FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2012

FINANCIAL INSTRUMENTS

12. FINANCIAL INSTRUMENTS

Products Corporation maintains standby and trade letters of credit for various corporate purposes under which Products Corporation is obligated, of which $10.4 million and $11.1 million (including amounts available under credit agreements in effect at that time) were maintained at September 30, 2012 and December 31, 2011, respectively. Included in these amounts is approximately $8.7 million and $9.1 million at September 30, 2012 and December 31, 2011, respectively, in standby letters of credit which support Products Corporation’s self-insurance programs. The estimated liability under such programs is accrued by Products Corporation.

Derivative Financial Instruments

The Company uses derivative financial instruments, primarily FX Contracts intended for the purpose of managing foreign currency exchange risk by reducing the effects of fluctuations in foreign currency exchange rates on the Company’s net cash flows.

The FX Contracts are entered into primarily to hedge the anticipated net cash flows resulting from inventory purchases and intercompany payments denominated in currencies other than the local currencies of the Company’s foreign and domestic operations and generally have maturities of less than one year. The U.S. dollar notional amount of the FX Contracts outstanding at September 30, 2012 and December 31, 2011 was $47.3 million and $58.4 million, respectively.

While the Company may be exposed to credit loss in the event of the counterparty’s non-performance, the Company’s exposure is limited to the net amount that Products Corporation would have received, if any, from the counterparty over the remaining balance of the terms of the FX Contracts. The Company does not anticipate any non-performance and, furthermore, even in the case of any non-performance by the counterparty, the Company expects that any such loss would not be material.

Quantitative Information – Derivative Financial Instruments

The effects of the Company’s derivative instruments on its consolidated financial statements were as follows:

(a) Fair Value of Derivative Financial Instruments in Consolidated Balance Sheet:

	Assets					Liabilities
	Balance Sheet Classification	September 30, 2012 Fair Value		December 31, 2011 Fair Value		Balance Sheet Classification	September 30, 2012 Fair Value		December 31, 2011 Fair Value
Derivatives not designated as hedging instruments:
FX Contracts (a)	Prepaid expenses and other	$	—	$	0.2	Accrued expenses	$	0.9	$	0.8

^(a)  The fair values of the FX Contracts at September 30, 2012 and December 31, 2011 were determined by using observable market transactions of spot and forward rates at September 30, 2012 and December 31, 2011, respectively.

(b) Effects of Derivative Financial Instruments on income for the three and nine months ended September 30, 2012 and 2011:

	Amount of Gain (Loss) Recognized in Foreign Currency (Gains) Losses, Net
	Three Months Ended September 30,					Nine Months Ended September 30,
	2012			2011		2012			2011
Derivatives not designated as hedging instruments:
FX Contracts	$	(0.9	)	$	2.3	$	(2.0	)	$	0.5