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Financial Instrument, Risk Management and Fair Value Measurements | 9 Months Ended
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Sep. 30, 2012
Financial Instruments Risk Management And Fair Value Measurements [Abstract] |
Financial Instrument, Risk Management and Fair Value Measurements | Financial Instruments, Risk Management and Fair Value Measurements Our financial instruments include cash and cash equivalents, trade receivables, other current assets, certain receivables classified as other long-term assets, accounts payable, and amounts included in investments and accruals meeting the definition of financial instruments. The carrying value of these financial instruments approximates their fair value. Our other financial instruments include the following:
Financial Instrument |  | Valuation Method
Foreign Exchange Forward Contracts |  | Estimated amounts that would be received or paid to terminate the contracts at the reporting date based on current market prices for applicable currencies.
Commodity Forward and Option Contracts |  | Estimated amounts that would be received or paid to terminate the contracts at the reporting date based on quoted market prices for applicable commodities.
Debt |  | Our estimates and information obtained from independent third parties using market data, such as bid/ask spreads for the last business day of the reporting period.
The estimated fair value of the financial instruments in the above table have been determined using standard pricing models which take into account the present value of expected future cash flows discounted to the balance sheet date. These standard pricing models utilize inputs derived from or corroborated by observable market data such as interest rate yield curves and currency and commodity spot and forward rates. In addition, we test a subset of our valuations against valuations received from the transaction's counterparty to validate the accuracy of our standard pricing models. Accordingly, the estimates presented may not be indicative of the amounts that we would realize in a market exchange at settlement date and do not represent potential gains or losses on these agreements. The estimated fair values of foreign exchange forward contracts and commodity forward and option contracts are included in the tables within this Note. The estimated fair value of debt is $958.8 million and $866.8 million and the carrying amount is $869.4 million and $825.6 million as of September 30, 2012 and December 31, 2011, respectively. We enter into various financial instruments with off-balance-sheet risk as part of the normal course of business. These off-balance sheet instruments include financial guarantees and contractual commitments to extend financial guarantees under letters of credit, and other assistance to customers (Note 17). Decisions to extend financial guarantees to customers, and the amount of collateral required under these guarantees is based on our evaluation of creditworthiness on a case-by-case basis. Use of Derivative Financial Instruments to Manage Risk We mitigate certain financial exposures, including currency risk, commodity purchase exposures and interest rate risk, through a program of risk management that includes the use of derivative financial instruments. A detailed description of these risks including a discussion on the concentration of credit risk is provided in Note 17 to our consolidated financial statements on our 2011 Form 10-K. We formally document all relationships between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions. This process includes relating derivatives that are designated as fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. We also formally assess both, at the inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in fair values or cash flows of the hedged item. If we determine that a derivative is not highly effective as a hedge, or if a derivative ceases to be a highly effective hedge, we discontinue hedge accounting with respect to that derivative prospectively. Accounting for Derivative Instruments and Hedging Activities Cash Flow Hedges We recognize all derivatives on the balance sheet at fair value. On the date the derivative instrument is entered into, we generally designate the derivative as a hedge of the variability of cash flows to be received or paid related to a forecasted transaction (cash flow hedge). We record in accumulated other comprehensive income or loss (“AOCI”) changes in the fair value of derivatives that are designated as and meet all the required criteria for a cash flow hedge. We then reclassify these amounts into earnings as the underlying hedged item affects earnings. We immediately record in earnings changes in the fair value of derivatives that are not designated as cash flow hedges. As of September 30, 2012, we had open foreign currency forward contracts in AOCI in a net loss position of $1.9 million, before-tax ($1.3 million, after-tax), designated as cash flow hedges of underlying forecasted sales and purchases. Current open contracts hedge forecasted transactions until December 31, 2013. At September 30, 2012, we had open forward contracts with various expiration dates to buy, sell or exchange foreign currencies with a U.S. dollar equivalent of approximately $475.3 million. As of September 30, 2012, we had current open commodity contracts in AOCI in a net loss position of $0.1 million, before-tax, designated as cash flow hedges of underlying forecasted purchases, primarily natural gas. Current open commodity contracts hedge forecasted transactions until December 31, 2013. At September 30, 2012, we had 9.1 million mmBTUs (millions of British Thermal Units) in aggregate notional volume of outstanding natural gas commodity forward contracts to hedge forecasted purchases. Of the $1.3 million of net losses after-tax, representing both open foreign currency exchange contracts and open commodity contracts, $1.8 million of these losses would be realized in earnings during the twelve months ending September 30, 2013 and $0.5 million of net gains will be realized subsequent to September 30, 2013, if spot rates in the future are consistent with forward rates as of September 30, 2012. The actual effect on earnings will be dependent on actual spot rates when the forecasted transactions occur. We recognize derivative gains and losses in the “Costs of sales and services” line in the condensed consolidated statements of income. Derivatives Not Designated As Hedging Instruments We hold certain forward contracts that have not been designated as cash flow hedging instruments for accounting purposes. Contracts used to hedge the exposure to foreign currency fluctuations associated with certain monetary assets and liabilities are not designated as cash flow hedging instruments, and changes in the fair value of these items are recorded in earnings. We hold call options that are effective as economic hedges of a portion of our natural gas exposure and the change in fair value of this instrument is also recorded in earnings. We periodically hold soybean barter contracts which qualify as derivatives and we have entered into offsetting commodity contracts to hedge our exposure. Both the change in fair value of the soybean barter contracts and the offsetting commodity contracts are recorded in earnings. We had open forward contracts not designated as cash flow hedging instruments for accounting purposes with various expiration dates to buy, sell or exchange foreign currencies with a U.S. dollar equivalent of approximately $484.4 million at September 30, 2012. We held 0.2 million bushels in aggregate notional volume of outstanding soybean contracts to hedge outstanding barter contracts at September 30, 2012. The following table provides the fair value and balance sheet presentation of our derivative instruments as of September 30, 2012 and December 31, 2011.
