Derivative Financial Instruments and Hedging Activities

9 Months Ended

Jun. 30, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments and Hedging Activities

Derivative Financial Instruments and Hedging Activities

The Company has used forward foreign currency exchange contracts (“derivatives”) to reduce the exchange rate risk of specific foreign currency denominated transactions. These derivatives typically require the exchange of a foreign currency for U.S. dollars at a fixed rate at a future date. At times, the Company has designated these hedges as either cash flow hedges or fair value hedges under FASB ASC Topic 815, Derivatives and Hedging. At June 30, 2013 and 2012, the Company had no forward foreign exchange contracts designated as hedges.

The Company has entered into forward foreign currency exchange contracts to create an economic hedge to manage foreign exchange risk exposure associated with non-functional currency denominated payables resulting from global sourcing activities. The Company has not designated these derivative contracts as hedge transactions under FASB ASC Topic 815, and accordingly, the mark-to-market impact of these derivatives is recorded each period in current earnings. The fair value of foreign currency related derivatives is included in the Condensed Consolidated Balance Sheets in “Other current assets” and “Other current liabilities.” At June 30, 2013, the U.S. dollar equivalent of these outstanding forward foreign exchange contracts totaled $124.6 million in notional amounts, including $79.7 million in contracts to sell Euro, $19.6 million in contracts to sell Australian dollars and $13.0 million in contracts to buy U.K. pound sterling, with the remaining contracts covering a variety of foreign currencies.

Fair Market Value of Financial Instruments — The fair values of all open derivative instruments in the Condensed Consolidated Balance Sheets were as follows (in millions):

	June 30, 2013				September 30, 2012
	Other Current Assets		Other Current Liabilities		Other Current Assets		Other Current Liabilities
Not designated as hedging instruments:
Foreign exchange contracts	$	2.5	$	0.4	$	0.4	$	—

The pre-tax effects of derivative instruments on the Condensed Consolidated Statements of Income consisted of the following (in millions):

	Classification of Gains (Losses)	Three Months Ended June 30,				Nine Months Ended June 30,
		2013		2012		2013		2012
Cash flow hedges:
Reclassified from other comprehensive income (effective portion):
Interest rate contracts	Interest expense	$	—	$	—	$	—	$	(2.2	)
Not designated as hedges:
Foreign exchange contracts	Miscellaneous, net	1.1		3.8		1.2		(3.1		)
		$	1.1	$	3.8	$	1.2	$	(5.3	)