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Derivative Instruments And Risk Management
 12 Months Ended
Dec. 31, 2011
Derivative Instruments And Risk Management [Abstract]  
Derivative Instruments And Risk Management

Note 17.    Derivative Instruments and Risk Management

 

The Company has limited involvement with derivative instruments and does not trade them. The Company does use derivatives to manage certain interest rate, foreign currency exchange rate and raw material cost exposures.

 

The Company uses interest rate swaps, floors, collar and cap agreements to reduce the impact of changes in interest rates on its floating rate debt. The swap agreements are contracts to exchange floating rate for fixed interest payments periodically over the life of the agreements without the exchange of the underlying notional amounts. The notional amounts are used to calculate interest to be paid or received and do not represent the amount of exposure to credit loss.

 

As at December 31, 2011 the Company had no interest rate instruments designated as effective hedges. At December 31, 2010 the following were in effect:

 

(in millions)

    Notional
Amount
      Strike
Rate
     Expiry date
  

Interest rate swap

    $ 7.5         1.4435 %      February 7, 2011   
     $ 7.5         1.4500 %      February 7, 2011   
     $ 15.0         1.8250 %      February 6, 2012   
     $ 10.0         1.8700 %      February 6, 2012   

 

The interest rate swaps with expiry dates of February 6, 2012 were ineffective at December 31, 2011 because the Company's previous finance facility, which carried the corresponding floating rate debt obligations, had been repaid. Accordingly, a loss of $0.1 million has been recognized in earnings in 2011.

 

The Company has hedged the cost of certain raw materials with commodity swaps which are summarized as follows:

 

     December 31, 2011
      December 31, 2010
  

(in millions)

    Carrying
Amount
      Fair
Value
      Carrying
Amount
      Fair
Value
  

Notional quantity – 2,950 tonnes

                      $ 1.7       $ 1.7   

Notional quantity – 2,075 tonnes

    $ 0.2       $ 0.2                     

The impact on the income statement for the last 12 months is summarized below:

 

(in millions)

   Gain/(Loss)
Recognized in
OCI on
Derivative
    

Location of Gain/(Loss)

Reclassified from Accumulated

OCI into Income

   Amount of Gain/(Loss)
Reclassified from
Accumulated OCI  into
Income
  

Interest rate contracts

   $ 0.0      Interest income/(expense)   $ (0.5 ) 

Commodity contracts

     (0.3 )    Cost of goods sold     1.2   
   
     
      (0.3 )          0.7   

Taxation

     0.1      Income taxes     (0.2 ) 
   
     
    $ (0.2 )        $ 0.5   
   
     

 

We enter into various foreign currency forward exchange contracts to minimize currency exposure from expected future cash flows. The contracts have maturity dates of up to four years at the date of inception. These foreign currency forward exchange contracts have not been designated as hedging instruments, and their impact on the income statement in 2011, 2010 and 2009 is summarized below:

 

    

Location of Gain/(Loss)

Recognized in Income

    Amount of Gain/(Loss)
Recognized in Income
  

(in millions)

       2011
      2010
      2009
  

Foreign currency forward exchange contracts

    Other income/(expense)    $ 1.3       $ 0.9       $ 12.0   
         
  
  

The Company sells a range of Fuel Specialties, Active Chemicals and Octane Additives to major oil refineries and chemical companies throughout the world. Credit limits, ongoing credit evaluation and account monitoring procedures are used to minimize bad debt risk. Collateral is not generally required.