DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS

DERIVATIVES

        The Company is exposed to market risk due to changes in currency exchange rates, commodities pricing and interest rates. To manage that risk, the Company enters into certain derivative financial instruments, when available on a cost-effective basis, to hedge its underlying economic exposure. These financial instruments are classified as Level 2 of the fair value hierarchy for both periods presented. For the years ended December 31,2012 and 2011, there were no transfers between levels in the fair value hierarchy. Derivative financial instruments are not used for speculative purposes.

        The following table summarizes the Company’s fair value of outstanding derivatives designated as hedging instruments:

		December 31,
(In millions)	Balance Sheet Location	2012			2011
Cash flow hedges:
Foreign exchange contracts	Other assets	$	—		$	5.2
Foreign exchange contracts	Accrued expenses	(5.1		)	(0.1		)
Net asset/(liability) of derivatives designated as hedging instruments		$	(5.1	)	$	5.1

        The Company’s derivative financial instruments present certain market and counterparty risks; however, concentration of counterparty risk is mitigated as the Company deals with a variety of major banks worldwide whose long-term debt is rated A or higher by Standard & Poor’s Rating Service, Fitch Ratings, or Moody’s Investors Service, Inc. In addition, only conventional derivative financial instruments are used. The Company would not be materially impacted if any of the counterparties to the derivative financial instruments outstanding at December 31, 2012 failed to perform according to the terms of its agreement. At this time, the Company does not require collateral or any other form of securitization to be furnished by the counterparties to its derivative financial instruments.

Cash Flow Hedges-Foreign Exchange Contracts

        The Company uses foreign exchange contracts to hedge forecasted transactions, primarily intercompany purchases for up to 18 months, on certain foreign currencies and designates these derivative instruments as foreign currency cash flow hedges when appropriate. For the contracts that qualify as hedges of probable forecasted transactions, the effective portion of changes in fair value is temporarily reported in accumulated other comprehensive income (loss) and recognized in earnings when the hedged item affects earnings.

        The Company assesses effectiveness at inception and on a quarterly basis. These assessments determine whether derivatives designated as qualifying hedges continue to be highly effective in offsetting changes in the cash flows of hedged items. Any ineffective portion of the change in fair value is included in current period earnings. For the years ended December 31, 2012, 2011, and 2010, the impact of hedge ineffectiveness on earnings was not significant.

        The Company will discontinue cash flow hedge accounting when the forecasted transaction is no longer probable of occurring on the originally forecasted date, or 60 days thereafter, or when the hedge is no longer effective. For the years ended December 31, 2012, 2011, and 2010, the Company did not discontinue any cash flow hedges of this nature.

The effective portion of changes in the fair value of foreign exchange contracts is recognized in earnings when the hedged item affects earnings, in cost of products sold, or deemed ineffective, in other expenses/(income)—net. All of the Company’s foreign exchange contracts qualify as hedges of probable forecasted cash flows.

        The table below summarizes the Company’s outstanding foreign exchange forward contracts at December 31, 2012. The fair value of all foreign exchange forward contracts is based on quarter-end forward currency rates. The fair value of foreign exchange forward contracts should be viewed in relation to the fair value of the underlying hedged transactions and the overall reduction in exposure to fluctuations in foreign currency exchange rates.

(Dollars in millions)	Weighted-average Forward Rate	Notional Amount		Fair Value Liability			Maturity
Foreign exchange contracts:
Cash flow hedges:
Canadian dollar	0.99	$	9.9	$	—		2013
Mexican peso	13.37	106.6		(2.7		)	2013
Malaysian ringgit	3.13	49.2		(0.9		)	2013
Philippine peso	42.28	41.5		(1.5		)	2013
Total foreign exchange contracts		$	207.2	$	(5.1	)

        The change in accumulated other comprehensive income (loss) and the impact on earnings from foreign exchange contracts that qualified as cash flow hedges for the years ended December 31, 2012 and 2011, were as follows:

(In millions)	2012			2011
Balance—January 1	$	4.3		$	(1.8	)
Derivatives qualifying as cash flow hedges deferred in other comprehensive income	(12.7		)	5.8
Derivatives qualifying as cash flow hedges reclassified to cost of products sold (effective portion)	0.8			2.9
Change in deferred taxes	3.5			(2.6		)
Balance—December 31	$	(4.1	)	$	4.3

At December 31, 2012, the balance of the effective portion of changes in fair value on foreign exchange forward contracts that qualified for cash flow hedge accounting included in accumulated other comprehensive income (loss) was $(4.1) million, $(3.8) million of which is expected to be reclassified into earnings within the next 12 months.

Fair Value Hedges-Interest Rate Swaps

        The Company may, from time to time, enter into fixed-to-floating interest rate swaps as part of its interest rate management strategy. The gain or loss on these swaps is recognized in current earnings and is offset by the loss or gain on the hedged item. The swaps are recorded at fair value. The fair value of the interest rate swaps is the present value of the future cash flows calculated based on forecasted LIBOR rates from a third party bank including credit value adjustments.

In November 2009, the Company executed several interest rate swaps to convert $700.0 million of the Company’s newly-issued fixed rate debt to be paid in 2014 and 2019 to variable rate debt. In November 2010, the Company terminated $200.0 million notional amount of fixed-to-floating interest rate swaps for cash of $15.6 million. In July 2011, the Company terminated the remaining $500.0 million notional amount of fixed-to-floating interest rate swaps for cash of $23.5 million. The related basis adjustments of the underlying hedged items are being recognized as a reduction of interest expense over the remaining life of the underlying debt. The Company had no interest rate swaps outstanding at December 31, 2012.

        (Gain) loss on marked to market of fair value hedges during the years ended December 31, 2012, 2011, and 2010 was as follows:

	(Gain) Loss on Marked to Market Swaps								(Gain) Loss on Marked to Market of Hedged Items
(In millions)	2012		2011			2010			2012		2011		2010
Interest expense—net	$	—	$	(4.2	)	$	(20.1	)	$	—	$	4.2	$	20.1

        The impact on earnings from interest rate swaps that qualified as fair value hedges was as follows:

(In millions)	2012			2011			2010
Recognized in interest expense	$	—		$	(6.3	)	$	(17.1	)
Amortization of basis adjustment for terminated interest rate swaps recognized in interest expense	(9.3		)	(5.5		)	(0.3		)
Total	$	(9.3	)	$	(11.8	)	$	(17.4	)

        See Note 15 for discussion on the Company’s long-term debt.

Non-Qualifying Foreign Currency Forward Contract

        The Company may, from time to time, enter into foreign currency forward contracts to hedge foreign currency denominated monetary assets and liabilities. The primary objective of these contracts is to protect the U.S. dollar value of foreign currency denominated monetary assets and liabilities from the effects of volatility in foreign exchange rates that might occur prior to their receipt or settlement in U.S. dollars. These contracts are not designated as hedges and are adjusted to fair value through other expenses/(income)—net, other assets and accrued expenses as they occur and substantially offset the change in fair value of the underlying foreign currency denominated monetary asset or liability. The Company had no foreign currency forward contracts of this nature during the years ended and as of December 31, 2012 and 2011, respectively. For the year ended December 31, 2010, the impact on earnings from foreign currency forward contracts of this nature was a gain of $1.0 million.

Other Financial Instruments

The Company does not hedge the interest rate risk associated with money market funds, which totaled $520.7 million and $449.2 million as of December 31, 2012 and 2011, respectively. Money market funds are classified as Level 2 in the fair value hierarchy and are included in cash and cash equivalents on the balance sheet.  The money market funds have quoted market prices that are generally equivalent to par.