Rayovac 2011 Annual Report Download - page 126

Download and view the complete annual report

Please find page 126 of the 2011 Rayovac annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 170

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(In thousands, except per share amounts)
The Company’s interest rate swap derivative financial instruments at September 30, 2011 and
September 30, 2010 are summarized as follows:
2011 2010
Notional
Amount
Remaining
Term
Notional
Amount
Remaining
Term
Interest rate swaps-fixed .................... $200,000 .28 years $300,000 1.28 years
Interest rate swaps-fixed .................... $300,000 .36 years $300,000 1.36 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, 2011 the Company had a series of foreign exchange derivative contracts outstanding
through September 2012 with a contract value of $223,417. At September 30, 2010 the Company had a series of
foreign exchange derivative contracts outstanding through June 2012 with a contract value of $299,993. The
pretax derivative gain on these contracts recorded in AOCI by the Company at September 30, 2011 was $343, net
of tax expense of $148. The derivative net loss on these contracts recorded in AOCI by the Company at
September 30, 2010 was $5,322, net of tax benefit of $2,204. At September 30, 2011, the portion of derivative
net gains estimated to be reclassified from AOCI into earnings by the Company over the next 12 months is $343,
net of tax.
The Company is exposed to risk from fluctuating prices for raw materials, specifically zinc used in its
manufacturing processes. The Company hedges a portion of the risk associated with these materials through the
use of commodity swaps. The hedge contracts are designated as cash flow hedges with the fair value changes
recorded in AOCI and as a hedge asset or liability, as applicable. The unrecognized changes in fair value of the
hedge contracts are reclassified from AOCI into earnings when the hedged purchase of raw materials also affects
earnings. The swaps effectively fix the floating price on a specified quantity of raw materials through a specified
date. At September 30, 2011 the Company had a series of such swap contracts outstanding through December
2012 for 9 tons with a contract value of $18,858. At September 30, 2010 the Company had a series of such swap
contracts outstanding through September 2012 for 15 tons with a contract value of $28,897. The derivative net
loss on these contracts recorded in AOCI by the Company at September 30, 2011 was $599, net of tax benefit of
$312. The derivative net gain on these contracts recorded in AOCI by the Company at September 30, 2010 was
$2,256, net of tax expense of $1,201. At September 30, 2011, the portion of derivative net losses estimated to be
reclassified from AOCI into earnings by the Company over the next 12 months is $597, net of tax.
The Company was also exposed to fluctuating prices of raw materials, specifically urea and di-ammonium
phosphates (“DAP”), used in its manufacturing processes in the growing products portion of the Home and
Garden Business. During the period from October 1, 2008 through August 30, 2009 (Predecessor Company)
$2,116 of pretax derivative losses were recorded as an adjustment to Loss from Discontinued operations, net of
tax, for swap or option contracts settled at maturity. The hedges are generally highly effective; however, during
the period from October 1, 2008 through August 30, 2009, $12,803 of pretax derivative losses, were recorded as
116