Rayovac 2009 Annual Report Download - page 166

Table of Contents
Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
Derivative Contracts
For derivative instruments that are used to economically hedge the fair value of the Company’s third party and intercompany payments and interest
rate payments, the gain (loss) is recognized in earnings in the period of change associated with the derivative contract. During the one month period ended
September 30, 2009 (Successor Company) and the eleven month period ended August 30, 2009 (Predecessor Company), the Company recognized the
following respective gains (losses) on derivative contracts:
Derivatives Not Designated as
Hedging Instruments Under ASC 815
Amount of Gain (Loss)
Recognized in
Income on Derivatives
Location of Gain or (Loss)
Recognized in
Income on Derivatives
Successor
Company Predecessor Company
One Month
Period Ended
September 30,
2009
Eleven Month
Period Ended
August 30,
2009
Interest rate contracts(A) $ — $ (6,191) Interest expense
Foreign exchange contracts (1,469) 3,075 Other (income) expense, net
Total $ (1,469) $ (3,116)
(A) Amount represents ineffective portion of certain future payments related to an interest rate contracts that were de−designated as cash flow hedges
during the pendency of the Bankruptcy Cases.
During Fiscal 2008 and Fiscal 2007, the Company recognized the following respective gains (losses) on derivative contracts (Predecessor Company):
Derivatives Not Designated as
Hedging Instruments Under ASC 815
Amount of Gain (Loss)
Recognized in
Income on Derivatives Location of Gain or (Loss) Recognized in
Income on Derivatives2008 2007
Foreign exchange contracts (9,361) (16,485) Other (income) expense, net
Total $(9,361) $(16,485)
Credit Risk
The Company is exposed to the default risk of the counterparties with which the Company transacts. The Company monitors counterparty credit risk
on an individual basis by periodically assessing each such counterparty’s credit rating exposure. The maximum loss due to credit risk equals the fair value of
the gross asset derivatives which are primarily concentrated with a foreign financial institution counterparty. The Company considers these exposures when
measuring its credit reserve on its derivative assets, which was $32 and $0, respectively, at September 30, 2009 (Successor Company) and September 30,
2008 (Predecessor Company). Additionally, the Company does not require collateral or other security to support financial instruments subject to credit risk.
The Company’s standard contracts do not contain credit risk related contingencies whereby the Company would be required to post additional cash
collateral as a result of a credit event. However, as a result of the Company’s current credit profile, the Company is typically required to post collateral in
the normal course of business to offset its liability positions. At September 30, 2009 (Successor Company) and September 30, 2008
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