $—$4$6
Interest expense, net — interest rate swaps designated as fair
value hedges $ (12) $ (12) $ (1)
Other expenses (gains), net — foreign currency contracts $ (3) $14$20
The Company is subject to collateral security arrangements with most of its major counterparties. These arrangements require the
Company to hold or post collateral when the derivative fair values exceed contractually established thresholds. The aggregate fair
values of all derivative instruments under all collateralized arrangements were in a net asset position at each of March 31, 2012 and
2011. The Company posted no collateral at March 31, 2012 or 2011. Under these agreements, if the Company’s credit ratings had
been downgraded one rating level, the Company would still not have been required to post collateral.
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