Rayovac 2012 Annual Report Download - page 117

Download and view the complete annual report

Please find page 117 of the 2012 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 154

  • 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

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(In thousands, except per share amounts)
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 17, 2016.
The Company’s interest rate swap derivative financial instruments at September 30, 2012 and
September 30, 2011 are summarized as follows:
2012 2011
Notional
Amount
Remaining
Term
Notional
Amount
Remaining
Term
Interest rate swaps-fixed ....................... $— — $200,000 .28 years
Interest rate swaps-fixed ....................... $— — $300,000 .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 of 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, 2012 the Company had a series of foreign exchange derivative contracts outstanding
through September 2013 with a contract value of $202,453. 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.
The derivative loss on these contracts recorded in AOCI by the Company at September 30, 2012 was $1,409, net
of tax benefit of $565. The derivative net gain on these contracts recorded in AOCI by the Company at
September 30, 2011 was $238, net of tax expense of $148. At September 30, 2012, the portion of derivative net
losses estimated to be reclassified from AOCI into earnings by the Company over the next 12 months is $1,409,
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, 2012 the Company had a series of such swap contracts outstanding through September
2014 for 15 tons with a contract value of $29,207. 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. The derivative net gain
on these contracts recorded in AOCI by the Company at September 30, 2012 was $1,627, net of tax expense of
$320. The derivative net loss on these contracts recorded in AOCI by the Company at September 30, 2011 was
$686, net of tax benefit of $121. At September 30, 2012, the portion of derivative net gains estimated to be
reclassified from AOCI into earnings by the Company over the next 12 months is $796, net of tax.
Derivative Contracts
The Company periodically enters into forward and swap foreign exchange contracts to economically hedge
the risk from third party and intercompany payments resulting from existing obligations. These obligations
generally require the Company to exchange foreign currencies for U.S. Dollars, Euros or Australian Dollars.
107