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SPECTRUM BRANDS | 2006 ANNUAL REPORT 87
Pension Benefits Other Benefits
2006 2005 2004 2006 2005 2004
Components of net periodic benefit cost
Service cost $ 4,366 $ 2,319 $ 1,733 $614 $293 $269
Interest cost 5,535 4,695 3,973 299 186 175
Expected return on assets (3,838) (2,724) (2,153) – – –
Amortization of prior service cost 404 319 404 22 28 28
Amortization of transition obligation 34 – – – – –
(Gain) loss on curtailments – (92) (110) – – –
Recognized net actuarial loss (gain) 1,607 501 762 – – –
Net periodic benefit cost $ 8,108 $ 5,018 $ 4,609 $935 $507 $472
2006 Form 10-K Annual Report
Spectrum Brands, Inc.
Pension plan assets and obligations are measured at June 30
each year for the Company’s domestic plans and September 30
each year for its foreign plans. The contributions to the pension
plans between July 1 and September 30 were $3,778 in 2006 and
$2,448 in 2005. All of the Company’s plans individually have
accrued benefi t costs.
The discount rate is used to calculate the projected benefi t
obligation. The discount rate used is based on the rate of return
on government bonds of the respective countries as well as cur-
rent market conditions.
Below is a summary allocation of all pension plan assets along
with expected long-term rates of return by asset category as of
the measurement date.
Weighted-
Weighted-Average Average
Allocation Expected
Target Actual Long-Term
Rate of
Asset Category 2007 2006 2005 Return
Equity Securities 24% 27% 41% 9.0%
Fixed Income Securities 16% 15% 22% 6.4%
Other 60% 58% 37% 5.5%
Total 100% 100% 100% 6.5%
The Company has established formal investment policies for
the assets associated with these plans. Policy objectives include
maximizing long-term return at acceptable risk levels, diversify-
ing among asset classes, if appropriate, and among investment
managers, as well as establishing relevant risk parameters within
each asset class. Specifi c asset class targets are based on the results
of periodic asset liability studies. The investment policies permit
variances from the targets within certain parameters. The
weighted-average expected long-term rate of return is based on
a fi scal 2006 review of such rates. The plan assets currently do not
include holdings of Spectrum common stock.
The Company’s Fixed Income Securities portfolio is
invested primarily in commingled funds and managed for over-
all return expectations rather than matching duration against
plan liabilities; therefore, debt maturities are not signifi cant to
the plan performance.
The Company’s Other portfolio consists of all pension assets
in the United Kingdom, Germany and the Netherlands.
The Company expects to make minimal contributions to its
pension plans in 2007. The Company’s expected future pension
benefi t payments for fi scal 2007 – fi scal 2016 are as follows:
2007 $ 3,434
2008 3,505
2009 3,666
2010 3,790
2011 4,012
2012 to 2016 23,961
The Company has recorded an additional minimum pension
liability of $19,409 and $24,215 at September 30, 2006 and
2005, respectively, to recognize the underfunded position of its
benefi t plans. An intangible asset of $2,773 and $3,191 at
September 30, 2006 and 2005, respectively, equal to the unrec-
ognized prior service cost and net transition obligation of these
plans, has also been recorded. The excess of the additional mini-
mum liability over the unrecognized prior service cost, net of
tax, $9,668 and $16,702 at September 30, 2006 and 2005,
respectively, has been recorded as a component of Accumulated
other comprehensive income.
The Company sponsors a supplemental executive retirement
plan for eligible employees. Each October 1, the account of each
participant is credited by an amount equal to 15% of the partici-
pant’s salary. In addition, each quarter each account is credited by
an amount equal to 2% of the participant’s account value. Each
participant vests 20% per year in his account, with immediate
full vesting occurring upon death, disability or a change in con-
trol of the Company. As of September 30, 2006 and 2005, the
Company had recorded an obligation of $3,848 and $3,329,
respectively, related to the plan.
The Company sponsors a defi ned contribution pension plan for
its domestic salaried employees, which allows participants to make
contributions by salary reduction pursuant to Section 401(k) of the
Internal Revenue Code. The Company contributes annually from
3% to 6% of participants’ compensation based on age or service,
and may make additional discretionary contributions. The Company