XML 76 R20.htm IDEA: XBRL DOCUMENT
v2.4.0.8

Derivative Instruments, Hedging Activities and Fair Value | 3 Months Ended
--- | ---
Mar. 31, 2014
Derivative Instruments, Hedging Activities And Fair Value Disclosure [Abstract] |
Derivative Instruments, Hedging Activities and Fair Value | Derivative Instruments, Hedging Activities and Fair Value Derivative Instruments and Hedging Activities The Company uses derivative instruments, including foreign currency forward exchange contracts, cross-currency interest rate swaps and, at times, commodity contracts, to manage certain foreign currency, interest rate and commodity price exposures. Derivative instruments are viewed as risk management tools by the Company and are not used for trading or speculative purposes. All derivative instruments are recorded on the Condensed Consolidated Balance Sheets at fair value. Changes in the fair value of derivatives used to hedge foreign currency denominated balance sheet items are reported directly in earnings, along with offsetting transaction gains and losses on the items being hedged. Derivatives used to hedge forecasted cash flows associated with foreign currency commitments or forecasted commodity purchases may be accounted for as cash flow hedges, as deemed appropriate and if the criteria for hedge accounting are met. Gains and losses on derivatives designated as cash flow hedges are deferred as a separate component of equity and reclassified to earnings in a manner that matches the timing of the earnings impact of the hedged transactions. Generally, at March 31, 2014, these deferred gains and losses are reclassified to earnings over 10 to 15 years from the balance sheet date. The ineffective portion of all hedges, if any, is recognized currently in earnings. The fair values of outstanding derivative contracts recorded as assets and liabilities on the Condensed Consolidated Balance Sheets at March 31, 2014 and December 31, 2013 were as follows:
|  | Asset Derivatives |  | Liability Derivatives
(In thousands) |  | Balance Sheet Location |  | Fair Value |  | Balance Sheet Location |  | Fair Value
March 31, 2014 |  |  |  |  |  |  |  |
Derivatives designated as hedging instruments:
Foreign currency forward exchange contracts |  | Other current assets |  | $ | 52 |  |  | Other current liabilities |  | $ | 45 |
Cross-currency interest rate swaps |  | Other assets |  | 24,046 |  |  | Other liabilities |  | 17,412 |
Total derivatives designated as hedging instruments |  |  |  | $ | 24,098 |  |  |  |  | $ | 17,457 |
Derivatives not designated as hedging instruments:
Foreign currency forward exchange contracts |  | Other current assets |  | $ | 3,729 |  |  | Other current liabilities |  | $ | 2,770 |
|  | Asset Derivatives |  | Liability Derivatives
(In thousands) |  | Balance Sheet Location |  | Fair Value |  | Balance Sheet Location |  | Fair Value
December 31, 2013 |  |  |  |  |  |  |  |
Derivatives designated as hedging instruments:
Foreign currency forward exchange contracts |  | Other current assets |  | $ | 40 |  |  | Other current liabilities |  | $ | 17 |
Cross-currency interest rate swaps |  | Other assets |  | 26,001 |  |  | Other liabilities |  | 13,410 |
Total derivatives designated as hedging instruments |  |  |  | $ | 26,041 |  |  |  |  | $ | 13,427 |
Derivatives not designated as hedging instruments:
Foreign currency forward exchange contracts |  | Other current assets |  | $ | 1,216 |  |  | Other current liabilities |  | $ | 3,267 |
All of the Company's derivatives are recorded in the Condensed Consolidated Balance Sheets at gross amounts and not offset. All of the Company's cross-currency interest rate swaps and certain foreign currency forward exchange contracts are transacted under International Swaps and Derivatives Association ("ISDA") documentation. Each ISDA master agreement permits the net settlement of amounts owed in the event of default. The Company's derivative assets and liabilities subject to enforceable master netting arrangements resulted in a $0.1 million net liability at both March 31, 2014 and December 31, 2013. The effect of derivative instruments on the Condensed Consolidated Statements of Operations and the Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2014 and 2013 was as follows: Derivatives Designated as Hedging Instruments
(In thousands) |  | Amount of Gain (Loss) Recognized in Other Comprehensive Income (“OCI”) on Derivative - Effective Portion |  | Location of Gain (Loss) Reclassified from Accumulated OCI into Income - Effective Portion |  | Amount of Gain (Loss) Reclassified from Accumulated OCI into Income - Effective Portion |  | Location of Gain (Loss) Recognized in Income on Derivative - Ineffective Portion and Amount Excluded from Effectiveness Testing |  | Amount of Gain (Loss) Recognized in Income on Derivative - Ineffective Portion and Amount Excluded from Effectiveness Testing |
Three Months Ended March 31, 2014:
Foreign currency forward exchange contracts |  | $ | 11 |  |  | Cost of services and products sold |  | $ | (2 | ) |  |  |  | $ | — |  |
Cross-currency interest rate swaps |  | (4,360 | ) |  |  |  | — |  |  | Cost of services and products sold |  | (1,574 | ) | (a)
|  | $ | (4,349 | ) |  |  |  | $ | (2 | ) |  |  |  | $ | (1,574 | ) |
Three Months Ended March 31, 2013:
Foreign currency forward exchange contracts |  | $ | 5 |  |  | Cost of services and products sold |  | $ | (6 | ) |  |  |  | $ | — |  |
Cross-currency interest rate swaps |  | 2,493 |  |  |  |  | — |  |  | Cost of services and products sold |  | 20,453 |  | (a)
|  | $ | 2,498 |  |  |  |  | $ | (6 | ) |  |  |  | $ | 20,453 |  |
(a) These gains (losses) offset foreign currency fluctuation effects on the debt principal.