(in Millions) |  |  |  | September 30, 2012 |  | December 31, 2011
|  | Balance Sheet Location |  | Fair Value
Derivatives Designated as Cash Flow Hedges |  |  |  |  |  |
Foreign exchange contracts |  | Prepaid and other current assets |  | $ | 0.5 |  |  | $ | 8.4 |
Commodity contracts: |  |  |  |  |  |
Energy contracts |  | Prepaid and other current assets |  | 0.5 |  |  | 0.5 |
Other contracts |  | Prepaid and other current assets |  | 0.2 |  |  | — |
Total Derivative Assets |  |  |  | $ | 1.2 |  |  | $ | 8.9 |
Foreign exchange contracts |  | Accrued and other liabilities |  | (2.7 | ) |  | (10.3 | )
Commodity contracts: |  |  |  |  |  |
Energy contracts |  | Accrued and other liabilities |  | (0.7 | ) |  | (8.0 | )
Total Derivative Liabilities |  |  |  | $ | (3.4 | ) |  | $ | (18.3 | )
Net Derivative Assets/(Liabilities) |  |  |  | $ | (2.2 | ) |  | $ | (9.4 | )
Derivatives Not Designated as Hedging Instruments |  |  |  |  |  |
Foreign exchange contracts |  | Prepaid and other current assets |  | $ | 0.2 |  |  | $ | 3.5 |
Commodity contracts: |  |  |  |  |  |
Soybean contracts |  | Prepaid and other current assets |  | 0.5 |  |  | — |
Total Derivative Assets |  |  |  | $ | 0.7 |  |  | $ | 3.5 |
Foreign exchange contracts |  | Accrued and other liabilities |  | (0.9 | ) |  | — |
Commodity contracts: |  |  |  |  |  |
Soybean contracts |  | Accrued and other liabilities |  | (0.5 | ) |  | — |
Total Derivative Liabilities |  |  |  | $ | (1.4 | ) |  | $ | — |
Net Derivative Assets/(Liabilities) |  |  |  | $ | (0.7 | ) |  | $ | 3.5 |
The information included in the above chart is also presented in our fair value table included below. The following tables provide the impact of derivative instruments and related hedged items on the condensed consolidated statements of income for the three and nine months ended September 30, 2012 and 2011. Derivatives in Cash Flow Hedging Relationships
(in Millions) |  | Amount of Gain or (Loss) Recognized in OCI on Derivatives, net of tax (Effective Portion) |  | Amount of Pre-tax Gain or (Loss) Reclassified from AOCI into Income (Effective Portion) (a) |  | Amount of Pre-tax Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) (a)
|  | Three Months Ended September 30 |  | Three Months Ended September 30 |  | Three Months Ended September 30
|  | 2012 |  | 2011 |  | 2012 |  | 2011 |  | 2012 |  | 2011
Foreign exchange contracts |  | $ | 1.1 |  |  | $ | (6.3 | ) |  | $ | (1.7 | ) |  | $ | 3.0 |  |  | $ | (0.3 | ) |  | $ | (0.3 | )
Commodity contracts: |  |  |  |  |  |  |  |  |  |  |  |
Energy contracts |  | 2.6 |  |  | (0.7 | ) |  | (2.3 | ) |  | (1.7 | ) |  | — |  |  | — |
Total |  | $ | 3.7 |  |  | $ | (7.0 | ) |  | $ | (4.0 | ) |  | $ | 1.3 |  |  | $ | (0.3 | ) |  | $ | (0.3 | )
(in Millions) |  | Amount of Gain or (Loss) Recognized in OCI on Derivatives, net of tax (Effective Portion) |  | Amount of Pre-tax Gain or (Loss) Reclassified from AOCI into Income (Effective Portion) (a) |  | Amount of Pre-tax Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) (a)
|  | Nine Months Ended September 30 |  | Nine Months Ended September 30 |  | Nine Months Ended September 30
|  | 2012 |  | 2011 |  | 2012 |  | 2011 |  | 2012 |  | 2011
Foreign exchange contracts |  | $ | — |  |  | $ | (4.5 | ) |  | $ | 2.0 |  |  | $ | 4.8 |  |  | $ | — |  |  | $ | (0.1 | )
Commodity contracts: |  |  |  |  |  |  |  |  |  |  |  |
Energy contracts |  | 4.5 |  |  | 1.1 |  |  | (8.7 | ) |  | (5.5 | ) |  | (0.1 | ) |  | — |
Other |  | 0.1 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total |  | $ | 4.6 |  |  | $ | (3.4 | ) |  | $ | (6.7 | ) |  | $ | (0.7 | ) |  | $ | (0.1 | ) |  | $ | (0.1 | )
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(a) | Amounts are included in “Cost of sales and services” on the condensed consolidated statements of income.
