Rayovac 2009 Annual Report Download - page 167

Table of Contents
Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
(Predecessor Company), the Company had posted collateral of $1,943 and $13,227, respectively, related to such liability positions. The collateral is
included in Current—Receivables within the accompanying Consolidated Statements of Financial Position.
Derivative Financial Instruments
Cash Flow Hedges
The Company uses interest rate swaps to manage its interest rate risk. The swaps are designated as cash flow hedges with the changes in fair value
recorded in AOCI and as a derivative hedge asset or liability, as applicable. The swaps settle periodically in arrears with the related amounts for the current
settlement period payable to, or receivable from, the counter−parties included in accrued liabilities or receivables, respectively, and recognized in earnings
as an adjustment to interest expense from the underlying debt to which the swap is designated. During the one month period ended September 30, 2009
(Successor Company) and the eleven month period ended August 30, 2009 (Predecessor Company) $0 and $15,532 of pretax derivative losses, respectively,
from such hedges were recorded as an adjustment to Interest expense. During Fiscal 2008 and Fiscal 2007, $772 and $9,043 of pretax derivative gains,
respectively, from such hedges were recorded as an adjustment to Interest expense. During the one month period ended September 30, 2009 (Successor
Company) there was no ineffectiveness. During the eleven month period ended August 30, 2009, Fiscal 2008 and Fiscal 2007, the Predecessor Company
had $13,435, $0 and $0 of pretax derivative losses, respectively, which were recorded as adjustments to interest expense for ineffectiveness from such
hedges and included in the amounts above. The derivative net gain (loss) on these contracts recorded in AOCI by the Successor Company at September 30,
2009 was $0. The derivative net loss on these contracts recorded in AOCI by the Predecessor Company at September 30, 2008 was $3,604, net of tax
benefit of $2,209. The derivative net gain on these contracts recorded in AOCI by the Predecessor Company at September 30, 2007 was $163, net of tax
expense of $100.
The Successor Company had no interest rate swap financial instruments at September 30, 2009. The Predecessor Company’s interest rate swap
derivative financial instruments at September 30, 2008 and September 30, 2007 are summarized as follows:
2008 2007
Notional
Amount Remaining Term Notional Amount Remaining Term
Interest rate swaps−fixed $ 267,029 0.07 years $ 175,000 0.03 years
Interest rate swaps−fixed $ 170,000 0.11 years $ 70,760 0.07 years
Interest rate swaps−fixed $ 225,000 1.52 years $ 261,812 1.07 years
Interest rate swaps−fixed $ 80,000 1.62 years $ 170,000 1.11 years
Interest rate swaps−fixed $ 225,000 2.52 years
The Company periodically enters into forward foreign exchange contracts to hedge the risk from forecasted foreign denominated third party and
intercompany sales or payments. These obligations generally require the Company to exchange foreign currencies for U.S. Dollars, Euros, Pounds Sterling,
Australian Dollars, Brazilian Reals, Canadian Dollars or Japanese Yen. These foreign exchange contracts are cash flow hedges of fluctuating foreign
exchange related to sales or product or raw material purchases. Until the sale or purchase is recognized, the fair value of the related hedge is recorded in
AOCI and as a derivative hedge asset or liability, as applicable. At the time the sale or purchase is recognized, the fair value of the related hedge is
reclassified as an adjustment to Net sales or purchase price variance in Cost of goods sold. During the one month period ended September 30, 2009
(Successor Company) and the eleven month period ended August 30, 2009 (Predecessor Company) $0 and
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