Derivatives

The use of financial instruments, including derivatives, exposes the Company to market risk related to changes in interest rates, foreign currency exchange rates and commodity prices. The Company enters into interest rate swaps related to debt obligations with initial maturities ranging from five to ten years. The Company uses interest rate swap agreements to manage its interest rate exposure and to achieve a desired proportion of variable and fixed-rate debt. These derivatives are designated as fair value hedges based on the nature of the risk being hedged. The Company also uses derivatives to hedge interest rates on anticipated issuances of debt securities occurring within one year or less of the inception date of the derivative, and the Company uses these instruments to reduce the volatility in future interest payments that would be made pursuant to the anticipated debt issuances. The Company also uses derivative instruments, such as forward contracts, to manage the risk associated with the volatility of future cash flows denominated in foreign currencies and changes in fair value resulting from changes in foreign currency exchange rates. The Company’s foreign exchange risk management policy generally emphasizes hedging transaction exposures of one-year duration or less and hedging foreign currency intercompany financing activities with derivatives with maturity dates of one year or less. The Company uses derivative instruments to hedge various foreign exchange exposures, including the following: (i) variability in foreign currency-denominated cash flows, such as the hedges of inventory purchases for products produced in one currency and sold in another currency and (ii) currency risk associated with foreign currency-denominated operating assets and liabilities, such as forward contracts and other instruments that hedge cash flows associated with intercompany financing activities. Additionally, the Company purchases certain raw materials which are subject to price volatility caused by unpredictable factors. Where practical, the Company uses derivatives as part of its commodity risk management process. Generally, the Company's commodity derivative arrangements hedge exposures over a period of time not exceeding one year and tend to be floating-for-fixed price arrangements, which enables the Company to better manage input cost inflation. The Company reports its derivative positions in the Condensed Consolidated Balance Sheets on a gross basis and does not net asset and liability derivative positions with the same counterparty. The Company monitors its positions with, and the credit quality of, the financial institutions that are parties to its financial transactions.

Derivative instruments are accounted for at fair value. The accounting for changes in the fair value of a derivative depends on the intended use and designation of the derivative instrument. For a derivative instrument that is designated and qualifies as a fair value hedge, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings. For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is initially reported as a component of accumulated other comprehensive income (loss) (“AOCI”), net of tax, and is subsequently reclassified into earnings when the hedged transaction affects earnings. The ineffective portion of the gain or loss is recognized in current earnings. Gains and losses from changes in fair values of derivatives that are not designated as hedges for accounting purposes are recognized currently in earnings, and such amounts were not material for the three and nine months ended September 30, 2012 and 2011.

The following table summarizes the Company’s outstanding derivative instruments and their effects on the Condensed Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011 (in millions):



		Assets					Liabilities
Derivatives designated as hedging instruments	Balance Sheet Location	September 30, 2012		December 31, 2011		Balance Sheet Location	September 30, 2012		December 31, 2011
Interest rate swaps	Other assets	$	41.3	$	35.8	Other liabilities	$	—	$	—
Forward interest rate swaps	Prepaid expenses and other	1.0		—		Other accrued liabilities	0.7		—
Foreign exchange contracts on inventory-related purchases	Prepaid expenses and other	0.1		1.9		Other accrued liabilities	0.8		—
Foreign exchange contracts on intercompany borrowings	Prepaid expenses and other	0.3		0.5		Other accrued liabilities	—		—
Commodity swap	Prepaid expenses and other	—		—		Other accrued liabilities	1.7		—
Total assets		$	42.7	$	38.2	Total liabilities	$	3.2	$	—

The fair values of outstanding derivatives that are not designated as hedges for accounting purposes were not material as of September 30, 2012 and December 31, 2011.

The Company is not a party to any derivatives that require collateral to be posted prior to settlement.

Fair Value Hedges

The following table presents the pretax effects of derivative instruments designated as fair value hedges on the Company’s Condensed Consolidated Statements of Operations (in millions):



Derivatives in fair value hedging relationships	Location of gain (loss) recognized in income	Amount of gain (loss) recognized in income
		Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2012			2011			2012			2011
Interest rate swaps	Interest expense, net	$	2.3		$	16.6		$	5.5		$	15.8
Fixed-rate debt	Interest expense, net	$	(2.3	)	$	(16.6	)	$	(5.5	)	$	(15.8	)

The Company did not realize any ineffectiveness related to fair value hedges during the three and nine months ended September 30, 2012 and 2011.

Cash Flow Hedges

The following table presents the pretax effects of derivative instruments designated as cash flow hedges on the Company’s Condensed Consolidated Statements of Operations and AOCI (in millions):



Derivatives in cash flow hedging relationships	Location of gain (loss) recognized in income	Amount of gain (loss) reclassified from AOCI into income
		Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2012			2011			2012			2011
Foreign exchange contracts on inventory-related purchases	Cost of products sold	$	(0.3	)	$	(1.5	)	$	0.5		$	(6.2	)
Foreign exchange contracts on intercompany borrowings	Interest expense, net	—			(0.3		)	(0.1		)	(0.6		)
Commodity swap	Cost of products sold	(1.4		)	—			(1.9		)	—
		$	(1.7	)	$	(1.8	)	$	(1.5	)	$	(6.8	)



Derivatives in cash flow hedging relationships	Amount of gain (loss) recognized in AOCI
	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2012			2011		2012			2011
Foreign exchange contracts on inventory-related purchases	$	(2.0	)	$	2.5	$	(2.1	)	$	(4.5	)
Foreign exchange contracts on intercompany borrowings	(2.0		)	2.9		(0.4		)	0.8
Forward interest rate swaps	(0.8		)	—		0.3			—
Commodity swap	(0.4		)	—		(3.6		)	—
	$	(5.2	)	$	5.4	$	(5.8	)	$	(3.7	)

During the nine months ended September 30, 2012, the Company entered into forward interest rate swap contracts with certain counterparties for an aggregate $250.0 million notional amount (the "Forward Swaps") to swap floating LIBOR rates with a weighted-average fixed rate of 1.8%. The Forward Swaps mature in March 2013. The Forward Swaps are intended to fix the "risk-free" component of the interest rate of the Company's probable debt issuances. The Forward Swaps will unwind and settle when the underlying probable debt issuances are priced, which is expected to occur prior to the maturity date. The Company determined that the Forward Swaps meet the hedge accounting criteria under the relevant authoritative guidance, and accordingly, the Forward Swaps have been classified as cash flow hedges. The Company will continue to recognize any unrealized gains or losses arising from the mark-to-market adjustments of the Forward Swaps in AOCI until the issuance of the debt, subsequent to which the Company will record such gains or losses on the Forward Swaps into earnings over the term of the underlying debt. If it becomes no longer probable that the debt issuance will occur, gains or losses arising from the Forward Swaps, including mark-to-market adjustments, will be recognized in earnings immediately.

In May 2012, the Company entered into a commodity swap contract with a counterparty for an aggregate $14.0 million notional amount (the "Commodity Swap") relating to forecasted monthly purchases of resin. The Commodity Swap will expire on December 31, 2012 with cash settlement occurring monthly through the expiration date. The Company determined that the Commodity Swap meets the hedge accounting criteria under the relevant authoritative guidance, and accordingly, the Commodity Swap has been classified as a cash flow hedge.

The Company did not realize any ineffectiveness related to cash flow hedges during the three and nine months ended September 30, 2012 and 2011. As of September 30, 2012, the Company expects to reclassify net losses of $2.4 million into earnings during the next 12 months.