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HBI » Topics » (a) Currency Swaps

This excerpt taken from the HBI 8-K filed Sep 5, 2006.

(a) Currency Swaps

The Company has issued certain foreign currency-denominated debt instruments to a related entity and utilizes currency swaps to reduce the variability of functional currency cash flows related to the foreign currency debt.

The Company records gains and losses on these derivative instruments using mark-to-market accounting. Under this accounting method, the changes in the market value of outstanding financial instruments are recognized as gains or losses in the period of change. All derivatives using mark-to-market accounting were settled in 2005.

The fair value of currency swaps is determined based upon externally developed pricing models, using financial data obtained from swap dealers.

 

Currency Swap

    Notional
principal(1)		    Weighted Average
interest rates(2)		  
      Receive     Pay  

2003: Receive variable—pay variable

    $ 247,875    2.7 %   1.7 %

2004: Receive variable—pay variable

      247,875    2.5 %   1.7 %
(1) The notional principal is the amount used for the calculation of interest payments that are exchanged over the life of the swap transaction and is equal to the amount of foreign currency or dollar principal exchanged at maturity, if applicable.
(2) The weighted-average interest rates are as of the respective balance sheet dates.
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