Derivatives Not Designated as Hedging Instruments
|  | Location of Gain (Loss) Recognized in Income on Derivative |  | Amount of Gain (Loss) Recognized in Income on Derivative for the Three Months Ended March 31 (a)
(In thousands) |  |  | 2014 |  | 2013
Foreign currency forward exchange contracts |  | Cost of services and products sold |  | $ | 1,556 |  |  | $ | 2,059 |
(a) These gains (losses) offset amounts recognized in cost of services and products sold principally as a result of intercompany or third party foreign currency exposures.
Foreign Currency Forward Exchange Contracts The Company conducts business in multiple currencies and, accordingly, is subject to the inherent risks associated with foreign exchange rate movements. The financial position and results of operations of substantially all of the Company’s foreign subsidiaries are measured using the local currency as the functional currency. Foreign currency-denominated assets and liabilities are translated into U.S. dollars at the exchange rates existing at the respective balance sheet dates. Income and expense items are translated at the average exchange rates during the respective periods. The aggregate effects of translating the balance sheets of these subsidiaries are deferred and recorded in Accumulated other comprehensive loss, which is a separate component of equity. The Company uses derivative instruments to hedge cash flows related to foreign currency fluctuations. Foreign currency forward exchange contracts outstanding are part of a worldwide program to minimize foreign currency exchange operating income and balance sheet exposure by offsetting foreign currency exposures of certain future payments between the Company and its various subsidiaries, suppliers or customers. These unsecured contracts are with major financial institutions. The Company may be exposed to credit loss in the event of non-performance by the contract counterparties. The Company evaluates the creditworthiness of the counterparties and does not expect default by them. Foreign currency forward exchange contracts are used to hedge commitments, such as foreign currency debt, firm purchase commitments and foreign currency cash flows for certain export sales transactions. The following tables summarize, by major currency, the contractual amounts of the Company’s foreign currency forward exchange contracts in U.S. dollars at March 31, 2014 and December 31, 2013. The “Buy” amounts represent the U.S. dollar equivalent of commitments to purchase foreign currencies, and the “Sell” amounts represent the U.S. dollar equivalent of commitments to sell foreign currencies. The recognized gains and losses offset amounts recognized in cost of services and products sold principally as a result of intercompany or third party foreign currency exposures. Contracted Amounts of Foreign Currency Forward Exchange Contracts Outstanding at March 31, 2014:
(In thousands) |  | Type |  | U.S. Dollar Equivalent |  | Maturity |  | Recognized Gain (Loss)
British pounds sterling |  | Sell |  | $ | 27,256 |  |  | April 2014 |  | $ | (76 | )
British pounds sterling |  | Buy |  | 10,144 |  |  | April 2014 |  | 45 |
Euros |  | Sell |  | 252,913 |  |  | April 2014 through July 2014 |  | 3,258 |
Euros |  | Buy |  | 243,761 |  |  | April 2014 through September 2014 |  | (2,455 | )
Other currencies |  | Sell |  | 16,289 |  |  | April 2014 through August 2014 |  | 52 |
Other currencies |  | Buy |  | 10,827 |  |  | April 2014 through August 2014 |  | 142 |
Total |  |  |  | $ | 561,190 |  |  |  |  | $ | 966 |
Included in the contracted amounts of foreign currency exchange forward contracts outstanding at March 31, 2014 are $125.0 million of foreign currency exchange forward contracts entered into by the Company under the Transition Services Agreement with Brand. The Company has recognized a $0.1 million mark-to-market liability associated with these foreign currency exchange forward contracts. Contracted Amounts of Foreign Currency Forward Exchange Contracts Outstanding at December 31, 2013:
(In thousands) |  | Type |  | U.S. Dollar Equivalent |  | Maturity |  | Recognized Gain (Loss)
British pounds sterling |  | Sell |  | $ | 26,931 |  |  | January 2014 |  | $ | (277 | )
British pounds sterling |  | Buy |  | 1,976 |  |  | January 2014 |  | 15 |
Euros |  | Sell |  | 248,943 |  |  | January 2014 through July 2014 |  | (335 | )
Euros |  | Buy |  | 242,385 |  |  | January 2014 through March 2014 |  | (1,335 | )
Other currencies |  | Sell |  | 12,708 |  |  | January 2014 through July 2014 |  | (134 | )
Other currencies |  | Buy |  | 8,907 |  |  | January 2014 through August 2014 |  | 38 |
Total |  |  |  | $ | 541,850 |  |  |  |  | $ | (2,028 | )
