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Derivative Financial Instruments | 12 Months Ended
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Dec. 31, 2013
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments | Derivative Financial Instruments The company’s risk management objective is to ensure that business exposures to risks that have been identified and measured and are capable of being controlled, are minimized using the most effective and efficient methods to eliminate, reduce, or transfer such exposures. Operating decisions consider these associated risks and structure transactions to avoid these risks whenever possible. Use of derivative instruments is consistent with the overall business and risk management objectives of the company. Derivative instruments may be used to manage business risk within limits specified by the company’s risk policy and manage exposures that have been identified through the risk identification and measurement process, provided that they clearly qualify as “hedging” activities as defined in the risk policy. Use of derivative instruments is not automatic, nor is it necessarily the only response to managing pertinent business risk. Use is permitted only after the risks that have been identified are determined to exceed defined tolerance levels and are considered to be unavoidable. The primary risks managed by the company by using derivative instruments are interest rate risk, commodity price risk and foreign currency exchange risk. Interest rate swap or cap instruments are entered into to help manage interest rate or fair value risk. Swap contracts on various commodities are entered into to help manage the price risk associated with forecasted purchases of materials used in the company’s manufacturing process. The company also enters into various foreign currency derivative instruments to help manage foreign currency risk associated with the company’s projected purchases and sales and foreign currency denominated receivable and payable balances. ASC Topic 815-10 requires companies to recognize all derivative instruments as either assets or liabilities at fair value in the statement of financial position. In accordance with ASC Topic 815-10, the company designates commodity swaps, foreign currency exchange contracts, and interest rate derivative contracts as cash flow hedges of forecasted purchases of commodities and currencies, and fixed or variable rate interest payments. Also in accordance with ASC Topic 815-10, the company designates fixed-to-float interest rate swaps as fair market value hedges of fixed rate debt, which synthetically swaps the company’s fixed rate debt to floating rate debt. For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of Other Comprehensive Income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative instruments representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness, are recognized in current earnings. In the next twelve months the company estimates $1.6 million of unrealized gains, net of tax, related to interest rate, commodity price and currency rate hedging will be reclassified from Other Comprehensive Income into earnings. Foreign currency and commodity hedging is generally completed prospectively on a rolling basis for twelve and twenty-four months, respectively, depending on the type of risk being hedged. The risk management objective for the company’s fair market value interest rate hedges is to effectively change the amount of the underlying debt equal to the notional value of the hedges from a fixed to a floating interest rate based on the one-month LIBOR rate. These swaps include an embedded call feature to match the terms of the call schedule embedded in the Senior Notes. Changes in the fair value of the interest rate swap are expected to offset changes in the fair value of the debt due to changes in the one-month LIBOR rate. As of December 31, 2013, the company had the following outstanding commodity and currency forward contracts that were entered into as hedge forecasted transactions:
Commodity |  | Units Hedged |  |  |  | Type
