Financial Instruments and Derivative Financial Instruments | 9 Months Ended |
Sep. 30, 2013 |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Instruments and Hedging Activities Disclosure [Text Block] | Financial Instruments and Derivative Financial Instruments |
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Financial Instruments |
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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 company credit risk. This valuation methodology is Level 2 as defined in the fair value hierarchy. At September 30, 2013, the fair value and book value of revolving credit agreements and long-term debt, excluding capital leases, was $110.9 million. At December 31, 2012, the fair value and book value of revolving credit agreements and long-term debt, excluding capital leases, was $135.6 million. |
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Derivative Financial Instruments |
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The Company uses forward foreign currency exchange contracts to partially reduce risks related to transactions denominated in foreign currencies. The Company offsets fair value amounts related to foreign currency exchange contracts executed with the same counterparty. These contracts hedge firm commitments and forecasted transactions relating to cash flows associated with sales and purchases denominated in currencies other than its functional currencies. Changes in the fair value of forward foreign currency exchange contracts that are effective as hedges are recorded in OCI. Deferred gains or losses are reclassified from OCI to the unaudited condensed consolidated statements of operations in the same period as the gains or losses from the underlying transactions are recorded and are generally recognized in cost of sales. The ineffective portion of derivatives that are classified as hedges is immediately recognized in earnings and is also generally recognized in cost of sales. |
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The Company uses interest rate swap agreements to partially reduce risks related to floating rate financing agreements that are subject to changes in the market rate of interest. Terms of the interest rate swap agreements require the Company to receive a variable interest rate and pay a fixed interest rate. The Company's interest rate swap agreements and its variable rate financings are predominately based upon the three-month LIBOR. Changes in the fair value of interest rate swap agreements that are effective as hedges are recorded in OCI. Deferred gains or losses are reclassified from OCI to the unaudited condensed consolidated statements of operations in the same period as the gains or losses from the underlying transactions are recorded and are generally recognized in interest expense. The ineffective portion of derivatives that are classified as hedges is immediately recognized in earnings and included on the line “Other” in the “Other (income) expense” section of the unaudited condensed consolidated statements of operations. |
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Interest rate swap agreements and certain forward foreign currency exchange contracts held by the Company have been designated as hedges of forecasted cash flows. The Company does not currently hold any nonderivative instruments designated as hedges or any derivatives designated as fair value hedges. |
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The Company periodically enters into foreign currency exchange contracts that do not meet the criteria for hedge accounting. These derivatives are used to reduce the Company's exposure to foreign currency risk related to forecasted purchase or sales transactions or forecasted intercompany cash payments or settlements. Gains and losses on these derivatives are included on the line “Cost of sales” in the unaudited condensed consolidated statements of operations. |
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Cash flows from hedging activities are reported in the unaudited condensed consolidated statements of cash flows in the same classification as the hedged item, generally as a component of cash flows from operations. |
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The Company measures its derivatives at fair value on a recurring basis using significant observable inputs. This valuation methodology 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 the Company's and its counterparties' credit risk into the valuation. |
