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Financial Instruments
 3 Months Ended
Mar. 31, 2014
Financial Instruments
7. Financial Instruments

We do not enter into financial instruments for trading or speculative purposes. We principally use financial instruments to reduce the impact of changes in foreign currency exchange rates and commodities used as raw materials in our products. The principal derivative financial instruments we enter into on a routine basis are foreign exchange contracts. Derivative financial instruments are recorded at fair value. The counterparties to derivative contracts are major financial institutions. Management currently believes that the risk of incurring material losses is unlikely and that the losses, if any, would be immaterial to the Company. In addition, from time to time, we enter into commodity swaps.

Our primary foreign currency hedge contracts pertain to the Canadian dollar, the Chinese yuan and the Mexican peso. The gross U.S. dollar equivalent notional amount of all foreign currency derivative hedges outstanding at March 31, 2014 was $201.9 million, representing a net settlement receivable of $1.2 million. Based on foreign exchange rates as of March 31, 2014, we estimate that $0.1 million of net foreign currency derivative gains included in other comprehensive income as of March 31, 2014 will be reclassified to earnings within the next twelve months.

 

The fair values of derivative instruments on the consolidated balance sheets as of March 31, 2014 and December 31, 2013 were:

 

          Fair Value  
(In millions)   

Location

    March 31,
2014		      December 31,
2013		  
Assets         
Foreign exchange contracts    Other current assets    $ 1.9       $ 2.1   
Net investment hedges    Other current assets      0.6         0.6   
     

 

 

     

 

 

  
  

Total assets

    $ 2.5       $ 2.7   
Liabilities         
Foreign exchange contracts    Other current liabilities    $ 1.3       $ 0.3   

The effects of derivative financial instruments on the statements of comprehensive income for the three months ended March 31, 2014 and 2013 were:

 

          Gain (Loss) Recognized in Income  

(In millions)

Type of hedge

   

Location

    March 31,
2014		      March 31,
2013		  
Cash flow    Cost of products sold    $ 0.7       $ 0.4   
Fair value    Other income, net      0.9         (0.2 ) 
     

 

 

     

 

 

  

Total

       $ 1.6       $ 0.2   

The effective portion of cash flow hedges recognized in other comprehensive income were net (losses) gains of $(0.4) million and $1.6 million at March 31, 2014 and 2013, respectively. In the three months ended March 31, 2014 and 2013, the ineffective portion of cash flow hedges recognized in other income, net, was insignificant.