Derivative Instruments and Hedges

9 Months Ended

Sep. 30, 2011

Derivative Instruments and Hedges [Abstract]

Derivative Instruments and Hedges

4. 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 2010 Annual Report and Note 7 of this Quarterly Report for additional information on our purpose for entering into derivatives not designated as hedging instruments and our overall risk management strategies. 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. At September 30, 2011 and December 31, 2010, we had $506.6 million and $358.5 million, respectively, of notional amount in outstanding forward exchange contracts with third parties. At September 30, 2011, the length of forward exchange contracts currently in place ranged from 7 days to 22 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, 2011 and December 31, 2010, we had $335.0 million and $350.0 million, respectively, of notional amount in outstanding interest rate swaps with third parties. All interest rate swaps are highly effective. At September 30, 2011, the maximum remaining length of any interest rate swap contract in place was approximately 33 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 material, 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)	2011		2010
Current derivative assets	$	5,181	$	4,397
Noncurrent derivative assets		-		50
Current derivative liabilities		8,657		2,949
Noncurrent derivative liabilities		1,130		473

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

	September 30,		December 31,
(Amounts in thousands)	2011		2010
Current derivative assets	$	3	$	-
Noncurrent derivative assets		49		608
Current derivative liabilities		1,220		1,232
Noncurrent derivative liabilities		941		3

     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)	2011			2010		2011		2010
(Loss) gain recognized in income	$	(9,892	)	$	18,467	$	211	$	(7,787	)

     The impact of net changes in the fair values of interest rate swaps in cash flow hedging relationships are summarized below:

	Three Months Ended September 30,						Nine Months Ended September 30,
(Amounts in thousands)	2011			2010			2011			2010
Loss reclassified from accumulated other comprehensive income into income for settlements, net of tax	$	(396	)	$	(930	)	$	(1,203	)	$	(3,603	)
Loss recognized in other comprehensive income, net of tax		(912	)		(588	)		(2,149	)		(1,476	)

     Gains and losses recognized in our condensed consolidated statements of income for forward exchange contracts and interest rate swaps are classified as other income (expense), net, and interest expense, respectively. At September 30, 2011, we estimate that approximately $1.1 million of net losses on interest rate swaps designated as cash flow hedges will be reclassified from accumulated other comprehensive income to earnings during the next twelve months.