Aluminum |  | 1,622 |  | MT |  | Cash Flow
Copper |  | 382 |  | MT |  | Cash Flow
Natural Gas |  | 214,277 |  | MMBtu |  | Cash Flow
Steel |  | 11,503 |  | Short Tons |  | Cash Flow
Currency |  | Units Hedged |  | Type
Canadian Dollar |  | 11,011,092 |  | Cash Flow
European Euro |  | 74,934,975 |  | Cash Flow
South Korean Won |  | 1,258,808,642 |  | Cash Flow
Singapore Dollar |  | 5,280,000 |  | Cash Flow
United States Dollar |  | 14,380,959 |  | Cash Flow
Chinese Renminbi |  | 245,324,730 |  | Cash Flow
As of December 31, 2013 and December 31, 2012, the company had outstanding $100.0 million and $225.0 million, respectively, notional amount of 3.00% LIBOR caps related to the term loan portion of the Senior Credit Facility which effectively cap the company’s future interest rate exposure for the notional value of its variable term debt at a one-month LIBOR rate of 3.00%. The company paid various bank partners $0.7 million in option premium to purchase the protection on Term Loans A and B and is amortizing to interest expense over the life of the cap protection. The caps were designated as a hedge so any change in value of the derivative is booked to other comprehensive income. The remaining unhedged portions of Term Loans A and B continue to bear interest according to the terms of the Senior Credit Facility. The company has been party to various fixed-to-float interest rate swaps designated as fair market value hedges of its 2018, 2020, and 2022 Notes. The company monetized the derivative asset related to its fixed-to-float interest rate swaps due in 2018 and 2020 and received $21.5 million in the third quarter of 2011. The gain was treated as an increase to the debt balances for the 2018 and 2020 Notes and will be amortized against interest expense over the life of the original swap. Later in 2011, the company subsequently entered into new interest rate swaps due in 2018 and 2020. In the third quarter of 2012, the company further monetized the derivative asset related to its fixed-to-float interest rate swaps related to its 2018 and 2020 Notes and received $14.8 million in the quarter. Consistent with the prior monetization, the company treated the gain as an increase to the debt balances for each of the 2018 and 2020 notes, which is being amortized against interest expense over the life of the original swaps. In the fourth quarter of 2012, the company purchased and designated new fixed-to-float swaps as fair market value hedges of the 2022 Notes and as of December 31, 2012 $100.0 million of these notes were swapped to floating rate interest. During the second quarter of 2013, the company entered into new interest rate swaps due in 2020 and 2022, designating them as fair market value hedges of the 2020 and 2022 Notes, respectively. As of December 31, 2013, $75.0 million and $125.0 million of the 2020 and 2022 Notes, respectively, were swapped to floating rate interest. Including the floating rate swaps, the 2020 and 2022 Notes have an all-in interest rate of 8.31% and 5.188%, respectively. For derivative instruments that are not designated as hedging instruments under ASC Topic 815-10, the gains or losses on the derivatives are recognized in current earnings within Cost of Sales or Other income, net in the Condensed Consolidated Statement of Operations. As of December 31, 2013, the company had the following outstanding currency forward contracts that were not designated as hedging instruments:
Currency |  | Units Hedged |  | Recognized Location |  | Purpose
Euro |  | 31,738,273 |  | Other income, net |  | Accounts payable and receivable settlement
United States Dollar |  | 29,091,053 |  | Other income, net |  | Accounts payable and receivable settlement
Australian Dollar |  | 1,000,000 |  | Other income, net |  | Accounts payable and receivable settlement
Chinese Renminbi |  | 125,000,000 |  | Other income, net |  | Accounts payable and receivable settlement
The fair value of outstanding derivative contracts recorded as assets in the accompanying Consolidated Balance Sheet as of December 31, 2013 was as follows:
| ASSET DERIVATIVES
