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24 Jarden Corporation Annual Report 2013
Commercial commitments, such as standby and commercial letters of credit, are items that the Company could be obligated to pay in
the future and are also not included in the above table.
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 uctuations. The Company does not enter into derivative transactions for trading purposes.
Interest Rate Contracts
The Company manages its xed and oating rate debt mix using interest rate swaps. The Company uses xed and oating rate swaps
to alter its exposure to the impact of changing interest rates on its consolidated results of operations and future cash outows for
interest. Floating rate swaps are used, depending on market conditions, to convert the xed 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.
Cash Flow Hedges
During 2013, 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 xed rate of interest of approximately 1.9% over the term of the agreements, which mature through
June 2020. These swaps are forward-starting and are effective commencing December31, 2015. The Company has designated these
swaps as cash ow hedges of the interest rate risk attributable to forecasted variable interest (LIBOR) payments.
At December31, 2013, the Company had $850 million notional amount outstanding in swap agreements, which includes $350 million
notional amount of forward-starting swaps that become effective commencing December31, 2015, that exchange a variable rate of
interest (LIBOR) for xed interest rates over the terms of the agreements and are designated as cash ow hedges of the interest rate
risk attributable to forecasted variable interest payments and have maturity dates through June 2020. At December31, 2013, the
weighted average xed rate of interest on these swaps, excluding the forward-starting swaps, was approximately 1.3%. The effective
portion of the after-tax fair value gains or losses on these swaps is included as a component of accumulated other comprehensive
income (loss) (“AOCI”).
Foreign Currency Contracts
The Company uses forward foreign currency contracts to mitigate the foreign currency exchange rate exposure on the cash ows
related to forecasted inventory purchases and sales and have maturity dates through July 2015. The derivatives used to hedge these
forecasted transactions that meet the criteria for hedge accounting are accounted for as cash ow 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 earnings and is included in the same caption in the statements of operations as the underlying hedged item. At
December31, 2013, the Company had approximately $525 million notional amount outstanding of foreign currency contracts that are
designated as cash ow hedges of forecasted inventory purchases and sales.
The Company also uses foreign currency contracts, which include forward foreign currency contracts and foreign currency options,
to mitigate the foreign currency exposure of certain other foreign currency transactions. At December31, 2013, the Company had
approximately $281 million notional amount outstanding of these foreign currency contracts that are not designated as effective
hedges for accounting purposes and have maturity dates through December 2014. Fair market value gains or losses are included in the
results of operations and are classied in SG&A.
Commodity Contracts
The Company enters into commodity-based derivatives in order to mitigate the risk that the rising price of these commodities could
have on the cost of certain of the Company’s raw materials. These commodity-based derivatives provide the Company with cost
certainty, and in certain instances, allow the Company to benet should the cost of the commodity fall below certain dollar thresholds.
At December31, 2013, the Company had approximately $4 million notional amount outstanding of commodity-based derivatives that
are not designated as effective hedges for accounting purposes and have maturity dates through December 2014. Fair market value
gains or losses are included in the results of operations and are classied in SG&A.
Management’s Discussion and Analysis
Jarden Corporation Annual Report 2013