Derivatives Not Designated as Hedging Instruments
| Location of Gain or (Loss) Recognized in Income on Derivatives | Amount of Pre-tax Gain or (Loss) Recognized in Income on Derivatives
|  | Three Months Ended September 30 |  | Nine Months Ended September 30
(in Millions) |  | 2012 |  | 2011 |  | 2012 |  | 2011
Foreign Exchange contracts | Cost of Sales and Services | $ | (8.2 | ) |  | $ | (2.1 | ) |  | $ | 11.1 |  |  | $ | (4.6 | )
Commodity contracts: |  |  |  |  |  |  |  |
Energy contracts | Cost of Sales and Services | — |  |  | — |  |  | — |  |  | (0.2 | )
Total |  | $ | (8.2 | ) |  | $ | (2.1 | ) |  | $ | 11.1 |  |  | $ | (4.8 | )
Fair-Value Measurements Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market participants are defined as buyers or sellers in the principle or most advantageous market for the asset or liability that are independent of the reporting entity, knowledgeable and able and willing to transact for the asset or liability. Fair-Value Hierarchy We have categorized our assets and liabilities that are recorded at fair value, based on the priority of the inputs to the valuation technique, into a three-level fair-value hierarchy. The fair-value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the assets and liabilities fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair-value measurement of the instrument. The following tables present our fair-value hierarchy for those assets and liabilities measured at fair-value on a recurring basis in our condensed consolidated balance sheets as of September 30, 2012 and December 31, 2011. During the periods presented there were no transfers between fair-value hierarchy levels.
(in Millions) | September 30, 2012 |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Assets |  |  |  |  |  |  |
Derivatives – Commodities: (2) |  |  |  |  |  |  |
Energy contracts | 0.5 |  |  | — |  |  | 0.5 |  |  | — |
Other contracts | 0.7 |  |  | — |  |  | 0.7 |  |  | — |
Derivatives – Foreign Exchange (2) | 0.7 |  |  | — |  |  | 0.7 |  |  | — |
Deferred compensation arrangement (3) | 32.1 |  |  | 32.1 |  |  | — |  |  | — |
Total Assets | $ | 34.0 |  |  | $ | 32.1 |  |  | $ | 1.9 |  |  | $ | — |
Liabilities |  |  |  |  |  |  |
Derivatives – Commodities: (4) |  |  |  |  |  |  |
Energy contracts | $ | 0.7 |  |  | $ | — |  |  | $ | 0.7 |  |  | $ | — |
Other contracts | 0.5 |  |  | — |  |  | 0.5 |  |  | — |
Derivatives – Foreign Exchange (4) | 3.6 |  |  | — |  |  | 3.6 |  |  | — |
Acquisition (5) | 1.5 |  |  | — |  |  | — |  |  | 1.5 |
Deferred compensation arrangement (6) | 38.8 |  |  | 38.8 |  |  | — |  |  | — |
Total Liabilities | $ | 45.1 |  |  | $ | 38.8 |  |  | $ | 4.8 |  |  | $ | 1.5 |
(in Millions) | December 31, 2011 |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Assets |  |  |  |  |  |  |
Available-for-sale securities: |  |  |  |  |  |  |
Common Stock (1) | $ | 0.1 |  |  | $ | 0.1 |  |  | $ | — |  |  | $ | — |
Derivatives – Commodities: (2) |  |  |  |  |  |  |
Energy contracts | 0.5 |  |  | — |  |  | 0.5 |  |  | — |
Derivatives – Foreign Exchange (2) | 11.9 |  |  | — |  |  | 11.9 |  |  | — |
Other (3) | 20.9 |  |  | 20.9 |  |  | — |  |  | — |
Total Assets | $ | 33.4 |  |  | $ | 21.0 |  |  | $ | 12.4 |  |  | $ | — |
Liabilities |  |  |  |  |  |  |
Derivatives – Commodities: (4) |  |  |  |  |  |  |
Energy contracts | $ | 8.0 |  |  | $ | — |  |  | $ | 8.0 |  |  | $ | — |
Derivatives – Foreign Exchange (4) | 10.3 |  |  | — |  |  | 10.3 |  |  | — |
Acquisition (5) | 3.5 |  |  | — |  |  | — |  |  | 3.5 |
Other (6) | 31.8 |  |  | 31.8 |  |  | — |  |  | — |
Total Liabilities | $ | 53.6 |  |  | $ | 31.8 |  |  | $ | 18.3 |  |  | $ | 3.5 |
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(1) | Amounts included in “Investments” in the condensed consolidated balance sheets.
