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Jarden Corporation Annual Report 2014 25
Fair Value Hedges
At December31, 2014, the Company had $650 million notional amount of interest rate swaps that exchange a xed rate of interest for
variable rate of interest (LIBOR) plus a weighted average spread of approximately 605 basis points. These oating rate swaps, which
were entered into during June 2014, are designated as fair value hedges against $650 million of principal on the 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.
Cash Flow Hedges
At December31, 2014, 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, 2014, 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 (“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 June 2016. 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, 2014, the Company had approximately $467 million notional amount outstanding of forward 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, 2014, the Company had
approximately $369 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 2015. 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, 2014, the Company had approximately $24 million notional amount outstanding of commodity-based derivatives that
are not designated as effective hedges for accounting purposes and have maturity dates through December 2015. Fair market value
gains or losses are included in the results of operations and are classied in cost of sales.
Management’s Discussion and Analysis
Jarden Corporation Annual Report 2014