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These excerpts taken from the AN 10-K filed Feb 17, 2009. Derivative
Financial Instruments
We recognize all derivative instruments on the balance sheet at
fair value. The related gains or losses on these transactions
are deferred in stockholders’ equity as a component of
Accumulated Other Comprehensive Income (Loss). These deferred
gains and losses are recognized in income or expense in the
period in which the related items being hedged are recognized in
expense. However, to the extent that the change in value of a
derivative contract does not perfectly offset the change in the
value of the items being hedged, that ineffective portion is
immediately recognized in income. We recognize gains or losses
when the underlying transaction settles.
During 2006, we had $800.0 million of interest rate hedge
instruments (cash flow hedges) mature, consisting of
$200.0 million in swaps, which effectively locked in a
LIBOR-based rate of 3.0%, and $600.0 million in collars
that capped floating rates to a maximum LIBOR-based rate no
greater than 2.4%. We held no derivative contracts as of
December 31, 2008 and 2007.
Derivative Financial Instruments We recognize all derivative instruments on the balance sheet at fair value. The related gains or losses on these transactions are deferred in stockholders’ equity as a component of Accumulated Other Comprehensive Income (Loss). These deferred gains and losses are recognized in income or expense in the period in which the related items being hedged are recognized in expense. However, to the extent that the change in value of a derivative contract does not perfectly offset the change in the value of the items being hedged, that ineffective portion is immediately recognized in income. We recognize gains or losses when the underlying transaction settles. During 2006, we had $800.0 million of interest rate hedge instruments (cash flow hedges) mature, consisting of $200.0 million in swaps, which effectively locked in a LIBOR-based rate of 3.0%, and $600.0 million in collars that capped floating rates to a maximum LIBOR-based rate no greater than 2.4%. We held no derivative contracts as of December 31, 2008 and 2007. These excerpts taken from the AN 10-K filed Feb 28, 2008. Derivative
Financial Instruments
We recognize all derivative instruments on the balance sheet at
fair value. The related gains or losses on these transactions
are deferred in stockholders’ equity as a component of
Accumulated Other Comprehensive Income (Loss). These deferred
gains and losses are recognized in income or expense in the
period in which the related items being hedged are recognized in
expense. However, to the extent that the change in value of a
derivative contract does not perfectly offset the change in the
value of the items being hedged, that ineffective portion is
immediately recognized in income. We recognize gains or losses
when the underlying transaction settles.
During 2006, we had $800.0 million of interest rate hedge
instruments (cash flow hedges) mature, consisting of
$200.0 million in swaps, which effectively locked in a
LIBOR-based rate of 3.0%, and $600.0 million in collars
that capped floating rates to a maximum LIBOR-based rate no
greater than 2.4%. We held no derivative contracts as of
December 31, 2007 and 2006.
At December 31, 2005, net unrealized losses, net of income
taxes, related to hedges included in Accumulated Other
Comprehensive Income (Loss) were $2.1 million. The income
statement impact from interest rate hedges was additional income
of $1.8 million in 2006 and $0.2 million in 2005. At
December 31, 2005, all of our derivative contracts were
determined to be highly effective, and no ineffective portion
was recognized in income.
Derivative Financial Instruments We recognize all derivative instruments on the balance sheet at fair value. The related gains or losses on these transactions are deferred in stockholders’ equity as a component of Accumulated Other Comprehensive Income (Loss). These deferred gains and losses are recognized in income or expense in the period in which the related items being hedged are recognized in expense. However, to the extent that the change in value of a derivative contract does not perfectly offset the change in the value of the items being hedged, that ineffective portion is immediately recognized in income. We recognize gains or losses when the underlying transaction settles. During 2006, we had $800.0 million of interest rate hedge instruments (cash flow hedges) mature, consisting of $200.0 million in swaps, which effectively locked in a LIBOR-based rate of 3.0%, and $600.0 million in collars that capped floating rates to a maximum LIBOR-based rate no greater than 2.4%. We held no derivative contracts as of December 31, 2007 and 2006. At December 31, 2005, net unrealized losses, net of income taxes, related to hedges included in Accumulated Other Comprehensive Income (Loss) were $2.1 million. The income statement impact from interest rate hedges was additional income of $1.8 million in 2006 and $0.2 million in 2005. At December 31, 2005, all of our derivative contracts were determined to be highly effective, and no ineffective portion was recognized in income. This excerpt taken from the AN 10-K filed Feb 28, 2007. Derivative
Financial Instruments
The Company recognizes all derivative instruments on the balance
sheet at fair value. The related gains or losses on these
transactions are deferred in stockholders’ equity as a
component of Accumulated Other Comprehensive Income (Loss).
