Rayovac 2015 Annual Report Download - page 137

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SPECTRUM BRANDS HOLDINGS, INC.
SB/RH HOLDINGS, LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
Rent expense was $36.3 million, $40.8 million and $41.8 million for the years ended September 30, 2015,
2014 and 2013, respectively.
NOTE 11—DERIVATIVES
Derivative financial instruments are used by the Company principally in the management of its interest rate,
foreign currency exchange rate and raw material price exposures. The Company does not hold or issue derivative
financial instruments for trading purposes. For derivative instruments that are designated and qualify as cash flow
hedges, the gain or loss on the effective portion of the derivative is reported as a component of Accumulated
Other Comprehensive Income (“AOCI”) and reclassified into earnings in the same period or periods during
which the hedged transaction affects earnings. Gains and losses on derivatives representing either hedge
ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current
earnings.
Cash Flow Hedges
Interest Rate Swaps. The Company uses interest rate swaps to manage its interest rate risk. The swaps are
designated as cash flow hedges with the changes in fair value recorded in AOCI and as a derivative asset or
liability, as applicable. The swaps settle periodically in arrears with the related amounts for the current settlement
period payable to, or receivable from, the counter-parties included in accrued liabilities or receivables,
respectively, and recognized in earnings as an adjustment to Interest expense from the underlying debt to which
the swap is designated. As of September 30, 2015 and 2014, the Company had a series of U.S. dollar
denominated interest rate swaps outstanding which effectively fix the interest on variable rate debt, exclusive of
lender spreads, at 1.36% for a notional principal amount of $300.0 million through April 2017.
The Company’s interest rate swap derivative financial instruments at September 30, 2015 and 2014 are as
follows:
2015 2014
Notional
Amount
Remaining
Years
Notional
Amount
Remaining
Years
(in millions)
Interest rate swaps—fixed ....................... $300.0 1.5 $300.0 2.5
Commodity Swaps. The Company is exposed to risk from fluctuating prices for raw materials, specifically
zinc and brass used in its manufacturing processes. The Company hedges a portion of the risk associated with the
purchase of 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. The Company had the following outstanding commodity swap
contracts outstanding as of September 30, 2015 and 2014.
2015 2014
Notional
Contract
Value Notional
Contract
Value
(in millions, except notional)
Zinc swap contracts ........................... 10.8 Tons $22.2 8.0 Tons $17.4
Brass swap contracts ........................... 1.8Ton $ 8.5 0.6Ton $ 2.8
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