(2) | Amounts included in “Prepaid and other current assets” in the condensed consolidated balance sheets.
(3) | Consists of a deferred compensation arrangement, through which we hold various investment securities, recognized on our balance sheet. Both the asset and liability are recorded at fair value. Asset amounts included in “Other assets” in the condensed consolidated balance sheets.
(4) | Amounts included in “Accrued and other liabilities” in the condensed consolidated balance sheets.
(5) | Represents contingent consideration associated with the acquisitions during 2011. See Note 3 for more information. The changes in this Level 3 liability represented payments made against the liability.
(6) | Consists of a deferred compensation arrangement recognized on our balance sheet. Both the asset and liability are recorded at fair value. Liability amounts included in “Other long-term liabilities” in the condensed consolidated balance sheets.
The following tables present our fair value hierarchy for those assets and liabilities measured at fair value on a non-recurring basis in our condensed consolidated balance sheets during the nine months ended September 30, 2012 and the year ended December 31, 2011. See Note 3 for the assets and liabilities measured on a non-recurring basis at fair value associated with our acquisitions.
(in Millions) | Nine months ended September 30, 2012 |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total Gains (Losses) (Nine Months Ended September 30, 2012)
Assets |  |  |  |  |  |  |  |  |
Long-lived assets to be abandoned (1) | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (1.8 | )
Total Assets | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (1.8 | )
Liabilities |  |  |  |  |  |  |  |  |
Liabilities associated with exit activities (2) | $ | 5.7 |  |  | $ | — |  |  | $ | 5.7 |  |  | $ | — |  |  | $ | (5.7 | )
Total Liabilities | $ | 5.7 |  |  | $ | — |  |  | $ | 5.7 |  |  | $ | — |  |  | $ | (5.7 | )
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(1) | We recorded charges to write down the value of certain long-lived assets to be abandoned within our Agricultural Products segment to their salvage value of zero as the majority of these long-lived assets have no future use and are anticipated to be demolished. The loss noted in the above table represents the accelerated depreciation of these assets recorded during the period.
(2) | This amount represents severance liabilities associated with the Zeolites shutdown as further described in Note 8.
(in Millions) | Year ended December 31, 2011 |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total Gains (Losses) (Year Ended December 31, 2011)
Assets |  |  |  |  |  |  |  |  |
Long-lived assets to be abandoned (1) | $ | 2.3 |  |  | $ | — |  |  | $ | — |  |  | $ | 2.3 |  |  | $ | (16.4 | )
Total Assets | $ | 2.3 |  |  | $ | — |  |  | $ | — |  |  | $ | 2.3 |  |  | $ | (16.4 | )
Liabilities |  |  |  |  |  |  |  |  |
Liabilities associated with exit activities (2) | 5.5 |  |  | — |  |  | 5.5 |  |  | — |  |  | (5.5 | )
Total Liabilities | $ | 5.5 |  |  | $ | — |  |  | $ | 5.5 |  |  | $ | — |  |  | $ | (5.5 | )
____________________
(1) | In connection with the Sodium Percarbonate phase-out, we recorded charges to write down the value of the related long-lived assets to be abandoned to their salvage value of $0.7 million. We also recognized a $1.6 million charge to write down certain other assets to fair value in our Industrial Chemicals segment during the year ended December 31, 2011. The loss noted in the above table represents the accelerated depreciation and write-down of these assets recorded during the period.
(2) | This amount represents severance liabilities associated with the Sodium Percarbonate phase-out as further described in Note 8.

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- Definition This element can be used to disclose the entity's entire derivative instruments and hedging activities disclosure as a single block of text. Describes an entity's risk management strategies, derivatives in hedging activities and non-hedging derivative instruments, the assets, obligations, liabilities, revenues and expenses arising there from, and the amounts of and methodologies and assumptions used in determining the amounts of such items. This item also represents the complete disclosure regarding the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, 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 Company 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 risk is 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 No definition available. + Details
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