Financial Instruments

9 Months Ended

Sep. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Financial Instruments

Financial Instruments

The Company’s financial instruments include cash and marketable securities. Due to the short-term nature of these instruments, their book value approximates their fair value. The Company’s financial instruments also include long-term debt, interest rate and cross-currency swaps, commodity derivative contracts and foreign currency derivatives. All derivative contracts are placed with counterparties that have an S&P, or equivalent, investment grade credit rating at the time of the contracts’ placement. At September 30, 2014 and December 31, 2013, the Company had no derivative contracts that contained credit risk related contingent features.

The Company selectively uses cross-currency swaps to hedge the foreign currency exposure associated with its net investment in certain foreign operations (net investment hedges). Exchange rates at the end of the third quarter of 2014 allowed for the early termination of the Euro cross-currency swap position at a zero cash outlay. The Company elected to take this option and no longer holds a Euro cross-currency swap position as of September 30, 2014. The impact on net earnings in the three and nine months ended September 30, 2014 was negligible.

At September 30, 2014 and December 31, 2013, the following cross-currency swaps were outstanding:

(in millions)	Cross-currency swaps
As of September 30, 2014	Notional in USD		Notional in local currency		Duration
Floating $ to floating ¥	$	125.0	€	14,651.3	Nov - 16

(in millions)	Cross-currency swaps
As of December 31, 2013	Notional in USD		Notional in local currency		Duration
Floating $ to floating €	$	75.0	€	58.5	Oct - 19
Floating $ to floating ¥	$	150.0	¥	17,581.5	Nov - 16

The Company uses certain commodity derivative contracts to protect against commodity price changes related to forecasted raw material and supplies purchases. The Company primarily utilizes forward and option contracts, which are designated as cash flow hedges. The Company did not have any commodity derivative contracts outstanding at September 30, 2014 and December 31, 2013.

The Company uses foreign currency forward and option contracts to protect against exchange rate movements for forecasted cash flows, including capital expenditures, purchases, operating expenses or sales transactions designated in currencies other than the functional currency of the operating unit. Foreign currency derivative contracts require the Company, at a future date, to either buy or sell foreign currency in exchange for the operating units’ local currency.

At September 30, 2014 and December 31, 2013, the following foreign currency derivative contracts were outstanding:

Foreign currency derivatives (in millions)
Functional currency	Traded currency	Notional in traded currency September 30, 2014	Notional in traded currency December 31, 2013	Duration
Brazilian real	US dollar	4.8	19.3	Dec - 14
Chinese yuan	Japanese yen	—	215.0	Feb - 14
Chinese yuan	US dollar	3.3	12.3	Dec - 14
Euro	British pound	0.7	3.0	Dec - 14
Euro	Hungarian forint	1,587.8	6,430.5	Dec - 14
Euro	Japanese yen	1,380.2	5,830.7	Dec - 14
Euro	Korean won	—	663.1	Jul - 14
Euro	Polish zloty	22.8	96.0	Dec - 14
Euro	US dollar	12.8	29.4	Dec - 15
Hungarian forint	Euro	1.6	6.6	Dec - 14
Japanese yen	Chinese yuan	110.9	84.0	Dec - 15
Japanese yen	Korean won	8,508.7	5,715.5	Dec - 15
Japanese yen	US dollar	4.8	4.2	Dec - 15
Korean won	Euro	8.0	23.6	Dec - 15
Korean won	Japanese yen	115.0	380.5	Dec - 14
Korean won	US dollar	25.8	—	Dec - 15
Mexican peso	US dollar	3.8	—	Dec - 14
Swedish krona	Euro	9.7	33.7	Dec - 14
US dollar	Japanese yen	3,000.0	3,209.3	Dec - 14

At September 30, 2014 and December 31, 2013, the following amounts were recorded in the Condensed Consolidated Balance Sheets as being payable to or receivable from counterparties under ASC Topic 815:

	Assets					Liabilities
(millions of dollars)	Location	September 30, 2014		December 31, 2013		Location	September 30, 2014		December 31, 2013
Foreign currency contracts	Prepayments and other current assets	$	3.2	$	3.4	Accounts payable and accrued expenses	$	1.3	$	7.4
	Other non-current assets	$	0.5	$	—	Other non-current liabilities	$	0.1	$	—
Net investment hedge contracts	Other non-current assets	$	—	$	—	Other non-current liabilities	$	9.5	$	24.3

Effectiveness for cash flow and net investment hedges is assessed at the inception of the hedging relationship and quarterly, thereafter. To the extent that derivative instruments are deemed to be effective, gains and losses arising from these contracts are deferred into accumulated other comprehensive income (loss) ("AOCI") and reclassified into income as the underlying operating transactions are recognized. These realized gains or losses offset the hedged transaction and are recorded on the same line in the statement of operations. To the extent that derivative instruments are deemed to be ineffective, gains or losses are recognized into income.

The table below shows deferred gains (losses) reported in AOCI as well as the amount expected to be reclassified to income in one year or less. The amount expected to be reclassified to income in one year or less assumes no change in the current relationship of the hedged item at September 30, 2014 market rates.

(millions of dollars)	Deferred gain (loss) in AOCI at						Gain (loss) expected to be reclassified to income in one year or less
Contract Type	September 30, 2014			December 31, 2013
Foreign currency	$	1.9		$	(3.7	)	$	1.5
Net investment hedges	(10.8		)	(22.1		)	—
Total	$	(8.9	)	$	(25.8	)	$	1.5

Derivative instruments designated as hedging instruments as defined by ASC Topic 815 held during the period resulted in the following gains and losses recorded in income:

		Gain (loss) reclassified from AOCI to income (effective portion)							Gain (loss) recognized in income (ineffective portion)
(millions of dollars)		Three Months Ended							Three Months Ended
Contract Type	Location	September 30, 2014			September 30, 2013			Location	September 30, 2014			September 30, 2013
Foreign currency	Sales	$	0.7		$	0.7		SG&A expense	$	0.1		$	—
Foreign currency	Cost of goods sold	$	0.2		$	(4.1	)	SG&A expense	$	(0.1	)	$	(0.1	)
Foreign currency	SG&A expense	$	(0.2	)	$	(0.1	)	SG&A expense	$	—		$	—
Cross-currency swap	N/A							Interest expense	$	0.4		$	0.4

		Gain (loss) reclassified from AOCI to income (effective portion)							Gain (loss) recognized in income (ineffective portion)
(millions of dollars)		Nine Months Ended							Nine Months Ended
Contract Type	Location	September 30, 2014			September 30, 2013			Location	September 30, 2014			September 30, 2013
Foreign currency	Sales	$	2.0		$	1.6		SG&A expense	$	0.2		$	0.2
Foreign currency	Cost of goods sold	$	(1.6	)	$	(10.1	)	SG&A expense	$	(0.1	)	$	(0.8	)
Foreign currency	SG&A expense	$	(0.6	)	$	(0.2	)	SG&A expense	$	—		$	—
Cross-currency swap	N/A							Interest expense	$	1.0		$	0.1

At September 30, 2014, derivative instruments that were not designated as hedging instruments as defined by ASC Topic 815 were immaterial.