Sunbeam 2011 Annual Report Download - page 26

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Management’s Discussion and Analysis
Jarden Corporation Annual Report 2011
Year(s)
(In millions) Total 1 2-3 4-5 After 5
Debt (1) $ 4,095.8 $ 413.3 $ 484.7 $ 1,051.9 $ 2,145.9
Operating leases 317.2 66.4 106.3 74.1 70.4
Unconditional purchase obligations 114.5 56.3 46.0 11.7 0.5
Other current and non-current obligations 24.9 20.1 1.2 1.1 2.5
Total $ 4,552.4 $ 556.1 $ 638.2 $ 1,138.8 $ 2,219.3
Contractual Obligations and Commercial Commitments
The following table includes aggregate information about the Company’s contractual obligations as of December 31, 2011 and the
periods in which payments are due. Certain of these amounts are not required to be included in its consolidated balance sheets:
The table above does not reflect tax reserves and accrued interest thereon of $52.6 million and $5.2 million, respectively, as the
Company cannot reasonably predict the timing of the settlement of the related tax positions beyond 2012. See Note 12—”Taxes
on Income” to the consolidated financial statements for additional information on the Company’s unrecognized tax benefits at
December 31, 2011.
Commercial commitments are items that the Company could be obligated to pay in the future and are not included in the above
table. At December 31, 2011, the Company had approximately $40 million in standby and commercial letters of credit that expire
through December 2013.
Risk Management
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 Value Hedges
During 2011, the Company terminated $350 million notional amount outstanding in swap agreements that exchange a fixed rate
of interest for a variable rate (LIBOR) of interest and received $8.4 million in net proceeds. These floating rate swaps, which were
to mature in 2017, were designated as fair value hedges against $350 million of principal on the 7 1/2% senior subordinated notes
due 2017. The gain on the termination of these swaps is deferred and is being amortized over the remaining contractual term of the
terminated swaps.
Cash Flow Hedges
During 2011, the Company entered into an aggregate $350 million notional amount of interest rate swaps that exchange a variable
rate of interest (LIBOR) for an average fixed rate of interest of approximately 1.5% over the term of the agreements, which mature
on December 31, 2015. These swaps are forward-starting and are effective commencing December 31, 2013. The Company has
designated these swaps as cash flow hedges of the interest rate risk attributable to forecasted variable interest (LIBOR) payments.
At December 31, 2011, the Company had $750 million notional amount outstanding in swap agreements, which include $350 million
notional amount of forward-starting swaps that become effective commencing December 31, 2013, that exchange variable rates
of interest (LIBOR) for fixed interest rates over the terms of the agreements and are designated as cash flow hedges of the interest
(1) These amounts reflect scheduled principal payments and the expected future interest expense related to the debt at December 31, 2011 that
carries a fixed rate of interest. As of December 31, 2011, approximately $2.2 billion of the Company’s debt is considered fixed-rate debt, by nature
or through use of interest rate swaps. As of December 31, 2011, approximately $1.0 billion of the Company’s debt is considered variable-rate debt,
by nature or through use of interest rate swaps with a weighted average interest rate of approximately 2.4%. For further information regarding the
Company’s debt and interest rate structure, refer to Note 9—”Debt” and Note 10—”Derivative Financial Instruments” to the consolidated
financial statements.