Sunbeam 2010 Annual Report Download - page 46

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Notes to Consolidated Financial Statements
Jarden Corporation Annual Report 2010 (Dollars in millions, except per share data and unless otherwise indicated)
The Company’s debt maturities for the five years following December 31, 2010 and thereafter are as follows:
At December 31, 2010 and 2009, unamortized deferred debt issue costs were $47.6 and $33.8, respectively. These costs are included
in “Other assets” on the consolidated balance sheets and are being amortized over the respective terms of the underlying debt.
10. Derivative Financial Instruments
From time to time, the Company enters into derivative transactions to hedge its exposures to interest rate, foreign currency rate and
commodity price fluctuations. The Company does not enter into derivative transactions for trading purposes.
Interest Rate Contracts
The Company manages its fixed and floating rate debt mix using interest rate swaps. The Company uses fixed and floating rate
swaps to alter its exposure to the impact of changing interest rates on its consolidated results of operations and future cash outflows
for interest. Floating rate swaps are used, depending on market conditions, to convert the fixed rates of long-term debt into short-
term variable rates. Fixed rate swaps are used to reduce the Company’s risk of the possibility of increased interest costs. Interest rate
swap contracts are therefore used by the Company to separate interest rate risk management from the debt funding decision.
Fair Values Hedges
At December 31, 2010, the Company has $350 notional amount outstanding in swap agreements that exchange a fixed rate of
interest for variable rate of interest (LIBOR) plus an average spread of approximately 480 basis points. These floating rate swaps,
which were entered into during the fourth quarter of 2010, are designated as fair value hedges against $350 of principal on the
7 1/2% senior subordinated notes due 2017 for the remaining life of these notes. The effective portion of the fair value gains or
losses on these swaps is offset by fair value adjustments in the underlying debt.
During 2010, the Company terminated $625 notional amount outstanding in swap agreements that exchange a fixed rate of interest
for a variable rate of interest and received $3.1 in net proceeds. These floating rate swaps were not designated as effective hedges
for accounting purposes and the fair market value gains or losses are included in the results of operations.
Cash Flow Hedges
During 2010, the Company entered into a $200 notional amount forward-starting interest rate swap, which became effective
commencing December 31, 2010, that exchanges a variable rate of interest (LIBOR) for a fixed rate of interest of approximately 1.4%
over the term of the agreement, which matures on December 31, 2013. Additionally, during 2010, the Company entered into a $200
notional amount forward-starting interest rate swap, that becomes effective commencing December 30, 2011, that will exchange a
variable rate of interest (LIBOR) for an average fixed rate of interest of approximately 1.8% over the term of the agreement, which
matures on December 31, 2013.
At December 31, 2010, the Company had $650 notional amount outstanding in swap agreements (including the $200 notional
amount forward-starting swap that becomes effective commencing December 30, 2011) that exchange variable interest rates
(LIBOR) for fixed interest rates over the terms of the agreements and are designated as cash flow hedges of the interest rate risk
attributable to forecasted variable interest payments and have maturity dates through December 2013. At December 31, 2010, the
weighted average fixed rate of interest on these swaps, excluding the forward-starting swap, was approximately 1.7%. The after-tax
fair value gains or losses on the effective portion of these swaps are included as a component of AOCI.
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, 2010, the Company had a $22.4 notional amount cross-currency swap that exchanges Canadian dollars for U.S.
Years Ending December 31,
Amount
(in millions)
2011 $ 434.6
2012 157.5
2013 14.0
2014 697.3
2015 232.4
Thereafter 1,742.4
Total principal payments 3,278.2
Net discount and other (37.6)
Total $ 3,240.6
44