Included in the contracted amounts of foreign currency exchange forward contracts outstanding at December 31, 2013 are $121.2 million of foreign currency exchange forward contracts entered into by the Company under the Transition Services Agreement with Brand. The Company has recognized a $0.7 million mark-to-market liability associated with these foreign currency exchange forward contracts. In addition to foreign currency forward exchange contracts, the Company designates certain loans as hedges of net investments in international subsidiaries. The Company recorded pre-tax net gain of $0.2 million and $1.7 million during the three months ended March 31, 2014 and 2013, respectively, into Accumulated other comprehensive loss. Cross-Currency Interest Rate Swaps The Company uses cross-currency interest rate swaps in conjunction with certain debt issuances in order to secure a fixed local currency interest rate. Under these cross-currency interest rate swaps, the Company receives interest based on a fixed or floating U.S. dollar rate and pays interest on a fixed local currency rate based on the contractual amounts in dollars and the local currency, respectively. The cross-currency interest rate swaps are recorded on the Condensed Consolidated Balance Sheets at fair value, with changes in value attributed to the effect of the swaps’ interest spread recorded in Accumulated other comprehensive loss. Changes in value attributed to the effect of foreign currency fluctuations are recorded in the statements of operations and offset currency fluctuation effects on the debt principal. The following table indicates the contractual amounts of the Company's cross-currency interest rate swaps at March 31, 2014:
|  |  |  | Interest Rates
(In millions) |  | Contractual Amount |  | Receive |  | Pay
Maturing 2018 |  | $ | 250.0 |  |  | Fixed U.S. dollar rate |  | Fixed euro rate
Maturing 2020 |  | 220.0 |  |  | Fixed U.S. dollar rate |  | Fixed British pound sterling rate
Maturing 2016 through 2017 |  | 10.2 |  |  | Floating U.S. dollar rate |  | Fixed rupee rate
Fair Value of Derivative Assets and Liabilities and Other Financial Instruments 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 (an exit price). The Company utilizes market data or assumptions that the Company believes market participants would use in valuing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs), and (2) an entity’s own assumptions about market participant assumptions based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which give the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
• | Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
• | Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
• | Level 3—Inputs that are both significant to the fair value measurement and unobservable.
In instances in which multiple levels of inputs are used to measure fair value, hierarchy classification is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. The following table indicates the fair value hierarchy of the financial instruments of the Company at March 31, 2014 and December 31, 2013:
Level 2 Fair Value Measurements (In thousands) |  | March 31 2014 |  | December 31 2013
Assets |  |  |  |  |  |
Foreign currency forward exchange contracts |  | $ | 3,781 |  |  | $ | 1,256 |
Cross-currency interest rate swaps |  | 24,046 |  |  | 26,001 |
Liabilities |  |  |  |  |  |
Foreign currency forward exchange contracts |  | 2,815 |  |  | 3,284 |
Cross-currency interest rate swaps |  | 17,412 |  |  | 13,410 |
The following table reconciles the beginning and ending balances for liabilities measured on a recurring basis using unobservable inputs (Level 3) for three months ended March 31, 2014:
Level 3 Liabilities—Unit Adjustment Liability (a) for the Three Months Ended March 31 (b) (In thousands) |  | 2014
Balance at December 31, 2013 |  | $ | 106,343 |
Payments |  | (5,580 | )
Change in fair value to unit adjustment liability |  | 2,546 |
Balance at March 31, 2014 |  | $ | 103,308 |
(a) See Note 5, Equity Method Investments, for additional information related to the unit adjustment liability. (b) Does not total due to rounding. The Company primarily applies the market approach for recurring fair value measurements and endeavors to utilize the best available information. Accordingly, the Company utilizes valuation techniques that maximize the use of observable inputs, such as forward rates, interest rates, the Company’s credit risk and counterparties’ credit risks, and which minimize the use of unobservable inputs. The Company is able to classify fair value balances based on the ability to observe those inputs. Commodity derivatives, foreign currency forward exchange contracts and cross-currency interest rate swaps are classified as Level 2 fair value based upon pricing models using market-based inputs. Model inputs can be verified, and valuation techniques do not involve significant management judgment. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and short-term borrowings approximate fair value due to the short-term maturities of these assets and liabilities. At March 31, 2014 and December 31, 2013, the total fair value of long-term debt, including current maturities, was $893.1 million and $832.6 million, respectively, compared with a carrying value of $855.9 million and $803.4 million at March 31, 2014 and December 31, 2013, respectively. Fair values for debt are based on quoted market prices (Level 1) for the same or similar issues, or on the current rates offered to the Company for debt of the same remaining maturities.

X
- Details
Name: | hsc_DerivativeInstrumentsHedgingActivitiesAndFairValueDisclosureAbstract
Namespace Prefix: | hsc_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition Disclosure of the entity's derivative instruments and hedging activities. 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. Also represents the 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. + References No definition available. + Details
Name: | hsc_DerivativeInstrumentsHedgingActivitiesAndFairValueDisclosureTextBlock
Namespace Prefix: | hsc_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration