Financial Instruments and Derivative Financial Instruments

9 Months Ended

Sep. 30, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Financial Instruments and Derivative Financial Instruments

Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturities of these instruments. The fair values of revolving credit agreements and long-term debt, excluding capital leases, were determined using current rates offered for similar obligations taking into account subsidiary credit risk. This valuation methodology is Level 2 as defined in the fair value hierarchy. At September 30, 2012, the fair value and book value of revolving credit agreements and long-term debt, excluding capital leases, was $139.3 million. At December 31, 2011, the fair value of revolving credit agreements and long-term debt, excluding capital leases, was $223.3 million compared with the book value of $225.4 million.

Derivative Financial Instruments

The Company uses forward foreign currency exchange contracts to partially reduce risks related to transactions denominated in foreign currencies. The Company offsets fair value amounts related to foreign currency exchange contracts executed with the same counterparty. These contracts hedge firm commitments and forecasted transactions relating to cash flows associated with sales and purchases denominated in currencies other than its functional currencies. Changes in the fair value of forward foreign currency exchange contracts that are effective as hedges are recorded in accumulated other comprehensive income (loss) (“OCI”). Deferred gains or losses are reclassified from OCI to the unaudited condensed consolidated statements of comprehensive income (loss) in the same period as the gains or losses from the underlying transactions are recorded and are generally recognized in cost of sales. The ineffective portion of derivatives that are classified as hedges is immediately recognized in earnings and generally recognized in cost of sales.

The Company uses interest rate swap agreements to partially reduce risks related to floating rate financing agreements that are subject to changes in the market rate of interest. Terms of the interest rate swap agreements require the Company to receive a variable interest rate and pay a fixed interest rate. The Company's interest rate swap agreements and its variable rate financings are predominately based upon the three-month LIBOR. Changes in the fair value of interest rate swap agreements that are effective as hedges are recorded in OCI. Deferred gains or losses are reclassified from OCI to the unaudited condensed consolidated statements of comprehensive income (loss) in the same period as the gains or losses from the underlying transactions are recorded and are generally recognized in interest expense. The ineffective portion of derivatives that are classified as hedges is immediately recognized in earnings and included on the line “Other” in the “Other (income) expense” section of the unaudited condensed consolidated statements of comprehensive income (loss).

Interest rate swap agreements and forward foreign currency exchange contracts held by the Company have been designated as hedges of forecasted cash flows. The Company does not currently hold any nonderivative instruments designated as hedges or any derivatives designated as fair value hedges.

The Company periodically enters into foreign currency exchange contracts that do not meet the criteria for hedge accounting. These derivatives are used to reduce the Company's exposure to foreign currency risk related to forecasted purchase or sales transactions or forecasted intercompany cash payments or settlements. Gains and losses on these derivatives are included on the line “Cost of sales” or “Other” in the “Other (income) expense” section of the unaudited condensed consolidated statements of comprehensive income (loss).

Cash flows from hedging activities are reported in the unaudited condensed consolidated statements of cash flows in the same classification as the hedged item, generally as a component of cash flows from operations.

The Company measures its derivatives at fair value on a recurring basis using significant observable inputs. This valuation methodology is Level 2 as defined in the fair value hierarchy. The Company uses a present value technique that incorporates the LIBOR swap curve, foreign currency spot rates and foreign currency forward rates to value its derivatives, including its interest rate swap agreements and foreign currency exchange contracts, and also incorporates the effect of its subsidiary and counterparty credit risk into the valuation.

Foreign Currency Derivatives: The Company held forward foreign currency exchange contracts with total notional amounts of $447.7 million at September 30, 2012, primarily denominated in euros, British pounds, Japanese yen, Swedish kroner, Mexican pesos, Australian dollars and Brazilian real. The Company held forward foreign currency exchange contracts with total notional amounts of $395.6 million at December 31, 2011, primarily denominated in euros, British pounds, Japanese yen, Australian dollars, Swedish kroner and Mexican pesos. The fair value of these contracts approximated a net asset of $11.8 million and $4.8 million at September 30, 2012 and December 31, 2011, respectively.

Forward foreign currency exchange contracts that qualify for hedge accounting are generally used to hedge transactions expected to occur within the next twelve months. The mark-to-market effect of forward foreign currency exchange contracts that are considered effective as hedges has been included in OCI. Based on market valuations at September 30, 2012, $7.0 million of the amount included in OCI is expected to be reclassified as income into the consolidated statement of comprehensive income (loss) over the next twelve months, as the transactions occur.

