Sunbeam 2006 Annual Report Download - page 39

37
Management’s Discussion and Analysis
Jarden Corporation 2006 Annual Report
Stock Based Compensation Expense
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 recognize compensation cost in circumstances where the market price of the
underlying stock exceeds the exercise price of the Company’s stock options on the date of grant.
The fair value of stock options was determined using the Black-Scholes option-pricing model which was previously used for
disclosing the Company’s pro forma information under SFAS 123.The fair value of the market-based restricted stock awards was
determined using a Monte Carlo simulation embedded in a lattice model, and for all other restricted stock awards werebased on
the closing price of the Company’s common stock on the date of grant. The determination of the fair value of the Company’s
stock option awards and restricted stock awards is based on a variety of factors including, but not limited to, the Company’s com-
mon stock price, expected stock price volatility over the expected life of awards, and actual and projected exercise behavior.
Additionally pursuant to SFAS 123r, the Company has estimated forfeitures for options and restricted stock awards at the dates of
grant based on historical experience and will revise as necessary if actual forfeitures differ from these estimates.
Warranty
The Company recognizes warranty costs based on an estimate of amounts required to meet future warranty obligations aris-
ing as part of the sale of its products. In accordance with SFAS No. 5“Accounting for Contingencies,” the Company accrues an
estimated liability at the time of a product sale based on historical claim rates applied to current period sales, as well as any
information applicable to current product sales that may indicate a deviation from such historical claim rate trends.
CONTINGENCIES
The Company is involved in various legal disputes and other legal proceedings that arise from time to time in the ordinary
course of business. In addition, the Company or various of its subsidiaries have been identified by the United States
Environmental Protection Agency or a state environmental agency as a Potentially Responsible Party pursuant to the federal
Superfund Act and/or state Superfund laws comparable to the federal law at various sites. Based on currently available infor-
mation, the Company does not believe that the disposition of any of the legal or environmental disputes the Company is cur-
rently involved in will have a material adverse effect upon the financial condition, results of operations, cash flows or competi-
tive position of the Company. It is possible, that as additional information becomes available, the impact on the Company of
an adverse determination could have a different effect.
NEW AND PENDING ACCOUNTING PRONOUNCEMENTS
During 2006,2005 and 2004,the Company adopted various accounting standards. A description of these standards and
their effect on the consolidated financial statements are described in Note 1to the consolidated financial statements.
Pending standards and their estimated effect on the Company’s consolidated financial statements are described in Note 2
to the consolidated financial statements.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or
on behalf of the Company. The Company may from time to time make written or oral statements that are “forward-looking,”
including statements contained in this report and other filings with the Securities and Exchange Commission and in reports
to its shareholders. Such forward-looking statements include the outlook for Jarden’s markets and the demand for its prod-