v2.4.0.6
Derivative Financial Instruments
 12 Months Ended
Mar. 31, 2013
Derivative Financial Instruments

12. Derivative Financial Instruments

The Company utilizes derivative instruments to reduce its exposure to commodity price, foreign exchange risks and interest rates, under established procedures and controls. The Company does not enter into derivative contracts for speculative purposes. The Company’s agreements are with creditworthy financial institutions and the Company anticipates performance by counterparties to these contracts and therefore no material loss is expected.

Derivatives in Cash Flow Hedging Relationships

Lead Hedge Forward Contracts

The Company enters into lead hedge forward contracts to fix the price for a portion of lead purchases. Management considers the lead hedge forward contracts to be effective against changes in the cash flows of the underlying lead purchases. The vast majority of such contracts are for a period not extending beyond one year and the notional amounts at March 31, 2013 and 2012 were 56.3 million pounds and 60.0 million pounds, respectively.

Foreign Currency Forward Contracts

The Company purchases lead and other commodities in certain countries where the foreign currency exposure is different from the functional currency of that country. The Company uses foreign currency forward contracts to hedge a portion of the Company’s foreign currency exposures for lead as well as well as other foreign currency exposures so that gains and losses on these contracts offset changes in the underlying foreign currency denominated exposures. The vast majority of such contracts are for a period not extending beyond one year. As of March 31, 2013 and 2012, the Company had entered into a total of $51,366 and $42,121, respectively, of such contracts.

In the coming twelve months, the Company anticipates that $1,389 of pretax loss relating to lead and foreign currency forward contracts will be reclassified from AOCI as part of cost of goods sold. This amount represents the current unrealized impact of hedging lead and foreign exchange rates, which will change as market rates change in the future, and will ultimately be realized in the income statement as an offset to the corresponding actual changes in lead costs to be realized in connection with the variable lead cost and foreign exchange rates being hedged.

Derivatives not Designated in Hedging Relationships

Interest Rate Swap Agreements

As of March 31, 2013 and March 31, 2012, the Company maintained interest rate swap agreements that converted $65,000 and $85,000, respectively, of variable-rate debt to a fixed-rate basis, utilizing the three-month LIBOR, as a floating rate reference. These agreements, which expired in May 2013, no longer qualified for hedge accounting at the end of fiscal 2011 as a result of the refinancing of the Company’s previous credit facility. The Company recorded expense relating to changes in the fair value of these agreements in the Consolidated Statements of Income, within other (income) expense, net of $101 and $977 during fiscal 2013 and 2012, respectively. In fiscal 2011, the changes in the fair value of these agreements were recorded in AOCI.

Foreign Currency Forward Contracts

The Company also enters into foreign currency forward contracts to economically hedge foreign currency fluctuations on intercompany loans and foreign currency denominated receivables and payables. These are not designated as hedging instruments and changes in fair value of these instruments are recorded directly in the Consolidated Statements of Income. As of March 31, 2013 and 2012, the notional amount of these contracts was $21,749 and $11,410, respectively. The Company recorded (income) expense in the Consolidated Statements of Income within other (income) expense, net of ($2,597) and $106 during fiscal 2013 and 2012, respectively. There were no such contracts in fiscal 2011.

 

Presented below in tabular form is information on the location and amounts of derivative fair values in the Consolidated Balance Sheets and derivative gains and losses in the Consolidated Statements of Income:

Fair Value of Derivative Instruments

March 31, 2013 and 2012

 

     Derivatives and Hedging Activities
Designated as Cash Flow Hedges		      Derivatives and Hedging Activities
Not Designated as Hedging  Instruments		  
     March 31,
2013		      March 31,
2012		      March 31,
2013		      March 31,
2012		  

Prepaid and other current assets

            

Foreign currency forward contracts

    $ —        $ 670       $ 241      $ 112   

Other assets

            

Lead hedge forward contracts

      —          30         —          —    
  

 

 

     

 

 

     

 