Interest Rate Derivatives: The Company has interest rate swap agreements that hedge interest payments on its three-month LIBOR borrowings. The following table summarizes the notional amounts, related rates and remaining terms of active interest rate swap agreements at September 30, 2012 and December 31, 2011:

Notional Amount				Average Fixed Rate
SEPTEMBER 30 2012		DECEMBER 31 2011		SEPTEMBER 30 2012		DECEMBER 31 2011		Remaining Term at September 30, 2012
$	56.5	$	204.5	4.2	%	4.5	%	Various, extending to February 2013

In addition to the interest rate swap agreements reflected in the table, at September 30, 2012, the Company holds certain contracts that begin in December 31, 2014 and extend to December 31, 2018 for a notional amount of $100.0 million. The fair value of all interest rate swap agreements was a net liability of $1.2 million and $5.7 million at September 30, 2012 and December 31, 2011, respectively.

In connection with the refinancing of the Company's term loan during the second quarter of 2012, the Company determined that the hedged forecasted transactions associated with its interest rate swap agreements were no longer probable of occurring. As such, the Company recognized a loss of $1.4 million in the second quarter of 2012 related to the ineffectiveness of the Company's interest rate swap agreements. Any additional charges related to these interest rate swap agreements are immediately recognized in earnings. These expenses are recorded in the unaudited condensed consolidated statement of comprehensive income (loss) on the line “Other.”

The following table summarizes the fair value of derivative instruments reflected on a gross basis at September 30, 2012 and December 31, 2011 as recorded in the unaudited condensed consolidated balance sheets:

	Asset Derivatives					Liability Derivatives
	Balance Sheet Location	SEPTEMBER 30 2012		DECEMBER 31 2011		Balance Sheet Location	SEPTEMBER 30 2012		DECEMBER 31 2011
Derivatives designated as hedging instruments
Interest rate swap agreements
Current	Other current liabilities	$	—	$	—	Other current liabilities	$	—	$	4.3
Long-term	Other long-term liabilities	—		—		Other long-term liabilities	0.3		1.4
Foreign currency exchange contracts
Current	Prepaid expenses and other	8.3		7.7		Prepaid expenses and other	—		2.4
	Other current liabilities	1.9		1.3		Other current liabilities	0.5		2.1
Total derivatives designated as hedging instruments		$	10.2	$	9.0		$	0.8	$	10.2
Derivatives not designated as hedging instruments
Interest rate swap agreements
Current	Other current liabilities	$	—	$	—	Other current liabilities	$	0.9	$	—
Long-term	Other non-current assets	0.1		—		Other long-term liabilities	0.1		—
Foreign currency exchange contracts
Current	Prepaid expenses and other	3.0		1.4		Prepaid expenses and other	0.9		0.8
	Other current liabilities	—		0.2		Other current liabilities	—		0.5
Total derivatives not designated as hedging instruments		$	3.1	$	1.6		$	1.9	$	1.3
Total derivatives		$	13.3	$	10.6		$	2.7	$	11.5

The following table summarizes the pre-tax impact of derivative instruments for the three and nine months endedSeptember 30, 2012 and 2011 as recorded in the unaudited condensed consolidated statements of comprehensive income (loss):

	Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)											Location of Gain or (Loss) Reclassified from OCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from OCI into Income (Effective Portion)											Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
	THREE MONTHS					NINE MONTHS							THREE MONTHS					NINE MONTHS							THREE MONTHS					NINE MONTHS
Derivatives in Cash Flow Hedging Relationships	2012			2011		2012			2011				2012		2011			2012			2011				2012			2011		2012			2011
Interest rate swap agreements	$	(0.3	)	$	0.2	$	(0.2	)	$	(1.1	)	Interest expense	$	0.3	$	(2.2	)	$	(2.9	)	$	(6.4	)	Other	$	(0.3	)	$	—	$	(1.7	)	$	—
Foreign currency exchange contracts	8.4			3.2		10.8			(1.9		)	Cost of sales	2.7		(0.8		)	5.9			(2.3		)	N/A	—			—		—			—
Total	$	8.1		$	3.4	$	10.6		$	(3.0	)		$	3.0	$	(3.0	)	$	3.0		$	(8.7	)		$	(0.3	)	$	—	$	(1.7	)	$	—
																									Amount of Gain or (Loss) Recognized in Income on Derivative
																									THREE MONTHS					NINE MONTHS
Derivatives Not Designated as Hedging Instruments																								Location of Gain or (Loss) Recognized in Income on Derivative	2012			2011		2012			2011
Interest rate swap agreements																								Other	$	(0.1	)	$	—	$	(0.1	)	$	—
Foreign currency exchange contracts																								Cost of Sales or Other	(0.1		)	2.8		(1.2		)	(1.4		)
Total																									$	(0.2	)	$	2.8	$	(1.3	)	$	(1.4	)