(in millions) | Balance Sheet Location | Fair Value
Derivatives designated as hedging instruments |  |  |
Foreign exchange contracts | Other current assets | $ | 2.3 |
Commodity contracts | Other current assets | 0.2 |
Total derivatives designated as hedging instruments |  | $ | 2.5 |
| ASSET DERIVATIVES
(in millions) | Balance Sheet Location | Fair Value
Derivatives NOT designated as hedging instruments |  |  |
Foreign exchange contracts | Other current assets | $ | 0.6 |
Total derivatives NOT designated as hedging instruments |  | $ | 0.6 |
Total asset derivatives |  | $ | 3.1 |
The fair value of outstanding derivative contracts recorded as liabilities in the accompanying Consolidated Balance Sheet as of December 31, 2013 was as follows:
| LIABILITY DERIVATIVES
(in millions) | Balance Sheet Location | Fair Value
Derivatives designated as hedging instruments |  |  |
Foreign exchange contracts | Accounts payable and accrued expenses | $ | 0.5 |
Commodity contracts | Accounts payable and accrued expenses | 0.4 |
Interest rate swap contracts: Fixed-to-float | Other non-current liabilities | 14.9 |
Total derivatives designated as hedging instruments |  | $ | 15.8 |
| LIABILITY DERIVATIVES
(in millions) | Balance Sheet Location | Fair Value
Derivatives NOT designated as hedging instruments |  |  |
Foreign exchange contracts | Accounts payable and accrued expenses | $ | 0.6 |
Total derivatives NOT designated as hedging instruments |  | $ | 0.6 |
Total liability derivatives |  | $ | 16.4 |
The effect of derivative instruments on the Consolidated Statement of Operations for the twelve months ended December 31, 2013 and gains or losses initially recognized in Other Comprehensive Income (OCI) in the Consolidated Balance Sheet was as follows:
Derivatives in Cash Flow Hedging Relationships (in millions) |  | Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion, net of tax) |  | Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) |  | Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
Foreign exchange contracts |  | $ | (0.3 | ) |  | Cost of sales |  | $ | 3.0 |
Commodity contracts |  | 0.4 |  |  | Cost of sales |  | (1.6 | )
Total |  | $ | 0.1 |  |  |  |  | $ | 1.4 |
Derivatives Relationships (in millions) | Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) | Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Commodity contracts | Cost of sales | $ | — |
Total |  | $ | — |
Derivatives Not Designated as Hedging Instruments (in millions) | Location of Gain or (Loss) Recognized in Income on Derivative | Amount of Gain or (Loss) Recognized in Income on Derivative
Foreign exchange contracts | Other income | $ | 0.2 |
Total |  | $ | 0.2 |
Derivatives Designated as Fair Market Value Instruments under ASC 815 (in millions) | Location of Gain or (Loss) Recognized in Income on Derivative | Amount of Gain or (Loss) Recognized in Income on Derivative
Interest rate swap contracts | Interest expense | $ | (13.7 | )
Total |  | $ | (13.7 | )
As of December 31, 2012, the company had the following outstanding interest rate, commodity and currency forward contracts that were entered into as hedge forecasted transactions:
Commodity |  | Units Hedged |  |  |  | Type
Aluminum |  | 1,382 |  | MT |  | Cash Flow
Copper |  | 515 |  | MT |  | Cash Flow
Natural Gas |  | 158,670 |  | MMBtu |  | Cash Flow
Steel |  | 10,041 |  | Short Tons |  | Cash Flow
Currency |  | Units Hedged |  | Type
Canadian Dollar |  | 9,351,126 |  | Cash Flow
European Euro |  | 66,389,190 |  | Cash Flow
South Korean Won |  | 2,595,874,455 |  | Cash Flow
Singapore Dollar |  | 4,800,000 |  | Cash Flow
United States Dollar |  | 2,398,273 |  | Cash Flow
Chinese Renminbi |  | 187,640,472 |  | Cash Flow
As of December 31, 2012, the designated fair market value hedges of receive-fixed/pay-float swaps of the 2022 Notes was $100.0 million. Including the floating rate swaps, the 2022 Notes had an all-in interest rate of 5.35%. For derivative instruments that are not designated as hedging instruments under ASC Topic 815-10, the gains or losses on the derivatives are recognized in current earnings within Cost of Sales or Other income, net.