 

     

 

 

  

Total assets

    $ —        $ 700       $ 241      $ 112   
  

 

 

     

 

 

     

 

 

     

 

 

  

Accrued expenses

            

Interest rate swap agreements

    $ —        $ —        $ 654      $ 3,628   

Lead hedge forward contracts

      2,832         881         —          —    

Foreign currency forward contracts

      252         —          —           —    

Other liabilities

            

Interest rate swap agreements

      —          —          —          244   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total liabilities

    $ 3,084       $ 881       $ 654      $ 3,872   
  

 

 

     

 

 

     

 

 

     

 

 

  

The Effect of Derivative Instruments on the Consolidated Statements of Income

For the fiscal year ended March 31, 2013

 

Derivatives Designated as Cash Flow Hedges

    Gain (Loss)
Recognized in
AOCI on
Derivative
(Effective
Portion)		     

Location of Gain
(Loss) Reclassified
from
AOCI into Income
(Effective Portion)

    Gain (Loss)
Reclassified
from
AOCI into
Income
(Effective
Portion)		  

Lead hedge forward contracts

    $ 1,623       Cost of goods sold    $ 3,309   

Foreign currency forward contracts

      248       Cost of goods sold      1,703   
  

 

 

        

 

 

  

Total

    $ 1,871          $ 5,012   
  

 

 

        

 

 

  

 

Derivatives Not Designated as Hedging Instruments

   

Location of Gain (Loss)
Recognized in Income
on Derivative

    Gain (Loss)  

Interest rate swap contracts

    Other (income) expense, net    $ (101 ) 

Foreign currency forward contracts

    Other (income) expense, net      2,597   
     

 

 

  

Total

       $ 2,496   
     

 

 

  

 

The Effect of Derivative Instruments on the Consolidated Statements of Income

For the fiscal year ended March 31, 2012

 

Derivatives Designated as Cash Flow Hedges

    Gain (Loss)
Recognized in
AOCI on
Derivative
(Effective
Portion)		    

Location of Gain
(Loss) Reclassified
from
AOCI into Income
(Effective Portion)

    Gain (Loss)
Reclassified
from
AOCI into
Income
(Effective
Portion)		  

Lead hedge forward contracts

    $ (9,731 )    Cost of goods sold    $ (831 ) 

Foreign currency forward contracts

      (152 )    Cost of goods sold      (3,882 ) 
  

 

 

       

 

 

  

Total

    $ (9,883 )       $ (4,713 ) 
  

 

 

       

 

 

  

 

Derivatives Not Designated as Hedging Instruments

   

Location of Gain (Loss)
Recognized in Income
on Derivative

    Gain (Loss)  

Interest rate swap contracts

    Other (income) expense, net    $ (977 ) 

Foreign currency forward contracts

    Other (income) expense, net      (106 ) 
     

 

 

  

Total

       $ (1,083 ) 
     

 

 

  

The Effect of Derivative Instruments on the Consolidated Statements of Income

For the fiscal year ended March 31, 2011

 

Derivatives in a Cash Flow Hedging Relationship

    Gain (Loss)
Recognized in
AOCI on
Derivative
(Effective
Portion)		     Location of
Gain (Loss) Reclassified
from
AOCI into Income
(Effective Portion)		    Gain (Loss)
Reclassified
from
AOCI into
Income
(Effective
Portion)		  

Interest rate swap contracts

    $ (2,835 )    Interest expense    $ (6,698 ) 

Lead hedge forward contracts

      15,930      Cost of goods sold      6,417   

Foreign currency forward contracts

      (4,031 )    Cost of goods sold      471   
  

 

 

       

 

 

  

Total

    $ 9,064         $ 190   
  

 

 

       

 

 

  

 

Derivatives Not Designated as Hedging Instruments

   

Location of Gain (Loss)
Recognized in Income
on Derivative

    Gain (Loss)  

Interest rate swap contracts

    Charges related to refinancing    $ (5,847 )