Rayovac 2015 Annual Report Download - page 138

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SPECTRUM BRANDS HOLDINGS, INC.
SB/RH HOLDINGS, LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
Foreign exchange contracts. The Company periodically enters into forward foreign exchange contracts to
hedge the risk from forecasted foreign currency 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, Mexican Pesos, Canadian Dollars or Japanese Yen. These foreign
exchange contracts are cash flow hedges of fluctuating foreign exchange rates 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 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 Cost of Goods Sold, respectively. At
September 30, 2015 and 2014, the Company had foreign exchange derivative contracts designated as cash flow
hedges with a notional value of $300.6 million and $226.7 million, respectively.
Derivative Contracts Not Designated As Hedges for Accounting Purposes
Foreign exchange 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,
Canadian Dollars, Euros or Australian Dollars. These foreign exchange contracts are economic hedges of a
related liability or asset recorded in the accompanying Consolidated Statements of Financial Position. The gain
or loss on the derivative hedge contracts is recorded in earnings as an offset to the change in value of the related
liability or asset at each period end. At September 30, 2015 and 2014, the Company had $126.8 million and
$108.9 million, respectively, of notional value for such foreign exchange derivative contracts outstanding.
Commodity Swaps. The Company periodically enters into commodity swap contracts to economically hedge
the risk from fluctuating prices for raw materials, specifically the pass-through of market prices for silver used in
manufacturing purchased watch batteries. The Company hedges a portion of the risk associated with these
materials through the use of commodity swaps. The swap contracts are designated as economic hedges with the
unrealized gain or loss recorded in earnings and as an asset or liability at each period end. The unrecognized
changes in fair value of the hedge contracts are adjusted through earnings when the realized gains or losses affect
earnings upon settlement of the hedges. The swaps effectively fix the floating price on a specified quantity of
silver 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)
Silver ................................. 25.0 troy oz. $0.4 25.0 troy oz. $0.4
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