Office Depot 2009 Annual Report Download - page 81

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We also are exposed to the risk of changing fuel prices from inbound and outbound transportation arrangements.
Some transportation contracts may provide for specific identification of the fuel cost component such that the
risk of fuel price changes may be offset by third-party contracts thereby allowing us to designate and qualify
these offsetting contracts as cash flow hedges for accounting purposes. Deferred gains or losses associated with
these arrangements would be recorded in OCI until such time as the hedged item impacts earnings. The structure
of certain other transportation arrangements, however, precludes applying hedge accounting. In those
circumstances, we may enter into derivative transactions to offset the risk of commodity price changes, and the
value of the derivative contract is marked to market at each reporting period with changes recognized in earnings.
As of December 26, 2009, no fuel contracts remained open with the company.
Interest rate changes on our obligations may result from external market factors, as well as changes in our credit
rating. We manage our exposure to interest rate risks at the corporate level. Interest rate-sensitive assets and
liabilities are monitored and assessed for market risk. Currently, no interest-rate related derivative arrangements
are in place. At December 26, 2009 and December 27, 2008, OCI included the deferred gain from a hedge
contract terminated in a prior period. This deferral is being amortized to interest expense through 2013.
In certain markets, we may contract with third parties for our future energy needs. Such arrangements are not
considered derivatives because they are within the ordinary course of business and are for physical delivery.
Accordingly, these arrangements are not included in the tables below.
Financial instruments authorized under the company’s established risk management policy include swaps,
options, caps, forwards and futures. Use of derivative financial instruments for trading or speculative purposes is
expressly prohibited.
The following tables provide information on our hedging and derivative positions and activity.
Fair Value of Derivative Instruments
As of December 26, 2009
(Dollars in thousands) Balance Sheet Location Fair Value
Derivatives designated as hedging instruments:
Foreign exchange contracts ............................. Other current liabilities $ 266
Total derivatives ....................................... $ 266
Derivatives not designated as
hedging instruments
Location of gain/(loss)
recognized in earnings
Amount of
gain/(loss)
recognized
in earnings
(Dollars in thousands) 2009
Commodity contracts — fuel ............ Cost of goods sold and occupancy costs &
Store and warehouse operating and selling
expenses* $ 111
Foreign exchange contracts .............. Miscellaneous income (expense), net (7,707)
Total .............................. $(7,596)
79