Target 2008 Annual Report Download - page 59

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Additionally, during 2008, we de-designated certain ‘‘pay floating’’ interest rate swaps, and upon
de-designation, these swaps no longer qualified for hedge accounting treatment. As a result of the
de-designation, the unrealized gains on these swaps determined at the date of de-designation will be
amortized into earnings over the remaining lives of the previously hedged items.
Simultaneous to the de-designations, we entered into ‘‘pay fixed’’ swaps to economically hedge the risks
associated with the de-designated ‘‘pay floating’’ swaps. These swaps are not designated as hedging
instruments and along with the de-designated ‘‘pay floating’’ swaps are measured at fair value on a quarterly
basis. Changes in fair value measurements are a component of net interest expense on the Consolidated
Statements of Operations.
Interest Rate Swap Rollforward
Notional
(in millions) Pay Floating Pay Fixed Total Fair Value
February 2, 2008 $ 4,575 $ — $ 223
New 750 1,250 —
Matured (950) — —
Terminated (3,125) — (160)
Valuation adjustment gain/(loss) — — 70
January 31, 2009 $ 1,250 $1,250 $ 133
At January 31, 2009 a characteristic summary of interest rate swaps outstanding was:
Outstanding Interest Rate Swap Characteristic Summary
At January 31, 2009: Pay Floating Pay Fixed
Weighted average rate:
Pay one-month LIBOR 2.6% fixed
Receive 5.0% fixed one-month LIBOR
Weighted average maturity 5.4 years 5.4 years
In 2008, 2007 and 2006, total net gains amortized into net interest expense for terminated and
dedesignated swaps were $55 million, $6 million and $9 million, respectively. The amount remaining on
unamortized hedged debt valuation gains from terminated and de-designated interest rate swaps that will be
amortized into earnings over the remaining lives totaled $263 million, $14 million and $19 million, at the end of
2008, 2007, and 2006, respectively.
Derivative Contracts – Types, Balance Sheet Classifications and Fair Values
(millions)
Asset Liability
Fair Value At Fair Value At
Jan. 31, Feb. 2, Jan. 31, Feb. 2,
Type Classification 2009 2008 Classification 2009 2008
Designated as hedging
instruments:
Interest Rate Swaps Other current assets $— $8 $— $—
Interest Rate Swaps Other noncurrent assets —215 ——
Not designated as hedging
instruments:
Interest Rate Swaps Other noncurrent assets 163 — Other noncurrent 30 —
liabilities
Interest Rate Forward Other current assets —11 ——
Total $163 $234 $30 $—
During 2007, we entered into a series of interest rate lock agreements that effectively fixed the interest
payments on our anticipated issuance of debt that would be affected by interest-rate fluctuations on the U.S.
Treasury benchmark between the beginning date of the interest rate locks and the date of the issuance of the
debt. Upon our issuance of fixed-rate debt in fiscal 2007, we terminated these rate lock agreements with a
combined notional amount of $2.5 billion for cash payment of $79 million, which is classified within other
39
PART II