Harman Kardon 2009 Annual Report Download - page 90

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Harman International Industries, Incorporated and Subsidiaries
(Dollars in thousands, except per-share data and unless otherwise indicated)
At June 30, 2009, we had outstanding foreign currency forward exchange contracts which are summarized
below:
Gross Notional
Value
Fair Value
Asset/
(Liability)(1)
Currency Hedged (Buy/Sell):
US Dollar/Euro ...................................... $176,872 $(13,039)
Danish Krone/Euro ................................... 73,136 (4)
Canadian Dollar/US Dollar ............................ 22,972 182
Swiss Franc/US Dollar ................................ 13,814 (52)
Japanese Yen/Euro ................................... 6,225 (58)
Euro/British Pound ................................... 5,614 6
Swedish Krona/Euro .................................. 5,452 65
Swiss Franc/Euro .................................... 4,835 (66)
Other .............................................. 6,891 (244)
Total .............................................. $315,811 $(13,210)
(1) Represents the net receivable/(payable) included in the Consolidated Balance Sheet.
Cash Flow Hedges
We designate a portion of our foreign currency derivative contracts as cash flow hedges of foreign currency
denominated purchases. These contracts are recorded at fair value in the accompanying Consolidated Balance
Sheets. The changes in fair value for these contracts on a spot to spot basis are reported in accumulated other
comprehensive income and are reclassified to either cost of sales or SG&A expenses, in our Consolidated
Statements of Operations, in the period or periods during which the underlying transaction occurs. If it becomes
apparent that an underlying forecasted transaction will not occur, the amount recorded in accumulated other
comprehensive income related to the hedge is reclassified to other expenses, in our Consolidated Statements of
Operations, in the then-current period. Amounts relating to such reclassifications were immaterial for the years
ended June 30, 2009, 2008 and 2007.
Changes in the fair value of the derivatives are highly effective in offsetting changes in the cash flows of the
hedged items because the amounts and the maturities of the derivatives approximate those of the forecasted
exposures. Any ineffective portion of the derivative is recognized in the current period in our Consolidated
Statements of Operations, on the same line item in which the foreign currency gain or loss on the underlying
hedged transaction was recorded. We recognized no ineffectiveness for the years ending June 30, 2009, 2008 and
2007 and all components of each derivative’s gain or loss, with the exception of forward points (see below), were
included in the assessment of hedge ineffectiveness. At June 30, 2009, the net liability fair value of these
contracts was $14.6 million. The amount associated with these hedges that is expected to be reclassified from
accumulated other comprehensive income to earnings within the next 12 months is a loss of $12.1 million. This
amount also represents the fair market value of foreign currency forward contracts at June 30, 2009.
We elected to exclude forward points from the effectiveness assessment. At the end of the period we
calculate the excluded amount, which is the fair value relating to the change in forward points that is recorded to
current earnings as miscellaneous, net. For the year ended June 30, 2009, we recognized $2.4 million in net gains
related to the change in forward points.
69