Attached files
file | filename |
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EX-99.1 - EX-99.1 - Spectrum Brands Holdings, Inc. | y91550exv99w1.htm |
EX-23.1 - EX-23.1 - Spectrum Brands Holdings, Inc. | y91550exv23w1.htm |
EX-99.4 - EX-99.4 - Spectrum Brands Holdings, Inc. | y91550exv99w4.htm |
EX-99.2 - EX-99.2 - Spectrum Brands Holdings, Inc. | y91550exv99w2.htm |
8-K - FORM 8-K - Spectrum Brands Holdings, Inc. | y91550e8vk.htm |
EXHIBIT
99.3
Quantitative and Qualitative Disclosures About Market Risk
Market Risk Factors
We,
primarily through Spectrum Brands, have market risk exposure from changes in interest rates, foreign currency exchange rates and
commodity prices. Spectrum Brands uses derivative financial instruments for purposes other than
trading to mitigate the risk from such exposures. A more detailed discussion of our derivative
financial instruments is included in Note 5 to our Consolidated
Financial Statements.
Interest Rate Risk
Spectrum Brands has bank lines of credit at variable interest rates. The general level of U.S.
interest rates, LIBOR and EURIBOR affect interest expense. Spectrum Brands uses interest rate swaps
to manage such risk. The net amounts to be paid or received under interest rate swap agreements are
accrued as interest rates change, and are recognized over the life of the swap agreements as an
adjustment to interest expense from the underlying debt to which the swap is designated. The
related amounts payable to, or receivable from, the contract counter-parties are included in
accrued liabilities or accounts receivable.
Foreign Exchange Risk
Spectrum Brands is subject to risk from sales and loans to and from its subsidiaries as well as
sales to, purchases from and bank lines of credit with, third-party customers, suppliers and
creditors, respectively, denominated in foreign currencies. Foreign currency sales and purchases
are made primarily in Euro, Pounds Sterling, Canadian Dollars, Australian Dollars and Brazilian
Reals. Spectrum Brands manages its foreign exchange exposure from anticipated sales, accounts
receivable, intercompany loans, firm purchase commitments, accounts payable and credit obligations
through the use of naturally occurring offsetting positions (borrowing in local currency), forward
foreign exchange contracts, foreign exchange rate swaps and foreign exchange options. The related
amounts payable to, or receivable from, the contract counter-parties are included in accounts
payable or accounts receivable.
Commodity Price Risk
Spectrum
Brands is exposed to fluctuations in market prices for purchases of
raw materials used in the
manufacturing process, particularly zinc. Spectrum Brands uses commodity swaps and calls to manage such risk. The
maturity of, and the quantities covered by, the contracts are closely correlated to our anticipated
purchases of the commodities. The cost of calls are amortized over the life of the contracts and
are recorded in cost of goods sold, along with the effects of the swap and call contracts. The
related amounts payable to, or receivable from, the counter-parties are included in accounts
payable or accounts receivable.
Sensitivity Analysis
The analysis below is hypothetical and should not be considered a projection of future risks.
Earnings projections are before tax.
As of September 30, 2010, the potential change in fair value of outstanding interest rate
derivative instruments, assuming a 1 percentage point unfavorable shift in the underlying interest
rates would result in a loss of $0.3 million. The net impact on reported earnings, after also
including the reduction in one years interest expense on the related debt due to the same shift in
interest rates, would be a net loss of $0.3 million. As of September 30, 2009, there were no
interest rate derivative instruments outstanding.
As of September 30, 2010, the potential change in fair value of outstanding foreign exchange
derivative instruments, assuming a 10% unfavorable change in the underlying exchange rates would be
a loss of $63.4 million. The net impact on reported earnings, after also including the effect of
the change in the underlying foreign currency-denominated exposures, would be a net gain of $8.9
million. The same hypothetical shift in exchange rates as of September 30, 2009, would have
resulted in a loss of $10.8 million. The net impact on reported earnings, after also including the
effect of the change in the underlying foreign currency-denominated exposures, would be a net gain
of $10.8 million.
1
As of September 30, 2010, the potential change in fair value of outstanding commodity price
derivative instruments, assuming a 10% unfavorable change in the underlying commodity prices would
be a loss of $3.3 million. The net impact on reported earnings, after also including the reduction
in cost of one years purchases of the related commodities due to the same change in commodity
prices, would be a net loss of $0.3 million. The same hypothetical shift in commodity prices as of
September 30, 2009 would have resulted in a loss of $1.5 million. The net impact on reported
earnings, after also including the reduction in cost of one years purchases of the related
commodities due to the same change in commodity prices, would be a net gain of $0.8 million.
2