Sunbeam 2009 Annual Report Download - page 59

At December 31, 2009, unamortized deferred gains resulting from the termination of certain cash flow hedges was approximately
$1.9. These deferred gains are being amortized over the remaining life of the terminated swaps as a credit to interest expense. All these
deferred gains are expected to be amortized to interest expense in 2010.
The interest rate differential received or paid on both the cash flow and fair value hedges is recognized as an adjustment to interest expense.
Cross-Currency Contracts
The Company uses cross-currency swaps to hedge foreign currency risk on certain U.S. dollar-based debt of foreign subsidiaries. At
December 31, 2009, the Company had a $22.6 notional amount cross-currency swap outstanding that exchanges Canadian dollars for U.S.
dollars. This swap exchanges the variable interest rate bases of the U.S. dollar balance (3-month U.S. LIBOR plus a spread of 175 basis points)
and the equivalent Canadian dollar balance (3-month CAD BA plus a spread of 192 basis points). This swap is designated as fair value hedge
on a U.S. dollar-based term loan of a Canadian subsidiary. Changes in the fair market value of this cross-currency swap are recorded as an
offset to the corresponding long-term debt.
Forward Foreign Currency Contracts
The Company uses foreign currency contracts to mitigate the foreign currency exchange rate exposure on the cash flows related to
forecasted inventory purchases and sales and have maturity dates through December 2011. The derivatives used to hedge these forecasted
transactions that meet the criteria for hedge accounting are accounted for as cash flow hedges. The effective portion of the gains or losses
on these derivatives is deferred as a component of AOCI and is recognized in earnings at the same time that the hedged item affects earn-
ings and is included in the same caption in the statements of income as the underlying hedged item. At December 31, 2009, the Company
had approximately $336 notional amount of foreign currency contracts outstanding that are designated as cash flow hedges of forecasted
inventory purchases and sales. For 2009, 2008 and 2007, deferred net (losses) / gains of $20.1, ($7.1) and ($3.2), respectively, were reclassified
from AOCI and recognized in earnings. At December 31, 2009, the deferred net losses of $9.2 within AOCI are primarily expected to be
reclassified to earnings for the year ending December 31, 2010.
At December 31, 2009, the Company had outstanding approximately $49 notional amount of foreign currency contracts that are not
designated as effective hedges for accounting purposes and have maturity dates through August 2011. Fair market value gains or losses are
included in the results of operations and are classified in SG&A.
In January 2010, the Company entered into foreign currency contracts to purchase €125 as a hedge against the Euro purchase price
of the Acquisition (see Note 3). These foreign currency contracts, which mature on April 1, 2010, are not designated as effective hedges for
accounting purposes and the fair market value gains or losses will be included in the results of operations.
Commodity Contracts
The Company enters into commodity-based derivatives in order to mitigate the impact that the rising price of these commodities has
on the cost of certain of the Company’s raw materials. These derivatives provide the Company with maximum cost certainty, and in certain
instances allow the Company to benefit should the cost of the commodity fall below certain dollar levels. At December 31, 2009, the
Company had outstanding approximately $13 notional amount of commodity-based derivatives that are not designated as effective hedges
for accounting purposes and have maturity dates through September 2010. Fair market value gains or losses are included in the results of
operations and are classified in SG&A.
The following table presents the fair value of derivative financial instruments as of December 31, 2009:
December 31, 2009
Fair Value of Derivatives Weighed Average
(In millions) Asset (1) Liability (1) Maturity (years)
Derivatives designated as effective hedges:
Cash flow hedges:
Interest rate swaps $ — $ 15.2 1.3
Foreign currency contracts 3.7 10.4 0.6
Fair value hedges:
Cross-currency swaps — 2.8 2.1
Subtotal 3.7 28.4
Derivatives not designated as effective hedges:
Interest rate swaps - cash flow hedges — 0.9 0.5
Interest rate swaps - fair value hedges — 15.5 7.3
Foreign currency contracts 0.8 1.0 0.3
Commodity contracts 1.3 — 0.4
Subtotal 2.1 17.4
Total $ 5.8 $ 45.8
(1) Consolidated balance sheet locations:
Asset: Other non-current assets
Liability: Other non-current liabilities
Notes to Consolidated Financial Statements
Jarden Corporation Annual Report 2009 (Dollars in millions, except per share data and unless otherwise indicated)
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