ZIMMER HOLDINGS INC | 2013 | FY | 3


12. ACCUMULATED OTHER COMPREHENSIVE INCOME

 

OCI refers to certain gains and losses that under GAAP are included in comprehensive income but are excluded from net earnings as these amounts are initially recorded as an adjustment to stockholders’ equity. Amounts in OCI may be reclassified to net earnings upon the occurrence of certain events.

Our OCI is comprised of foreign currency translation adjustments, unrealized gains and losses on cash flow hedges, unrealized gains and losses on available-for-sale securities, and amortization of prior service costs and unrecognized gains and losses in actuarial assumptions on our defined benefit plans. Foreign currency translation adjustments are reclassified to net earnings upon sale or upon a complete or substantially complete liquidation of an investment in a foreign entity. Unrealized gains and losses on cash flow hedges are reclassified to net earnings when the hedged item affects net earnings. Unrealized gains and losses on available-for-sale securities are reclassified to net earnings if we sell the security before maturity or if the unrealized loss is considered to be other-than-temporary. We typically hold our available-for-sale securities until maturity and are able to realize their amortized cost and therefore we do not have reclassification adjustments to net earnings on these securities. Amounts related to defined benefit plans that are in OCI are reclassified over the service periods of employees in the plan. The reclassification amounts are allocated to all employees in the plans and therefore the reclassified amounts may become part of inventory to the extent they are considered direct labor costs. See Note 14 for more information on our defined benefit plans.

The following table shows the changes in the components of OCI, net of tax (in millions):

 

      Foreign
Currency
Translation
    Cash
Flow
Hedges
    Unrealized
Gains on
Securities
     Defined
Benefit
Plan
Items
 

Balance December 31, 2012

   $ 445.5      $ 4.1      $ 0.4       $ (106.1

OCI before reclassifications

     (44.4     33.4        0.1         30.6   

Reclassifications

            (4.4             7.9   

 

   

 

 

   

 

 

    

 

 

 

Balance December 31, 2013

   $ 401.1      $ 33.1      $ 0.5       $ (67.6

 

   

 

 

   

 

 

    

 

 

 

 

The following table shows the reclassification adjustments from OCI (in millions):

 

     Amount of Gain / (Loss)
Reclassified from OCI
   

Location on Statement of Earnings

     For the Years Ended December 31,    
Component of OCI            2013             2012             2011    

Cash flow hedges

        

Foreign exchange forward contracts

   $ 8.0      $ (12.0   $ (32.9   Cost of products sold

Foreign exchange options

     (0.2     (0.4          Cost of products sold

Cross-currency interest rate swaps

            0.2        (8.3   Interest expense

 

   

 

 

   

 

 

   
     7.8        (12.2     (41.2   Total before tax
     3.4        (8.9     (16.7   Provision for income taxes

 

   

 

 

   

 

 

   
   $ 4.4      $ (3.3   $ (24.5   Net of tax

 

   

 

 

   

 

 

   

Defined benefit plans

        

Prior service cost

   $ 3.9      $ 2.9      $ 0.8      *

Unrecognized actuarial (loss)

     (16.6     (13.3     (7.4   *

 

   

 

 

   

 

 

   
     (12.7     (10.4     (6.6   Total before tax
     (4.8     (3.9     (2.6   Provision for income taxes

 

   

 

 

   

 

 

   
   $ (7.9   $ (6.5   $ (4.0   Net of tax

 

   

 

 

   

 

 

   

Total reclassifications

   $ (3.5   $ (9.8   $ (28.5   Net of tax

 

   

 

 

   

 

 

   

 

* These OCI components are included in the computation of net periodic pension expense (see Note 14).

The following table shows the tax effects on each component of OCI recognized in our consolidated statements of comprehensive income (in millions):

 

     Before Tax     Tax     Net of Tax  
For the Years Ended December 31,    2013     2012      2011     2013     2012      2011     2013     2012      2011  

Foreign currency cumulative translation adjustments

   $ (44.4   $ 46.1       $ 4.6      $      $       $      $ (44.4   $ 46.1       $ 4.6   

Unrealized cash flow hedge gains/(losses)

     63.6        15.2         (34.9     30.2        4.3         (4.3     33.4        10.9         (30.6

Reclassification adjustments on foreign currency hedges

     (7.8     12.2         41.2        (3.4     8.9         16.7        (4.4     3.3         24.5   

Unrealized gains on securities

     0.1        0.4         0.2                              0.1        0.4         0.2   

Adjustments to prior service cost and unrecognized actuarial assumptions

     50.3        20.3         (71.3     11.8        8.5         (23.0     38.5        11.8         (48.3

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Total Other Comprehensive Gain/(Loss)

   $ 61.8      $ 94.2       $ (60.2   $ 38.6      $ 21.7       $ (10.6   $ 23.2      $ 72.5       $ (49.6

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

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