Sunbeam 2012 Annual Report Download - page 26

24 Jarden Corporation Annual Report 2012
Management’s Discussion and Analysis
Jarden Corporation Annual Report 2012
Year(s)
(In millions) Total 1 2-3 4-5 After 5
Debt (1) $ 4,726.2 $ 656.8 $ 753.7 $ 1,247.4 $ 2,068.3
Operating leases 328.8 75.2 118.8 69.4 65.4
Unconditional purchase obligations 188.6 103.8 79.6 5.1 0.1
Other current and non-current obligations 21.9 17.4 1.1 1.0 2.4
Total $ 5,265.5 $ 853.2 $ 953.2 $ 1,322.9 $ 2,136.2
Contractual Obligations and Commercial Commitments
The following table includes aggregate information about the Company’s contractual obligations as of December 31, 2012 and the
periods in which payments are due. Certain of these amounts are not required to be included in its consolidated balance sheets:
The table above does not reflect tax reserves and accrued interest thereon of $68.3 million and $6.8 million, respectively, as the
Company cannot reasonably predict the timing of the settlement of the related tax positions beyond 2013. See Note 12—“Taxes
on Income” to the consolidated financial statements for additional information on the Company’s unrecognized tax benefits at
December 31, 2012.
Commercial commitments are items that the Company could be obligated to pay in the future and are not included in the above
table. At December 31, 2012, the Company had approximately $29 million in standby and commercial letters of credit with terms
that expire through April 2014.
Risk Management
From time to time, the Company enters into derivative transactions to hedge its exposures to interest rate, foreign currency rate and
commodity price fluctuations. The Company does not enter into derivative transactions for trading purposes.
Interest Rate Contracts
The Company manages its fixed and floating rate debt mix using interest rate swaps. The Company uses fixed and floating rate
swaps to alter its exposure to the impact of changing interest rates on its consolidated results of operations and future cash outflows
for interest. Floating rate swaps are used, depending on market conditions, to convert the fixed rates of long-term debt into short-
term variable rates. Fixed rate swaps are used to reduce the Company’s risk of the possibility of increased interest costs. Interest rate
swap contracts are therefore used by the Company to separate interest rate risk management from the debt funding decision.
Cash Flow Hedges
During 2012, the Company entered into an aggregate $150 million notional amount of interest rate swaps that exchange variable
rates of interest (LIBOR) for an average fixed interest rate of approximately 0.75% over the term of the agreements, which mature
on December 31, 2015. These swaps are forward-starting and are effective commencing December 31, 2013. The Company has
designated these swaps as cash flow hedges of the interest rate risk attributable to forecasted variable interest (LIBOR) payments.
At December 31, 2012, the Company had $900 million notional amount outstanding in swap agreements, which included $500
million notional amount of forward-starting swaps that will become effective commencing December 31, 2013, that exchange
variable rates of interest (LIBOR) for fixed interest rates over the terms of the agreements and are designated as cash flow hedges
of the interest rate risk attributable to forecasted variable interest payments and have maturity dates through December 2015.
At December 31, 2012, the weighted average fixed rate of interest on these swaps, excluding the forward-starting swaps, was
approximately 1.6%. The effective portion of the after-tax fair value gains or losses on these swaps is included as a component of
accumulated other comprehensive income (loss) (“AOCI”).
(1) These amounts reflect scheduled debt principal payments and the expected future interest expense related to the debt at December 31, 2012
that carries a fixed rate of interest. As of December 31, 2012, approximately $2.6 billion of the Company’s debt is considered fixed-rate debt, by
nature or through use of interest rate swaps. As of December 31, 2012, approximately $1.2 billion of the Company’s debt is considered variable-rate
debt, by nature or through use of interest rate swaps with a weighted average interest rate of approximately 2.5%. For further information regarding
the Company’s debt and interest rate structure, refer to Note 9—“Debt” and Note 10—“Derivative Financial Instruments” to the consolidated
financial statements.