Staples 2013 Annual Report Download - page 153

STAPLES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
C-22
The tables below present pre-tax gains and losses recognized in Other Comprehensive Income ("OCI") during 2013,
2012 and 2011 related to derivative financial instruments designated as cash flow hedges or net investment hedges, as well as the
amount of gains and losses reclassified into earnings during those periods (in thousands). There were no net investment or cash
flow hedges outstanding during 2013.
Gain (loss) recognized in OCI (Loss) gain reclassified into earnings Location of gain
(loss) recognized in
earningsDerivative Type
Hedge
Designation 2013 2012 2011 2013 2012 2011
Interest rate swaps Cash flow $ — $ 705 $ — $ — $ — $ (300) Interest expense
Foreign currency
swaps Cash flow — — — — — 948 Other expense
Foreign currency
swaps Net investment — (505) (2,904) — — — —
Foreign currency
forward Net investment — 2,795 — — — — —
Interest Rate Swaps:
During 2012, Staples entered into a series of interest rate swap agreements for an aggregate notional amount of $325
million. These swaps were designated as cash flow hedges of interest rate risk, and were used to hedge the Company's exposure
to the variability in future cash flows associated with the forecasted issuances of the January 2018 Notes and the January 2023
Notes (see Note F - Debt and Credit Agreements). Upon issuance of these notes in January 2013, the Company terminated these
swaps, realizing a gain of $1.3 million. Of this amount, $0.7 million is being amortized to interest expense over the terms of the
January 2018 Notes and January 2023 Notes and $0.6 million was recognized as a gain in Other income (expense), net in the
consolidated statement of income in 2012 due to ineffectiveness associated with these cash flow hedges.
In March 2010, Staples entered into interest rate swaps for an aggregate notional amount of $750 million. These swaps
were designated as a fair value hedge and designed to convert half of the aggregate principal amount of the January 2014 Notes
into a variable rate obligation. In September 2011, the Company terminated the $750 million interest rate swaps, realizing a gain
of $30.3 million which was recorded as an adjustment to the carrying value of the debt and was amortized to interest expense over
the remaining term of the hedged portion of the January 2014 Notes.
In connection with Staples’ acquisition of Corporate Express, the Company assumed interest rate swaps designed to
convert Corporate Express’ variable rate credit facilities into fixed rate obligations. On May 5, 2011, the Company repaid the
outstanding balance on these variable rate credit facilities and terminated the related interest rate swap agreements. As a result of
the termination of these interest rate swap agreements, the Company recognized a loss of $0.3 million in Other income (expense),
net in the consolidated statement of income in 2011.
Foreign Currency Swaps and Forwards:
In August 2007, the Company entered into a series of foreign currency swaps with an aggregate notional amount of $300
million that had been designated as a foreign currency hedge on Staples’ net investment in Canadian dollar denominated subsidiaries.
In 2012, the Company terminated these swaps, recognizing a loss of $14.9 million which was recorded as a foreign currency
translation loss within other comprehensive income. No amounts were included in the consolidated statements of income related
to ineffectiveness associated with this net investment hedge.
In May 2011, the Company entered into a foreign currency swap designed to convert a 75 million intercompany loan
denominated in Australian dollars into a fixed Euro amount. The intercompany loan had a fixed interest rate of 6.65%. The
agreement was accounted for as a cash flow hedge. No amounts were included in the consolidated statement of income related
to ineffectiveness associated with this cash flow hedge. Upon maturity of the agreement in August 2011, Staples paid 76.4 million
Australian dollars and recognized a gain of $0.9 million.
In August 2011, the Company entered into a foreign currency swap designed to convert a 75 million intercompany loan
denominated in Australian dollars into a fixed Euro amount. The intercompany loan had a fixed interest rate of 6.65%. The
agreement was accounted for as a fair value hedge. No amounts were included in the consolidated statement of income related
to ineffectiveness associated with this cash flow hedge. Upon maturity of the agreement in October 2011, Staples paid AUD 76.4
million and recognized a loss of $4.1 million.