Financial Instruments and Derivative Financial Instruments

12 Months Ended

Dec. 31, 2011

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Financial Instruments and Derivative Financial Instruments

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, which is Level 2 as defined in the fair value hierarchy. At December 31, 2011, the fair value of revolving credit agreements and long-term debt, excluding capital leases, was $369.4 million compared with the book value of $370.7 million. At December 31, 2010, the fair value of revolving credit agreements and long-term debt, excluding capital leases, was $384.6 million compared with the book value of $391.2 million.

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of accounts receivable and derivatives. The large number of customers comprising the Company's customer base and their dispersion across many different industries and geographies mitigates concentration of credit risk on accounts receivable. However, HBB maintains significant accounts receivable balances with several large retail customers. At December 31, 2011 and 2010, receivables from HBB's five largest customers represented 10.2% and 13.6%, respectively, of the Company's net accounts receivable. In addition, under its mining contracts, NACoal recognizes revenue and a related receivable as coal or limerock is delivered or predevelopment services are provided. These mining contracts provide for monthly settlements. NACoal's significant credit concentration is uncollateralized; however, historically minimal credit losses have been incurred. To further reduce credit risk associated with accounts receivable, the Company performs periodic credit evaluations of its customers, but does not generally require advance payments or collateral. The Company enters into derivative contracts with high-quality financial institutions and limits the amount of credit exposure to any one institution.

Derivative Financial Instruments

The Company measures its derivatives at fair value on a recurring basis using significant observable inputs, which 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: NMHG and HBB held forward foreign currency exchange contracts with total notional amounts of $285.1 million and $15.6 million, respectively, at December 31, 2011, primarily denominated in euros, British pounds, Japanese yen, Canadian dollars, Swedish kroner, Australian dollars and Mexican pesos. NMHG and HBB held forward foreign currency exchange contracts with total notional amounts of $338.1 million and $16.5 million, respectively, at December 31, 2010, primarily denominated in euros, British pounds, Japanese yen, Australian dollars, Brazilian Real, Canadian dollars, Swedish kroner and Mexican pesos. The fair value of these contracts approximated a net asset of $5.2 million at December 31, 2011 and a net liability of $2.4 million at December 31, 2010.

Forward foreign currency exchange contracts that qualify for hedge accounting are 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 December 31, 2011, $6.2 million of the amount included in OCI is expected to be reclassified as income into the Consolidated Statement of Operations over the next twelve months, as the transactions occur.

During the year ended December 31, 2009, the Company settled $11.5 million, of its foreign currency exchange contracts ahead of their maturities which were classified in the Consolidated Statements of Cash Flows in operating activities on the line “Other.” During 2010 and 2009, $14.0 million and $15.1 million, respectively, was recognized as a gain in the Consolidated Statements of Operations on the line “Cost of sales" as the forecasted transactions related to previously settled foreign currency exchange contracts occurred.

Interest Rate Derivatives: The following table summarizes the notional amounts, related rates and remaining terms of interest rate swap agreements active at December 31:

	Notional Amount				Average Fixed Rate				Remaining Term at
	2011		2010		2011		2010		December 31, 2011
NMHG	$	204.5	$	206.5	4.5	%	4.5	%	Various, extending to February 2013
HBB	$	40.0	$	65.0	4.6	%	4.6	%	Various, extending to June 2012

In addition to the interest rate swap agreements reflected in the table, at December 31, 2011, HBB holds certain contracts that begin in June 2012 and extend to June 2013. These contracts increase the notional amount to $65.0 million at December 31, 2011, but the amount outstanding at any one time will not exceed the balance of the HBB Term Loan. The fair value of all interest rate swap agreements was a net liability of $7.3 million and $16.3 million at December 31, 2011 and 2010, respectively. The mark-to-market effect of interest rate swap agreements that are considered effective as hedges has been included in OCI. Based on market valuations at December 31, 2011, $3.5 million of the amount included in OCI is expected to be reclassified as expense into the Consolidated Statement of Operations over the next twelve months, as cash flow payments are made in accordance with the interest rate swap agreements.

NMHG: NMHG has interest rate swap agreements that hedge interest payments on the NMHG Term Loan. The interest rate swap agreements held by NMHG on December 31, 2011 are expected to continue to be effective as hedges.

HBB: HBB has interest rate swaps that hedge interest payments on the HBB Term Loan. The interest rate swap agreements held by HBB on December 31, 2011 are expected to continue to be effective as hedges.

The following table summarizes the fair value of derivative instruments at December 31 as recorded in the Consolidated Balance Sheets:

	Asset Derivatives					Liability Derivatives
	Balance sheet location	2011		2010		Balance sheet location	2011		2010
Derivatives designated as hedging instruments
Interest rate swap agreements
Current	Other current liabilities	$	—	$	—	Other current liabilities	$	5.5	$	4.7
Long-term	Other long-term liabilities	—		—		Other long-term liabilities	1.8		11.6
Foreign currency exchange contracts
Current	Prepaid expenses and other	8.1		1.3		Prepaid expenses and other	2.4		1.2
	Other current liabilities	1.3		1.7		Other current liabilities	2.1		1.7
Total derivatives designated as hedging instruments		$	9.4	$	3.0		$	11.8	$	19.2
Derivatives not designated as hedging instruments
Interest rate swap agreements
Current	Other current liabilities	$	—	$	—	Other current liabilities	$	—	$	—
Long-term	Other non-current assets	—		—		Other long-term liabilities	—		—
Foreign currency exchange contracts
Current	Prepaid expenses and other	1.4		0.5		Prepaid expenses and other	0.8		0.3
	Other current liabilities	0.2		0.6		Other current liabilities	0.5		3.3
Total derivatives not designated as hedging instruments		$	1.6	$	1.1		$	1.3	$	3.6
Total derivatives		$	11.0	$	4.1		$	13.1	$	22.8

The following table summarizes the pre-tax impact of derivative instruments for each year ended December 31 as recorded in the Consolidated Statements of Operations:

Derivatives in Cash Flow Hedging Relationships	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 Portion and Amount Excluded from Effectiveness Testing)
	2011			2010			2009				2011			2010			2009				2011		2010		2009
Interest rate swap agreements	$	(1.5	)	$	(7.6	)	$	(5.5	)	Interest expense	$	(10.5	)	$	(12.0	)	$	(10.5	)	N/A	$	—	$	—	$	—
Foreign currency exchange contracts	4.2			0.6			10.5			Cost of sales	(1.3		)	16.5			5.0			N/A	—		—		—
Total	$	2.7		$	(7.0	)	$	5.0			$	(11.8	)	$	4.5		$	(5.5	)		$	—	$	—	$	—

		Amount of Gain or (Loss) Recognized in Income on Derivative
Derivatives Not Designated as Hedging Instruments	Location of Gain or (Loss) Recognized in Income on Derivative	2011			2010			2009
Interest rate swap agreements	Other	$	—		$	0.2		$	0.6
Foreign currency exchange contracts	Cost of sales or Other	(1.5		)	(3.7		)	(10.4		)
Total		$	(1.5	)	$	(3.5	)	$	(9.8	)