Derivative Instruments and Risk Management

6 Months Ended

Jun. 30, 2012

Derivative Instruments and Risk Management

8. Derivative Instruments and Risk Management

Changes in interest rates, foreign exchange rates, 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.

The Company formally designates and documents qualifying instruments as hedges of underlying exposures when it enters into derivative arrangements. 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.

For additional details on the Company’s risk management activities and accounting for the Company’s derivative instruments, refer to the Company’s Form 10-K.

The following table summarizes 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 (“OCI”):

Fair Value of Derivative Instruments

		Notional Amount		Fair Value at
(In millions)	Balance Sheet Location	June 30, 2012		June 30, 2012		December 31, 2011
Derivatives designated as hedging instruments
Asset Derivatives
Diesel fuel contracts	Other current assets	$	0.0	$	0.0	$	0.1
Foreign exchange contracts	Other current assets	$	23.6		0.8		1.1
Total assets				$	0.8	$	1.2
Liability Derivatives
Diesel fuel contract	Accounts payable and accrued expenses	$	10.0	$	0.9	$	0.0
Total liabilities				$	0.9	$	0.0
Derivatives not designated as hedging instruments
Asset Derivatives
Foreign exchange contracts	Other current assets	$	39.6	$	0.4	$	0.0
Equity derivatives	Other current assets	$	20.2		3.1		2.0
Total assets				$	3.5	$	2.0

		Amount of Gain (Loss) Recognized in OCI from Derivatives for the Three Months Ended
	Income Statement Location	June 30, 2012			July 1, 2011
Derivatives designated as hedging instruments
Foreign exchange contracts (net of taxes)	Other comprehensive income (loss)	$	0.2		$	0.2
Diesel fuel contracts (net of taxes)	Other comprehensive income (loss)		(1.0	)		(0.6	)
Total gain (loss) recognized in OCI		$	(0.8	)	$	(0.4	)

		Amount of Gain (Loss) Recognized in Income for the Three  Months Ended
		June 30, 2012			July 1, 2011
Derivatives not designated as hedging instruments
Equity derivatives	Selling, general and administrative expenses	$	2.6		$	0.3
Foreign exchange contracts	Selling, general and administrative expenses		0.7			(0.2	)
Total gain (loss) recognized in income		$	3.3		$	0.1
		Amount of Gain (Loss) Recognized in OCI from Derivatives for the Six Months Ended
	Income Statement Location	June 30, 2012			July 1, 2011
Derivatives designated as hedging instruments
Foreign exchange contracts (net of taxes)	Other comprehensive income (loss)	$	(0.3	)	$	(0.4	)
Diesel fuel contracts (net of taxes)	Other comprehensive income (loss)		(0.6	)		(0.2	)
Total gain (loss) recognized in OCI		$	(0.9	)	$	(0.6	)
		Amount of Gain (Loss) Recognized in Income for the Six Months Ended
		June 30, 2012			July 1, 2011
Derivatives not designated as hedging instruments
Equity derivatives	Selling, general and administrative expenses	$	4.0		$	2.3
Foreign exchange contracts	Selling, general and administrative expenses		0.7			0.9
Total gain (loss) recognized in income		$	4.7		$	3.2

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 amount of gain (loss) on derivative instruments reclassified from other comprehensive income to current period earnings was immaterial for the six months ended June 30, 2012 and July 1, 2011.