Rayovac 2005 Annual Report Download - page 94

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(s) Fair Value of Financial Instruments
The carrying values of cash and cash equivalents,
accounts and notes receivable, accounts payable
and short-term debt approximate fair value. The fair
values of long-term debt and derivative fi nancial instru-
ments are generally based on quoted market prices.
The carrying value of fi nancial instruments
approximates the fair value of those instruments due
to the applicable interest rates being substantially
at market (“fl oating”), except for $350,000 of Senior
Subordinated Notes due September 30, 2013 with
interest payable semiannually at 8.5% and $700,000
of Senior Subordinated Notes due February 1, 2015
with interest payable semiannually at 7.375%. The
total fair value of the Notes at September 30, 2005
was approximately $969,500. (See also Note 2(r),
Signifi cant Accounting Policies – Derivative Financial
Instruments, and Note 6, Debt).
The carrying amounts and fair values of the Com-
pany’s fi nancial instruments are summarized as fol-
lows ((liability)/asset):
September 30,
2005 2004
Carrying Carrying
Amount Fair Value Amount Fair Value
Total debt $(2,307,333) $(2,226,833) $(829,897) $(858,116)
Interest rate
swap
agreements 2,180 2,180 (3,816) (3,816)
Commodity
swap
agreements 478 478 1,764 1,764
(t) Environmental Expenditures
Environmental expenditures that relate to current
ongoing operations or to conditions caused by past
operations are expensed or capitalized as appropri-
ate. The Company determines its liability on a site-
by-site basis and records a liability at the time when
it is probable that a liability has been incurred and
such liability can be reasonably estimated. The esti-
mated liability is not reduced for possible recoveries
from insurance carriers. Estimated environmental
remediation expenditures are included in the deter-
mination of the net realizable value recorded for
assets held for sale.
(u) Reclassifications
Certain prior year amounts have been reclassifi ed
to conform with the current year presentation. These
reclassifi cations had no effect on previously reported
results of operations or retained earnings.
(v) Comprehensive Income
Comprehensive income includes foreign currency
translation of assets and liabilities of foreign
sub sidiaries, effects of exchange rate changes on
intercompany balances of a long-term nature and
transactions designated as a hedge of net foreign
investments, derivative fi nancial instruments desig-
nated as cash fl ow hedges, and additional minimum
pension liabilities associated with the Company’s
pension plans. Except for the currency translation
impact of the Company’s intercompany debt of a
long-term nature, the Company does not provide
income taxes on currency translation adjustments,
as earnings from international subsidiaries are
considered to be indefi nitely reinvested.
Amounts recorded in Accumulated other com-
prehensive income on the Consolidated Statements
of Shareholders’ Equity for the years ended
September 30, 2005, 2004 and 2003 are net
of tax expense (benefi t) in the amount of:
Pension Cash Flow Translation
Adjustment Hedges Adjustment Total
2005 $(5,968) $ 692 $ (559) $(5,835)
2004 1,356 3,009 (2,378) 1,987
2003 (4,744) 76 – (4,668)
(w) Stock Compensation
The Company has elected to apply the intrinsic
value method under Accounting Principles Board
(“APB”) Opinion No. 25 and related Interpretations
in accounting for stock-based compensation plans,
instead of applying the optional cost recognition
requirements of SFAS 123, Accounting for Stock-
Based Compensation. The Company recognized
$9,509, $5,291 and $3,426, respectively, of com-
pensation cost, before tax, related to restricted
stock in 2005, 2004 and 2003, respectively, and no
compensation cost related to stock options. For
fi xed awards with prorata vesting, the Company rec-
ognizes costs on a straight-line method. For stock
options granted, no employee compensation cost is
refl ected in the Company’s results of operations as
all options granted under the plans have an exercise
price equal to the market value of the underlying
common stock at the grant date.
2005 Form 10-K Annual Report
Spectrum Brands, Inc.
SPECTRUM BRANDS, INC.74