Rayovac 2010 Annual Report Download - page 132

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
The derivative net gain (loss) on these contracts recorded in AOCI by the 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. At September 30, 2010, the portion of derivative net (losses)
estimated to be reclassified from AOCI into earnings by the Successor Company over the next 12 months is
$(1,416), net of tax.
In connection with the Company’s merger with Russell Hobbs and the refinancing of the Company’s
existing senior credit facilities associated with the closing of the Merger, the Company assessed the prospective
effectiveness of its interest rate cash flow hedges during fiscal 2010. As a result, during fiscal 2010, the
Company ceased hedge accounting and recorded a loss of ($1,451) as an adjustment to interest expense for the
change in fair value of its U.S. dollar swaps from the date of de-designation until the U.S. dollar swaps were re-
designated. The Company also evaluated whether the amounts recorded in AOCI associated with the forecasted
U.S. dollar swap transactions were probable of not occurring and determined that occurrence of the transactions
was still reasonably possible. Upon the refinancing of the existing senior credit facility associated with the
closing of the Merger, the Company re-designated the U.S. dollar swaps as cash flow hedges of certain scheduled
interest rate payments on the new $750,000 U.S. Dollar Term Loan expiring June 16, 2016. At September 30,
2010, the Company believes that all forecasted interest rate swap transactions designated as cash flow hedges are
probable of occurring.
The Company’s interest rate swap derivative financial instruments at September 30, 2010, September 30,
2009 and September 30, 2008 are summarized as follows:
2010 2009 2008
Notional
Amount
Remaining
Term
Notional
Amount
Notional
Amount
Remaining
Term
Interest rate swaps-fixed ........................ $300,000 1.28 years $— $267,029 0.07 years
Interest rate swaps-fixed ........................ $300,000 1.36 years $— $170,000 0.11 years
Interest rate swaps-fixed ........................ $ — — $— $225,000 1.52 years
Interest rate swaps-fixed ........................ $ — — $— $ 80,000 1.62 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.
At September 30, 2010 the Successor Company had a series of foreign exchange derivative contracts
outstanding through June 2012 with a contract value of $299,993. At September 30, 2009 the Successor
Company had a series of foreign exchange derivative contracts outstanding through September 2010 with a
contract value of $92,963. At September 30, 2008 the Predecessor Company had a series of such derivative
contracts outstanding through September 2010 with a contract value of $144,776. The derivative net (loss) on
these contracts recorded in AOCI by the Successor Company at September 30, 2010 was $(5,322), net of tax
benefit of $2,204. The derivative net (loss) on these contracts recorded in AOCI by the Successor Company at
September 30, 2009 was $(378), net of tax benefit of $167. The derivative net gain on these contracts recorded in
AOCI by the Predecessor Company at September 30, 2008 was $3,591, net of tax expense of $1,482. At
September 30, 2010, the portion of derivative net (losses) estimated to be reclassified from AOCI into earnings
by the Company over the next 12 months is $(4,596), net of tax.
122