Financial Instruments

9 Months Ended

Sep. 30, 2011

Derivative Instruments and Hedging Activities Disclosure [Abstract]

FINANCIAL INSTRUMENTS

FINANCIAL INSTRUMENTS

As more fully described below, the Company enters into certain interest rate swap agreements in order to manage its exposure to changes in interest rates. The amount of the Company’s fixed obligation interest payments may change based upon the expiration dates of its interest rate swap agreements and the level and composition of its debt. The Company also enters into certain foreign currency forward contracts to limit the Company’s exposure to currency fluctuations on the respective hedged items. The Company does not use derivative financial instruments for trading purposes. For additional disclosures on the fair value of financial instruments, also see Note 5 to the interim consolidated financial statements.

Cash Flow Hedge

The Company has an interest rate swap agreement, designated as a cash flow hedge. The agreement is a forward-starting swap which changed the floating rate LIBOR-based interest payments associated with $100 million in forecasted borrowings under the Company’s credit facility to a fixed obligation of 3.24% beginning in October 2010. During the nine months ended September 30, 2010, the Company settled $100 million of its original $200 million arrangement, resulting in expense of $0.6 million being reclassified from other comprehensive income to interest expense. The swap is recorded in other non-current liabilities in the consolidated balance sheet at its fair value at September 30, 2011 and December 31, 2010 of $9.5 million and $5.8 million, respectively. The effective portion of the loss reclassified from accumulated other comprehensive income (loss) to interest expense was $0.8 million for the three month period ended September 30, 2011 and $2.3 million and$0.6 million for the nine month periods ended September 30, 2011 and 2010, respectively. No reclassification occurred for the three month period ended September 30, 2010. The amount recognized in other comprehensive income (loss) during the three month periods ended September 30, 2011 and 2010 was a loss of $2.7 million and $3.5 million, respectively, and during the nine month periods ended September 30, 2011 and 2010 was a loss of $3.6 million and $12.2 million, respectively. A net after tax derivative loss of $1.8 million based upon interest rates at September 30, 2011, is expected to be reclassified from other comprehensive income (loss) to earnings in the next twelve months. Through September 30, 2011 no hedge ineffectiveness has occurred in relation to this hedge.

Other Derivatives

The Company enters into foreign currency forward contracts in order to economically hedge short-term intercompany balances largely denominated in Swiss franc and other major European currencies with its foreign businesses. In accordance with U.S. GAAP, these contracts are considered “derivatives not designated as hedging instruments”. Gains or losses on these instruments are reported in current earnings. The foreign currency forward contracts were reported at their fair value in the consolidated balance sheet at September 30, 2011 and December 31, 2010 in other current assets of $0.1 million and $1.8 million, respectively, and other liabilities of $1.2 million and $0.3 million, respectively. The Company recognized in other charges (income), net a loss of $3.2 million during the three month period and a gain of $1.2 million during the nine month period ended September 30, 2011, respectively. The Company recognized a net gain of $2.1 million and a net loss of $2.5 million during the three and nine month periods ended September 30, 2010, respectively. At September 30, 2011 and December 31, 2010, these contracts had a notional value of $94.4 million and $99.3 million, respectively.