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Foreign Currency Derivatives: The Company held forward foreign currency exchange contracts with total notional amounts of $326.4 million at September 30, 2013, primarily denominated in euros, Japanese yen, British pounds, Swedish kroner, Mexican pesos and Australian dollars. The Company held forward foreign currency exchange contracts with total notional amounts of $428.7 million at December 31, 2012, primarily denominated in euros, British pounds, Japanese yen, Swedish kroner, Australian dollars and Mexican pesos. The fair value of these contracts approximated a net asset of $0.5 million and $3.9 million at September 30, 2013 and December 31, 2012, respectively. |
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Forward foreign currency exchange contracts that qualify for hedge accounting are generally 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 September 30, 2013, $1.0 million of the amount included in OCI is expected to be reclassified as a loss into the unaudited condensed consolidated statement of operations over the next twelve months, as the transactions occur. |
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Interest Rate Derivatives: At September 30, 2013, the Company has interest rate swap agreements that are expected to hedge interest payments on its future three-month LIBOR borrowings. These contracts begin on December 31, 2014 and extend to December 31, 2018 for a notional amount of $100.0 million. The fair value of interest rate swap agreements was a net asset of $2.0 million at September 30, 2013 and a net liability of $0.7 million at December 31, 2012. |
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The following table summarizes the fair value of derivative instruments reflected on a gross basis by contract at September 30, 2013 and December 31, 2012 as recorded in the unaudited condensed consolidated balance sheets: |
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| Asset Derivatives | | Liability Derivatives | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance Sheet Location | | SEPTEMBER 30 | | DECEMBER 31 | | Balance Sheet Location | | SEPTEMBER 30 | | DECEMBER 31 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2013 | 2012 | 2013 | 2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivatives designated as hedging instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest rate swap agreements | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current | Other current liabilities | | $ | — | | | $ | — | | | Other current liabilities | | $ | — | | | $ | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Long-term | Other non-current assets | | 2 | | | — | | | Other long-term liabilities | | — | | | 0.4 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Foreign currency exchange contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current | Prepaid expenses and other | | 0.8 | | | 6.6 | | | Prepaid expenses and other | | 1 | | | 2.7 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| Other current liabilities | | 2.8 | | | 1.4 | | | Other current liabilities | | 1.6 | | | 1.2 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Long-term | Other non-current assets | | 0.1 | | | — | | | Other non-current assets | | — | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| Other long-term liabilities | | — | | | — | | | Other long-term liabilities | | 0.4 | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Total derivatives designated as hedging instruments | | $ | 5.7 | | | $ | 8 | | | | | $ | 3 | | | $ | 4.3 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Derivatives not designated as hedging instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash Flow Hedges | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest rate swap agreements | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current | Other current liabilities | | $ | — | | | $ | — | | | Other current liabilities | | $ | — | | | $ | 0.4 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Long-term | Other non-current assets | | — | | | 0.1 | | | Other long-term liabilities | | — | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Foreign currency exchange contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current | Prepaid expenses and other | | 3.3 | | | 1.7 | | | Prepaid expenses and other | | 1.6 | | | 1.2 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| Other current liabilities | | 0.4 | | | 0.6 | | | Other current liabilities | | 2.3 | | | 1.3 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Long-term | Other non-current assets | | — | | | — | | | Other long-term liabilities | | — | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Total derivatives not designated as hedging instruments | | $ | 3.7 | | | $ | 2.4 | | | | | $ | 3.9 | | | $ | 2.9 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Total derivatives | | $ | 9.4 | | | $ | 10.4 | | | | | $ | 6.9 | | | $ | 7.2 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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The following table summarizes the offsetting of the fair value of derivative instruments on a gross basis by counterparty at September 30, 2013 and December 31, 2012 as recorded in the unaudited condensed consolidated balance sheets: |
