Sunbeam 2005 Annual Report Download - page 49

Jarden Corporation
Notes to Consolidated Financial Statements (cont’d)
December 31, 2005
Consolidated Statements of Income. However, pursuant to the applicable provisions of EITF No. 01-9, the
Company does include consideration granted in certain of these transactions as SG&A expenses in its
Consolidated Statements of Income. The amounts charged to SG&A totaled $7.9 million, $6.3 million and
$5.8 million for the years ended December 31, 2005, 2004 and 2003, respectively.
Income Taxes
Deferred taxes are provided for differences between the financial statement and tax basis of assets and
liabilities using enacted tax rates. The Company established a valuation allowance against a portion of the
net tax benefit associated with all carryforwards and temporary differences in a prior year, as it was more
likely than not that these would not be fully utilized in the available carryforward period. A portion of this
valuation allowance remained as of December 31, 2005 and 2004 (see Note 8).
Fair Value and Credit Risk of Financial Instruments
The carrying values of cash and cash equivalents, accounts receivable, notes payable, accounts payable
and accrued liabilities approximate their fair market values due to the short-term maturities of these
instruments. The fair market value of the Company’s senior subordinated notes was determined based on
quoted market prices (see Note 5). The fair market value of the Company’s other long-term debt was
estimated using rates currently available to the Company for debt with similar terms and maturities (see
Note 5).
The Company enters into interest rate swaps to manage interest rate exposures. The Company
designates the interest rate swaps as hedges of interest payments associated with its underlying debt.
Interest expense is adjusted to include the payment made or received under the swap agreements. The fair
market value of the swap agreements was estimated based on the current market value of similar
instruments (see Note 6).
Financial instruments that potentially subject the Company to credit risk consist primarily of trade
receivables and interest-bearing investments. Trade receivable credit risk is limited due to the diversity of
the Company’s customers and the Company’s ongoing credit review procedures. Collateral for trade
receivables is generally not required. The Company places its interest-bearing cash equivalents with major
financial institutions.
Share-Based Compensation Cost
Effective October 1, 2005, the Company adopted SFAS No. 123, “Share-Based Payment (Revised
2004),” (“SFAS 123R”) which requires the measurement and recognition of all unvested outstanding stock
based payment awards made to employees and directors based on estimated fair value at date of grant. Prior
to this as permitted under SFAS No. 123, the Company accounted for the issuance of stock options and
restricted stock using the intrinsic value method in accordance with Accounting Principles Opinion No. 25,
Accounting for Stock Issued to Employees (“APB 25”) and related interpretations. Under SFAS 123R,
compensation cost is recognized on a straight-line basis in the Consolidated Statements of Income related
to stock options and restricted stock expected to vest as well as the Company’s employee stock purchase
plans. Prior to this under the aforementioned intrinsic value method, the Company did not recognize
compensation cost related to stock options in the Consolidated Statements of Income when the exercise
price equaled the market price of the underlying stock on the date of grant. However, the Company would
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