DERIVATIVE FINANCIAL INSTRUMENTS AND CERTAIN HEDGING ACTIVITIES

12 Months Ended

Dec. 31, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments and Certain Hedging Activities

7. DERIVATIVE FINANCIAL INSTRUMENTS AND CERTAIN HEDGING ACTIVITIES

Foreign Currency Derivative and Hedging Activities

Currency forward contracts

We periodically enter into currency forward contracts primarily to hedge currency fluctuations of transactions denominated in currencies other than the functional currency of the respective entity. At December 31, 2013, the principal transactions hedged involved accounts receivable and accounts payable. When hedging currency exposures, our practice is to economically hedge such exposures with forward contracts denominated in the same currency and with similar critical terms as the underlying exposure, and therefore, the instruments are effective at generating offsetting changes in the fair value, cash flows or future earnings of the hedged item or transaction. The fair values of forward contracts are calculated each period. These forward contracts are not defined as hedging instruments and therefore, all changes in fair values are reported in Other (expense) income, net.

At December 31, 2013, net contractual amounts of forward contracts outstanding translated into USD totals $262.6. Of this total, $186.5 was attributed to the exposure in forward selling/purchase of USD, and $76.1 was attributable to the exposure in forward selling/purchase of Euros, translated into USD equivalent amounts. The net favorable fair values of currency contracts, based on forward exchange rates at December 31, 2013 and 2012 were $1.4 and $1.7, respectively.

At December 31, 2013 and 2012, the currency and net notional amounts of forward contracts outstanding translated into USD equivalent amounts were as follows:

December 31, 2013	Buy
Sell	U.S. Dollar		Euro		Chilean Peso		Mexican Peso		Pound Sterling		Norwegian Krone		Malaysian Ringgit		Thai Baht		Japanese Yen		Colombian Peso
U.S. Dollar	—		$	100.8	$	18.2	$	17.0	$	4.0	$	2.8	$	2.7	$	1.5	$	1.4	$	1.4
Pound Sterling	—		$	68.1	—		—		—		—		—		—		—		—
Chinese Yuan	$	17.1	—		—		—		—		—		—		—		—		—
Canadian Dollar	$	9.0	—		—		—		—		—		—		—		—		—
Brazilian Real	$	6.6	—		—		—		—		—		—		—		—		—
Australian Dollar	$	4.0	—		—		—		—		—		—		—		—		—
Thai Baht	—		$	6.4	—		—		—		—		—		—		—		—
Japanese Yen	—		$	1.6	—		—		—		—		—		—		—		—

December 31, 2012	Buy
Sell	U.S. Dollar		Euro		Canadian Dollar		Australian Dollar		Thai Baht		Chilean Peso		Mexican Peso		Malaysian Ringgit		Colombian Peso		Pound Sterling		Norwegian Krone
U.S. Dollar	—		$	73.3	$	66.9	—		$	8.7	$	20.2	$	17.3	$	3.0	$	1.0	$	0.1	—
Euro	—		—		—		—		—		—		—		—		—		—		$	1.6
Pound Sterling	—		$	152.9	—		$	46.6	$	15.5	—		—		—		—		—		—
Chinese Yuan	$	20.3	—		—		—		—		—		—		—		—		—		—
Brazilian Real	$	3.5	—		—		—		—		—		—		—		—		—		—
Japanese Yen	$	0.3	$	7.7	—		—		—		—		—		—		—		—		—

Cross currency swaps

We have used cross currency swaps to hedge the changes in the cash flows of certain Euro denominated intercompany loans receivable held by U.S. entities and, until the sale of our Coating Resins business, to hedge a portion of our net investment in Cytec Surface Specialties SA/NV (formerly, our largest Euro functional currency subsidiary).

As of September 2010, all our swaps were designated as a net investment hedge of the value of one of our U.S. subsidiaries’ net investment in our Belgium-based subsidiary, Cytec Surface Specialties SA/NV, against the risk of adverse foreign exchange movements in the USD value of the Euro. These swaps were highly effective in offsetting the changes in the value of the net investment attributable to the change in USD value of the Euro.

In July 2012, we terminated all of our outstanding cross currency swaps to take advantage of the declining value of the Euro and to prepare for the anticipated divestiture of Coating Resins. The final payment of approximately $1.8 to settle the swaps was based on the fair value of the swaps at the time of termination.

Prior to the termination of the swaps, the fair value of our swaps was calculated each period with changes in fair value reported in foreign currency translation adjustments within accumulated other comprehensive income (loss), net of tax. Such amounts reclassified to translation adjustments remained in other comprehensive income (loss) until the divestiture of Coating Resins, which included our investment in Cytec Surface Specialties SA/NV, on April 3, 2013. Until then, we monitored the counterparty credit risk and the continued probability of the hedged cash flows as to amount and timing. See Note 16, “Comprehensive Income,” for further details on the amounts reclassified out of other comprehensive income as related to the divestiture of Coating Resins.

Credit Risk

At December 31, 2013, we did not have derivative instruments that contained credit-related-risk contingent features or provisions that would trigger immediate settlement or require us to post collateral to our counterparties. Also as of December 31, 2013, we did not have any significant concentration of credit risk arising from our derivative instruments.

The following tables summarize the impact of derivative instruments on our consolidated balance sheets and consolidated statements of income:

Asset Derivatives

Liability Derivatives

Derivatives not designated as hedging instruments:

December 31, 2013

December 31, 2012

December 31, 2013

December 31, 2012

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Foreign currency forwards

Other current assets

$

2.3

Other current assets

$

3.2

Accrued expenses

$

0.9

Accrued expenses

$

1.5

The following tables summarize the amounts and locations of our hedging derivatives’ gains or (losses) recognized for the years ended December 31, 2013 and 2012:

	Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)				Location of Gain or (Loss) Recognized from Accumulated OCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)				Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Derivatives in net investment hedging relationships:	Year ended December 31,					Year ended December 31,					Year ended December 31,
	2013		2012			2013		2012			2013		2012
Cross currency swaps	$	—	$	7.8		$	—	$	—		$	—	$	—

The following table summarizes the amount and location of gains or (losses) recognized in income for our derivatives not designated as hedges for the years ended December 31, 2013 and 2012:

	Location of Gain or (Loss) Recognized in Income on Derivative	Amount of Gain or (Loss) Recognized in Income on Derivative
Derivatives not designated as hedging instruments:		Year ended December 31,
		2013		2012
Foreign currency forwards	Other (expense) income, net	$	9.3	$	0.2

Fair Value Measurements

We have certain assets and liabilities that are carried at fair value on a recurring basis in the financial statements, for which we determine the appropriate level in the fair value hierarchy for each fair value measurement. The fair value hierarchy prioritizes the inputs, which refer broadly to assumptions market participants would use in pricing an asset or liability, into three levels. It gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The level in the fair value hierarchy within which a fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, interest rates, exchange rates, and yield curves observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability.

All of our derivatives are valued based on Level 2 inputs. Our currency forwards are valued based on readily available published indices for currency exchange rates.

A summary of the fair value measurements for each major category of derivatives at December 31, 2013 is outlined in the table below:

Description	Significant Other Observable Inputs (Level 2)
Currency forwards	$	1.4

As of December 31, 2013, we did not have any non-financial assets and liabilities that are carried at fair value on a recurring basis in the consolidated financial statements for which a fair value measurement was required for the year ended December 31, 2013.