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| | Derivative Assets as of September 30, 2013 | | Derivative Liabilities as of September 30, 2013 | | | | | | | | | | | | | | | | | | | |
| | Gross Amounts of Recognized Assets | | Gross Amounts Offset | | Net Amounts Presented | | Net Amount | | Gross Amounts of Recognized Liabilities | | Gross Amounts Offset | | Net Amounts Presented | | Net Amount | | | | | | | | | | | | | | | | | | | |
Cash Flow Hedges | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest rate swap agreements | | $ | 2 | | | $ | — | | | $ | 2 | | | $ | 2 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | | | | | | | | | | | | | | | | |
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Foreign currency exchange contracts | | 1.6 | | | (1.1 | ) | | 0.5 | | | 0.5 | | | 1.1 | | | (1.1 | ) | | — | | | — | | | | | | | | | | | | | | | | | | | | |
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Total derivatives | | $ | 3.6 | | | $ | (1.1 | ) | | $ | 2.5 | | | $ | 2.5 | | | $ | 1.1 | | | $ | (1.1 | ) | | $ | — | | | $ | — | | | | | | | | | | | | | | | | | | | | |
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| | Derivative Assets as of December 31, 2012 | | Derivative Liabilities as of December 31, 2012 | | | | | | | | | | | | | | | | | | | |
| | Gross Amounts of Recognized Assets | | Gross Amounts Offset | | Net Amounts Presented | | Net Amount | | Gross Amounts of Recognized Liabilities | | Gross Amounts Offset | | Net Amounts Presented | | Net Amount | | | | | | | | | | | | | | | | | | | |
Cash Flow Hedges | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest rate swap agreements | | $ | 0.1 | | | $ | (0.1 | ) | | $ | — | | | $ | — | | | $ | 0.8 | | | $ | (0.1 | ) | | $ | 0.7 | | | $ | 0.7 | | | | | | | | | | | | | | | | | | | | |
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Foreign currency exchange contracts | | 4.4 | | | (0.5 | ) | | 3.9 | | | 3.9 | | | 0.5 | | | (0.5 | ) | | — | | | — | | | | | | | | | | | | | | | | | | | | |
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| | $ | 4.5 | | | $ | (0.6 | ) | | $ | 3.9 | | | $ | 3.9 | | | $ | 1.3 | | | $ | (0.6 | ) | | $ | 0.7 | | | $ | 0.7 | | | | | | | | | | | | | | | | | | | | |
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The following table summarizes the pre-tax impact of derivative instruments for the three and nine months ended September 30, 2013 and 2012 as recorded in the unaudited condensed consolidated statements of operations: |
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| 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 (Ineffective Portion and Amount Excluded from Effectiveness Testing) |
| THREE MONTHS | | NINE MONTHS | | | | THREE MONTHS | | NINE MONTHS | | | | THREE MONTHS | | NINE MONTHS |
Derivatives in Cash Flow Hedging Relationships | 2013 | | 2012 | | 2013 | | 2012 | | | | 2013 | | 2012 | | 2013 | | 2012 | | | | 2013 | | 2012 | | 2013 | | 2012 |
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Cash Flow Hedges | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest rate swap agreements | $ | (0.6 | ) | | $ | (0.3 | ) | | $ | 2.4 | | | $ | (0.2 | ) | | Interest expense | | $ | — | | | $ | 0.3 | | | $ | — | | | $ | (2.9 | ) | | Other | | $ | — | | | $ | (0.3 | ) | | $ | — | | | $ | (1.7 | ) |
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Foreign currency exchange contracts | 0.9 | | | 8.4 | | | (5.7 | ) | | 10.8 | | | Cost of sales | | (0.1 | ) | | 2.7 | | | (1.2 | ) | | 5.9 | | | Cost of sales | | — | | | — | | | — | | | — | |
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Total | $ | 0.3 | | | $ | 8.1 | | | $ | (3.3 | ) | | $ | 10.6 | | | | | $ | (0.1 | ) | | $ | 3 | | | $ | (1.2 | ) | | $ | 3 | | | | | $ | — | | | $ | (0.3 | ) | | $ | — | | | $ | (1.7 | ) |
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| | | | | | | | | | | | | | | | | | | | | Amount of Gain or (Loss) Recognized in Income on Derivative |
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Derivatives Not Designated as Hedging Instruments | | Location of Gain or (Loss) Recognized in Income on Derivative | | 2013 | | 2012 | | 2013 | | 2012 |
Cash Flow Hedges | | | | | | | | | | |
Interest rate swap agreements | | Other | | $ | — | | | $ | (0.1 | ) | | $ | — | | | $ | (0.1 | ) |
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Foreign currency exchange contracts | | Cost of sales | | (1.1 | ) | | (0.1 | ) | | (1.7 | ) | | (1.2 | ) |
Total | | | | $ | (1.1 | ) | | $ | (0.2 | ) | | $ | (1.7 | ) | | $ | (1.3 | ) |