Derivative Instruments and Hedges

9 Months Ended

Sep. 30, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedges

Derivative Instruments and Hedges

Our risk management and derivatives policy specifies the conditions under which we may enter into derivative contracts. See Notes 1 and 6 to our consolidated financial statements included in our 2012 Annual Report and Note 7 of this Quarterly Report for additional information on our derivatives. We enter into forward exchange contracts to hedge our cash flow risks associated with transactions denominated in currencies other than the local currency of the operation engaging in the transaction. We have not elected to apply hedge accounting to our forward exchange contracts. At September 30, 2013 and December 31, 2012, we had $666.6 million and $608.9 million, respectively, of notional amount in outstanding forward exchange contracts with third parties. At September 30, 2013, the length of forward exchange contracts currently in place ranged from one day to 20 months. Also as part of our risk management program, we enter into interest rate swap agreements to hedge exposure to floating interest rates on certain portions of our debt. At September 30, 2013 and December 31, 2012, we had $170.0 million and $275.0 million, respectively, of notional amount in outstanding interest rate swaps with third parties. All interest rate swaps are highly effective. At September 30, 2013, the maximum remaining length of any interest rate swap contract in place was approximately 21 months.

We are exposed to risk from credit-related losses resulting from nonperformance by counterparties to our financial instruments. We perform credit evaluations of our counterparties under forward exchange contracts and interest rate swap agreements and expect all counterparties to meet their obligations. If necessary, we would adjust the values of our derivative contracts for our or our counterparties’ credit risks. We have not experienced credit losses from our counterparties.

The fair value of forward exchange contracts not designated as hedging instruments are summarized below:

	September 30,		December 31,
(Amounts in thousands)	2013		2012
Current derivative assets	$	5,097	$	6,104
Noncurrent derivative assets	424		104
Current derivative liabilities	4,822		7,814
Noncurrent derivative liabilities	6		12

The fair value of interest rate swaps in cash flow hedging relationships are summarized below:

	September 30,		December 31,
(Amounts in thousands)	2013		2012
Current derivative liabilities	$	635	$	1,417
Noncurrent derivative liabilities	36		316

Current and noncurrent derivative assets are reported in our condensed consolidated balance sheets in prepaid expenses and other and other assets, net, respectively. Current and noncurrent derivative liabilities are reported in our condensed consolidated balance sheets in accrued liabilities and retirement obligations and other liabilities, respectively.

The impact of net changes in the fair values of forward exchange contracts not designated as hedging instruments are summarized below:

	Three Months Ended September 30,					Nine Months Ended September 30,
(Amounts in thousands)	2013		2012			2013			2012
Gain (loss) recognized in income	$	3,817	$	(855	)	$	(3,714	)	$	(6,496	)

Gains and losses recognized in our condensed consolidated statements of income for forward exchange contracts are classified as other income (expense), net.

The impact of net changes in the fair values of interest rate swaps in cash flow hedging relationships are summarized in Note 16.