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Jarden Corporation Annual Report 2012 25
Management’s Discussion and Analysis
Jarden Corporation Annual Report 2012
Forward Foreign Currency Contracts
The Company uses foreign currency contracts to mitigate the foreign currency exchange rate exposure on the cash flows related to
forecasted inventory purchases and sales and have maturity dates through September 2014. The derivatives used to hedge these
forecasted transactions that meet the criteria for hedge accounting are accounted for as cash flow hedges. The effective portion of
the gains or losses on these derivatives is deferred as a component of AOCI and is recognized in earnings at the same time that the
hedged item affects earnings and is included in the same caption in the statements of operations as the underlying hedged item. At
December 31, 2012, the Company had approximately $516 million notional amount of foreign currency contracts outstanding that
are designated as cash flow hedges of forecasted inventory purchases and sales.
At December 31, 2012, the Company had outstanding approximately $191 million notional amount of foreign currency contracts
that are not designated as effective hedges for accounting purposes and have maturity dates through July 2014. Fair market value
gains or losses are included in the results of operations and are classified in SG&A.
Commodity Contracts
The Company enters into commodity-based derivatives in order to mitigate the risk that the rising price of these commodities
could have on the cost of certain of the Company’s raw materials. These commodity-based derivatives provide the Company with
cost certainty, and in certain instances, allow the Company to benefit should the cost of the commodity fall below certain dollar
thresholds. At December 31, 2012, the Company had outstanding approximately $5 million notional amount of commodity-based
derivatives that are not designated as effective hedges for accounting purposes and have maturity dates through March 2014. Fair
market value gains or losses are included in the results of operations and are classified in SG&A.
The following table presents the fair value of derivative financial instruments as of December 31, 2012:
December 31, 2012
(In millions) Asset (Liability)
Derivatives designated as effective hedges:
Cash flow hedges:
Interest rate swaps $ (12.4)
Foreign currency contracts 4.8
Subtotal (7.6)
Derivatives not designated as effective hedges:
Foreign currency contracts (0.8)
Commodity contracts (0.1)
Subtotal (0.9)
Total $ (8.5)
Significant Accounting Policies and Critical Estimates
The Company’s financial statements are prepared in accordance with generally accepted accounting principles in the United States
of America (“GAAP”), which require us to make certain judgments, estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. The following list of critical accounting policies is not intended to be a
comprehensive list of all its accounting policies. The Company’s significant accounting policies are more fully described in Note
1—“Business and Significant Accounting Policies” to Item 8.—“Financial Statements and Supplementary Data”. The following
represents a summary of the Company’s critical accounting policies, defined as those policies that the Company believes are
the most important to the portrayal of its financial condition and results of operations, and/or require management’s significant
judgments and/or estimates. In many cases, the accounting treatment for a particular transaction is specifically directed by GAAP
with no need for management’s judgment in their application.
Revenue Recognition and Allowance for Product Returns
The Company recognizes revenues at the time of product shipment or delivery, depending upon when title and risk of loss
passes, to unaffiliated customers, and when all of the following have occurred: a firm sales agreement is in place, pricing is fixed
or determinable, and collection is reasonably assured. Revenue is recognized as the net amount estimated to be received after
deducting estimated amounts for product returns, discounts and allowances. The Company estimates future product returns,
discounts and allowances based upon historical return rates and its reasonable judgment.