These deferred gains and losses are recognized in income or
expense in the period in which the related items being hedged
are recognized in expense. However, to the extent that the
change in value of a derivative contract does not perfectly
offset the change in the value of the items being hedged, that
ineffective portion is immediately recognized in income. The
Company recognizes gains or losses when the underlying
transaction settles.
During 2006, the Company had $800.0 million of interest
rate hedge instruments (cash flow hedges) mature, consisting of
$200.0 million in swaps, which effectively locked in a
LIBOR-based rate of 3.0%, and $600 million in collars that
capped floating rates to a maximum LIBOR-based rate no greater
than 2.4%. The Company held no derivative contracts as of
December 31, 2006.
At December 31, 2005 and 2004, net unrealized losses, net
of income taxes, related to hedges included in Accumulated Other
Comprehensive Income (Loss) were $2.1 million and
$(1.5) million, respectively. For the years ended
December 31, 2006, 2005 and 2004, the income statement
impact from interest rate hedges was an additional income
(expense) of $1.8 million, $.2 million and
$(2.9) million, respectively. At December 31, 2005 and
2004, all of the Company’s derivative contracts were
determined to be highly effective, and no ineffective portion
was recognized in income.
Table of Contents
AUTONATION,
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
This excerpt taken from the AN 10-K filed Feb 24, 2005. Derivative Financial Instruments
The Company’s primary market risk exposure is increasing interest rates. Interest rate derivatives are used to adjust interest rate exposures when appropriate based on market conditions. The Company complies with Statement of Financial Accounting Standards Nos. 133, 137, 138 and 149 (collectively “SFAS 133”) pertaining to the accounting for derivatives and hedging activities. SFAS 133 requires the Company to recognize all derivative instruments on the balance sheet at fair value. The related gains or losses on these transactions are deferred in stockholders’ equity as a component of accumulated other comprehensive income (loss). These deferred gains and losses are recognized in income in the period in which the related items being hedged are recognized in expense. However, to the extent that the change in value of a derivative contract does not perfectly offset the change in the value of the items being hedged, that ineffective portion is immediately recognized in income. The Company recognizes gains or losses when the underlying transaction settles. All of the Company’s interest rate hedges are designated as cash flow hedges. The Company has a series of interest rate hedge transactions, with a notional value of $800.0 million, consisting of a combination of swaps, and cap and floor options (collars). The hedge instruments are designed to convert certain floating rate vehicle floorplan payable and portions of the Company’s mortgage facilities to fixed rate debt. The Company has $200 million in swaps, which started in 2004 and effectively lock in a rate of 3.0%, and $600 million in collars that cap floating rates to a maximum rate no greater than 2.4%. All of its hedge instruments mature over the next two years. At December 31, 2004 and 2003, net unrealized losses, net of 51
Table of Contents
AUTONATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) income taxes, related to hedges included in Accumulated Other Comprehensive Loss were $1.5 million and $3.1 million, respectively. For the years ended December 31, 2004 and 2003, the income statement impact from interest rate hedges was an additional expense of $2.9 million and $.6 million, respectively. At December 31, 2004 and 2003, all of the Company’s derivative contracts were determined to be highly effective, and no ineffective portion was recognized in income. The Company had no outstanding derivative instruments during 2002.
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