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FAIR VALUE OF FINANCIAL INSTRUMENTS | 6 Months Ended
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Jun. 30, 2012
Fair Value Of Financial Instruments [Abstract] |
FAIR VALUE OF FINANCIAL INSTRUMENTS | 7. FAIR VALUE OF FINANCIAL INSTRUMENTS Forward Foreign Exchange Contracts The Corporation has foreign currency exposure primarily in Europe and Canada. The Corporation uses financial instruments, such as forward contracts, to hedge a portion of existing and anticipated foreign currency denominated transactions. The purpose of the Corporation's foreign currency risk management program is to reduce volatility in earnings caused by exchange rate fluctuations. Guidance on accounting for derivative instruments and hedging activities requires companies to recognize all of the derivative financial instruments as either assets or liabilities at fair value in the Condensed Consolidated Balance Sheets based upon quoted market prices for comparable instruments. Interest Rate Risks and Related Strategies The Corporation's primary interest rate exposure results from changes in U.S. dollar interest rates. The Corporation's policy is to manage interest cost using a mix of fixed and variable rate debt. The Corporation periodically uses interest rate swaps to manage such exposures. Under these interest rate swaps, the Corporation exchanges, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. For interest rate swaps designated as fair value hedges (i.e., hedges against the exposure to changes in the fair value of an asset or a liability or an identified portion thereof that is attributable to a particular risk), changes in the fair value of the interest rate swaps offset changes in the fair value of the fixed rate debt due to changes in market interest rates. In January 2012, the Company entered into three fixed-to-floating interest rate swap agreements to convert the interest payments of the $200 million, 4.24% notes, due December 1, 2026, from a fixed rate to a floating interest rate based on 1-Month LIBOR plus a 2.02% spread, and one fixed-to-floating interest rate swap agreement to convert the interest payments of $25 million of the $100 million, 3.84% notes, due December 1, 2021, from a fixed rate to a floating interest rate based on 1-Month LIBOR plus a 1.90% spread. The notional amounts of the Company's outstanding interest rate swaps designated as fair value hedges were $200 million and $25 million at June 30, 2012. The Corporation utilizes the bid ask pricing that is common in the dealer markets to determine the fair value of its interest rate swap agreements and forward foreign exchange contracts. The dealers are ready to transact at these prices which use the mid-market pricing convention and are considered to be at fair market value. The fair value accounting guidance requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories: Level 1: Quoted market prices in active markets for identical assets or liabilities that the company has the ability to access. Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data such as quoted prices, interest rates and yield curves. Level 3: Inputs are unobservable data points that are not corroborated by market data. Based upon the fair value hierarchy, all of the forward foreign exchange contracts and interest rate swaps are valued at a Level 2. Effects on Consolidated Balance Sheets The location and amounts of derivative instrument fair values in the consolidated balance sheet are segregated below between designated, qualifying hedging instruments, and ones that are not designated for hedge accounting.
|  |  | (In thousands)
|  |  |  | June 30, |  |  | December 31,
|  |  |  | 2012 |  |  | 2011
Assets |  |  |  |  |  |
Designated for hedge accounting |  |  |  |  |  |
| Interest rate swaps |  | $ | 1,791 |  | $ | -
Undesignated for hedge accounting |  |  |  |  |  |
| Forward exchange contracts |  | $ | 215 |  | $ | 13
| Total asset derivatives (A) |  | $ | 2,006 |  | $ | 13
Liabilities |  |  |  |  |  |
Undesignated for hedge accounting |  |  |  |  |  |
| Forward exchange contracts |  | $ | 60 |  | $ | 356
| Total liability derivatives (B) |  | $ | 60 |  | $ | 356
Foreign exchange derivative assets are included in Other current assets and all interest rate swaps are included in Other assets. Forward exchange derivative liabilities are included in Other current liabilities. Effects on Condensed Consolidated Statements of Income Fair value hedge The location and amount of gains or losses on the hedged fixed rate debt attributable to changes in the market interest rates and the offsetting gain (loss) on the related interest rate swaps for the three and six months ended June 30, were as follows:
|  |  | (In thousands)
|  |  | Gain/(Loss) on Swap |  | Gain/(Loss) on Borrowings
|  |  | Three Months Ended |  | Six Months Ended |  | Three Months Ended |  | Six Months Ended
|  |  | June 30, |  | June 30, |  | June 30, |  | June 30,
Income Statement Classification |  | 2012 |  | 2011 |  | 2012 |  | 2011 |  | 2012 |  | 2011 |  | 2012 |  | 2011
Other income, net |  | $ | 14,503 |  | $ | - |  | $ | 1,791 |  | $ | - |  | $ | (14,503) |  | $ | - |  | $ | (1,791) |  | $ | -
Undesignated hedges The location and amount of gains and (losses) recognized in income on forward exchange derivative contracts not designated for hedge accounting for the three and six months ended June 30, were as follows:
|  |  | Three Months Ended |  | Six Months Ended
|  |  | June 30, |  | June 30,
Derivatives not designated as hedging instrument |  | 2012 |  | 2011 |  | 2012 |  | 2011
Foreign exchange contracts: |  |  |  |  |  |  |  |  |  |  |  |
| General and administrative expenses |  | $ | (1,146) |  | $ | 51 |  | $ | (170) |  | $ | 943
Debt The estimated fair value amounts were determined by the Corporation using available market information which is primarily based on quoted market prices for the same or similar issues as of June 30, 2012. In accordance with the fair value accounting guidance, all of the Corporation's debt is classified as Level 2. The carrying amount of the variable interest rate debt approximates fair value because the interest rates are reset periodically to reflect current market conditions. The fair values described below may not be indicative of net realizable value or reflective of future fair values. Furthermore, the use of different methodologies to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
|  | June 30, |  | December 31,
|  | 2012 |  | 2011
|  | Carrying Value |  | Estimated Fair Value |  | Carrying Value |  | Estimated Fair Value
Industrial revenue bonds, due from 2012 through 2023 |  | $ | 8,826 |  | $ | 8,826 |  | $ | 9,004 |  | $ | 9,004
5.74% Senior notes due September 25, 2013 |  |  | 125,017 |  |  | 132,179 |  |  | 125,024 |  |  | 134,982
5.51% Senior notes due December 1, 2017 |  |  | 150,000 |  |  | 170,890 |  |  | 150,000 |  |  | 172,871
3.84% Senior notes due December 1, 2021 |  |  | 100,597 |  |  | 100,597 |  |  | 100,000 |  |  | 101,886
4.24% Senior notes due December 1, 2026 |  |  | 201,194 |  |  | 201,194 |  |  | 200,000 |  |  | 204,965
Other debt |  |  | 2,492 |  |  | 2,492 |  |  | 2,402 |  |  | 2,402
|  | $ | 588,126 |  | $ | 616,178 |  | $ | 586,430 |  | $ | 626,110

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19296-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 159 -Paragraph 17-22, 27, 28 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13433-108611 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15C, 15D -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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