Sunbeam 2011 Annual Report Download - page 31

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Management’s Discussion and Analysis
Jarden Corporation Annual Report 2011
New and Pending Accounting Pronouncements
During 2011, 2010 and 2009, the Company adopted various accounting standards. A description of these standards and their effect
on the consolidated financial statements are described in Note 2 to 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 SEC and in reports to its stockholders. Such forward-looking
statements include the Company’s adjusted earnings per share, expected or estimated revenue, the outlook for the Company’s
markets and the demand for its products, estimated sales, segment earnings, earnings per share, reorganization and other charges,
cash flows from operations, consistent profitable growth, free cash flow, future revenues and gross operating and EBITDA margin
improvement requirement and expansion, organic net sales growth, bank leverage ratio, the success of new product introductions,
growth in costs and expenses, the impact of commodities, currencies, and transportation costs and the Company’s ability to
manage its risk in these areas, repurchase of shares of common stock from time to time under the Company’s stock repurchase
program or through any tender offer, and the impact of acquisitions, divestitures, restructurings and other unusual items, including
the Company’s ability to successfully integrate and obtain the anticipated results and synergies from its consummated acquisitions.
These statements are made on the basis of management’s views and assumptions as of the time the statements are made and the
Company undertakes no obligation to update these statements. There can be no assurance, however, that its expectations will
necessarily come to pass. A discussion of factors that could cause results to vary is included in the Company’s periodic and other
reports filed with the SEC.
Quantitative and Qualitative Disclosures About Market Risk
In general, business enterprises can be exposed to market risks including fluctuations in interest rates, foreign currency exchange
rates and certain commodity prices, and that can affect the cost of operating, investing and financing under those conditions. The
Company believes it has moderate exposure to these risks. The Company assesses market risk based on changes in interest rates,
foreign currency rates and commodity prices utilizing a sensitivity analysis that measures the potential loss in earnings, fair values
and cash flows based on a hypothetical 10% change in these rates and prices.
The Company is exposed to interest rate risk on its variable rate debt and price risk on its fixed rate debt. As such, the Company
monitors the interest rate environment and uses interest rate swap agreements to manage its interest rate risk and price risk by
balancing its exposure to fixed and variable interest rates while attempting to minimize interest costs. As of December 31, 2011,
approximately $1.0 billion of the Company’s debt carries a variable rate of interest either by nature or through the use of interest
rate swaps. The remainder of the debt (approximately $2.2 billion) carries a fixed rate of interest either by nature or through the use
of interest rate swaps. A hypothetical 10% change in these interest rates would change interest expense by approximately $4 million
and the fair values of fixed rate debt by approximately $60 million.
While the Company transacts business predominantly in U.S. dollars and most of its revenues are collected in U.S. dollars, a
substantial portion of the Company’s operating costs are denominated in other currencies, such as the Brazilian Real, British Pound,
Canadian dollar, Chinese Renminbi, European Euro, Japanese Yen, Mexican Peso and Venezuelan Bolivar. Changes in the relation
of these and other currencies to the U.S. dollar will affect Company’s sales and profitability and could result in exchange losses.
For 2011, approximately 39% of the Company’s sales were denominated in foreign currencies, the most significant of which were:
European Euro—approximately 13%; and Canadian dollar—approximately 6%. The primary purpose of the Company’s foreign
currency hedging activities is to mitigate the foreign currency exchange rate exposure on the cash flows related to forecasted
inventory purchases and sales. A hypothetical 10% change in foreign currency exchange rates would not have a material effect
on foreign currency gains and losses related to the foreign currency derivatives or the net fair value of the Company’s foreign
currency derivatives.
The Company is exposed to the price risk that the rising cost of commodities has on certain of its raw materials. As such, the
Company monitors the commodities markets and from time to time 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.
A hypothetical 10% change in the commodity prices underlying the derivatives would not have a material effect on the fair value
commodity derivatives and the related gains and losses included in the Company’s results of operations.
The Company is exposed to credit loss in the event of non-performance by the counterparties to its derivative financial instruments,
all of which are highly rated institutions; however, the Company does not anticipate non-performance by such counterparties.
The Company does not enter into derivative financial instruments for trading purposes.