Derivative Instruments And Risk Management

12 Months Ended

Dec. 31, 2011

Derivative Instruments And Risk Management [Abstract]

Derivative Instruments And Risk Management

3. Derivative Instruments and Risk Management

Changes in interest rates, foreign exchange rates, the price of the Company's Common Stock and commodity prices expose the Company to market risk. The Company manages these risks by the use of derivative instruments, such as cash flow hedges, diesel hedge contracts, equity derivatives and foreign exchange forward contracts. The Company does not use derivatives for trading or speculative purposes.

When it enters into derivative arrangements, the Company formally designates and documents qualifying instruments as hedges of underlying exposures. Changes in the fair value of derivatives designated as hedges and qualifying for hedge accounting are recorded in other comprehensive income and reclassified into earnings during the period in which the hedged exposure affects earnings. The Company reviews the effectiveness of its hedging instruments on a quarterly basis. If the Company determines that a derivative instrument is no longer highly effective in offsetting changes in fair values or cash flows, it recognizes in current period earnings the hedge ineffectiveness and discontinues hedge accounting with respect to the derivative instrument. Changes in fair value for derivatives not designated as hedges or those not qualifying for hedge accounting are recognized in current period earnings. Upon termination of cash flow hedges, the Company reclassifies gains and losses from other comprehensive income based on the timing of the underlying cash flows, unless the termination results from the failure of the intended transaction to occur in the expected timeframe. Such untimely transactions require immediate recognition in earnings of gains and losses previously recorded in other comprehensive income.

During 2011, the Company used derivative instruments to mitigate risk, some of which were designated as hedging instruments. The tables following the discussion of the derivative instruments summarize the fair value of the Company's derivative instruments and the effect of derivative instruments on the Company's consolidated statements of income and on other comprehensive income.

Derivatives Designated as Hedging Instruments

Diesel Fuel Hedges

The Company uses independent freight carriers to deliver its products. These carriers charge the Company a basic rate per mile that is subject to a mileage surcharge for diesel fuel price increases. During 2011, the Company entered into hedge agreements with financial counterparties. Under the hedge agreements, the Company agreed to pay a fixed price per gallon of diesel fuel determined at the time the agreements were executed and to receive a floating rate payment reflecting the variable common carriers' mileage surcharge. The floating rate payment is determined on a monthly basis, based on the average price of the Department of Energy's Diesel Fuel Index price during the applicable month and is designed to offset any increase or decrease in fuel surcharge payments that the Company pays to it common carriers. The agreements cover approximately 35% of the Company's diesel fuel requirements for 2011 and 33% of the Company's total 2012 diesel fuel requirements. The Company uses the hedge agreements to mitigate the volatility of diesel fuel prices and related fuel surcharges, and not to speculate in the future price of diesel fuel. The hedge agreements are designed to add stability to the Company's product costs, enabling the Company to make pricing decisions and lessen the economic impact of abrupt changes in diesel fuel prices over the term of the contract.

Since the agreements qualify for hedge accounting, changes in the fair value of cash flow hedge agreements are recorded in Other Comprehensive Income and reclassified to earnings when the hedged transactions affect earnings.

Foreign Currency

The Company is subject to exposure from fluctuations in foreign currency exchange rates, primarily U.S. Dollar/Euro, U.S. Dollar/British Pound, U.S. Dollar/Canadian Dollar, U.S. Dollar/Mexican Peso, U.S. Dollar/Australian Dollar, U.S. Dollar/Brazilian Real and U.S. Dollar/Chinese Yuan.

The Company, from time to time, enters into forward exchange contracts to reduce the impact of foreign exchange rate fluctuations related to anticipated but not yet committed sales or purchases denominated in the U.S. Dollar, Canadian dollar, British pound and Euro. Certain of the Company's subsidiaries entered into forward exchange contracts to protect the Company from the risk that, due to changes in currency exchange rates, it would be adversely affected by net cash outflows. The face value of the unexpired contracts as of December 31, 2011 totaled U.S. $30.3 million. The contracts qualified as foreign currency cash flow hedges, and, therefore, changes in the fair value of the contracts were recorded in Other Comprehensive Income (Loss) and reclassified to earnings when the hedged transaction affected earnings.

Derivatives not Designated as Hedging Instruments

Equity Derivatives

The Company has entered into equity derivative contracts covering its own stock in order to minimize its liability resulting from changes in quoted fair values of Company stock, to participants in its Executive Deferred Compensation Plan who have investments under that plan in a notional Company stock fund. The contracts are settled in cash.

The following tables summarize the fair value of the Company's derivative instruments and the effect of derivative instruments on our Consolidated Statements of Income and on other comprehensive income ("OCI"):

	0000000000000		0000000000000			0000000000000			0000000000000
		Notional Amount			Fair Value at December 31,
Fair Value of Derivative Instruments (In millions)	Balance Sheet Location	December 31, 2011			2011			2010
Derivatives designated as hedging instruments
Asset Derivatives
Diesel fuel contracts	Other current assets	$	3.9		$	0.1		$	0.6
Foreign exchange contracts	Accounts receivable	$	30.3			1.1			0.0
Total assets					$	1.2		$	0.6
Liability Derivatives
Foreign exchange contracts	Accounts payable and accrued expenses	$	0.0		$	0.0		$	1.0
Total liabilities					$	0.0		$	1.0
Derivatives not designated as hedging instruments
Asset Derivatives
Equity derivatives	Other current assets	$	17.2		$	2.0			0.4
Total assets					$	2.0		$	0.4
Liability Derivatives
Foreign exchange contracts	Accounts payable and accrued expenses	$	0.0		$	0.0		$	0.1
Total liabilities					$	0.0		$	0.1
	0000000000000		0000000000000			0000000000000			0000000000000
	Income Statement Location	Amount of Gain (Loss) Recognized in OCI from Derivatives for the Year ended December 31,
		2011			2010			2009
Derivatives designated as hedging instruments
Foreign exchange contracts (net of taxes)	Other comprehensive income (loss)	$	1.5		$	(0.1	)	$	(0.6	)
Diesel fuel contracts (net of taxes)	Other comprehensive income (loss)		(0.3	)		0.4			0.0
Interest rate collars and swaps (net of taxes)	Other comprehensive income (loss)		0.0			3.1			1.7
Total gain (loss) recognized in OCI		$	1.2		$	3.4		$	1.1
	0000000000000		0000000000000			0000000000000			0000000000000
		Amount of Gain (Loss) Recognized in Income for the Year ended December 31,
		2011			2010			2009
Derivatives not designated as hedging instruments
Equity derivatives	Selling, general and administrative expenses	$	3.9		$	1.4		$	0.9
Foreign exchange contracts	Selling, general and administrative expenses		(0.1	)		(0.2	)		0.0
Diesel fuel contracts	Cost of sales		0.0			(0.5	)		0.5
Total gain (loss) recognized in income		$	3.8		$	0.7		$	1.4

Other than the reclassification of losses related to the termination of interest rate swap and interest rate collar agreements in the fourth quarter of 2010, there were no other material reclassifications of gains (losses) from other comprehensive income to earnings for the years ended December 31, 2011 and December 31, 2010. The notional amount of a financial instrument is the nominal or face amount that is used to calculate payments made on that instrument. The fair values of derivative instruments disclosed above were measured based on Level 2 inputs.

The fair value of the foreign exchange contracts is based on observable forward rates in commonly quoted intervals for the full term of the contract.

The fair value of the equity derivatives is based on the quoted market prices of Company stock at the end of each reporting period.

The fair value of the diesel fuel contracts is based on home heating oil futures prices for the duration of the contract.