Currency |  | Units Hedged |  | Recognized Location |  | Purpose
Euro |  | 24,540,841 |  | Other income, net |  | Accounts Payable and Receivable Settlement
United States Dollar |  | 6,432,000 |  | Other income, net |  | Accounts Payable and Receivable Settlement
Pounds Sterling |  | 11,100,000 |  | Other income, net |  | Accounts Payable and Receivable Settlement
The fair value of outstanding derivative contracts recorded as assets in the accompanying Consolidated Balance Sheet as of December 31, 2012 was as follows:
| ASSET DERIVATIVES
(in millions) | Balance Sheet Location | Fair Value
Derivatives designated as hedging instruments |  |  |
Foreign Exchange Contracts | Other current assets | $ | 2.6 |
Total derivatives designated as hedging instruments |  | $ | 2.6 |
| ASSET DERIVATIVES
(in millions) | Balance Sheet Location | Fair Value
Derivatives NOT designated as hedging instruments |  |  |
Foreign Exchange Contracts | Other current assets | $ | 0.3 |
Total derivatives NOT designated as hedging instruments |  | $ | 0.3 |
Total asset derivatives |  | $ | 2.9 |
The fair value of outstanding derivative contracts recorded as liabilities in the accompanying Consolidated Balance Sheet as of December 31, 2012 was as follows:
| LIABILITIES DERIVATIVES
(in millions) | Balance Sheet Location |  | Fair Value
Derivatives designated as hedging instruments |  |  |  |
Foreign Exchange Contracts | Accounts payable and accrued expenses |  | $ | 0.4 |
Interest Rate Swaps: Fixed-to-Float | Other non-current liabilities |  | 1.1 |
Commodity Contracts | Accounts payable and accrued expenses |  | 0.8 |
Total derivatives designated as hedging instruments |  |  | $ | 2.3 |
| LIABILITY DERIVATIVES
(in millions) | Balance Sheet Location | Fair Value
Derivatives NOT designated as hedging instruments |  |  |
Foreign Exchange Contracts | Accounts payable and accrued expenses | $ | 0.5 |
Interest Rate Swap Contracts: Float-to-Fixed | Accounts payable and accrued expenses | 0.3 |
Total derivatives NOT designated as hedging instruments |  | $ | 0.8 |
Total liability derivatives |  | $ | 3.1 |
The effect of derivative instruments on the Consolidated Statement of Operations for the twelve months ended December 31, 2012 and gains or losses initially recognized in OCI in the Consolidated Balance Sheet was as follows:
Derivatives in Cash Flow Hedging Relationships (in millions) |  | Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion, net of tax) |  | Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) |  | Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
Foreign Exchange Contracts |  | $ | 4.2 |  |  | Cost of sales |  | $ | (7.3 | )
Interest Rate Swap & Cap Contracts |  | (0.2 | ) |  | Interest expense |  | 0.1 |
Commodity Contracts |  | 1.0 |  |  | Cost of sales |  | (2.7 | )
Total |  | $ | 5.0 |  |  |  |  | $ | (9.9 | )
Derivatives in Fair Value Hedging Relationships (in millions) |  | Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) |  | Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Commodity Contracts |  | Cost of sales |  | $ | — |
Total |  |  |  | $ | — |
Derivatives Not Designated as Hedging Instruments (in millions) |  | Location of Gain or (Loss) recognized in Income on Derivative |  | Amount of Gain or (Loss) Recognized in Income on Derivative
Foreign Exchange Contracts |  | Other income |  | $ | 1.2 |
Interest Rate Swap Contracts |  | Other income |  | 9.3 |
Total |  |  |  | $ | 10.5 |
Derivatives Designated as Fair Market Value Instruments under ASC 815 (in millions) | Location of Gain or (Loss) Recognized in Income on Derivative | Amount of Gain or (Loss) Recognized in Income on Derivative
Interest rate swap contracts | Interest expense | $ | (1.7 | )
Total |  | $ | (1.7 | )
The effect of derivative instruments on the Consolidated Statement of Operations for the twelve months ended December 31, 2011 and gains or losses initially recognized in OCI in the Consolidated Balance Sheet was as follows:
Derivatives in Cash Flow Hedging Relationships (in millions) |  | Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion, net of tax) |  | Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) |  | Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
Foreign Exchange Contracts |  | $ | (3.7 | ) |  | Cost of sales |  | $ | 2.5 |
Interest Rate Swap & Cap Contracts |  | 1.3 |  |  | Interest expense |  | (5.3 | )
Commodity contracts |  | (2.1 | ) |  | Cost of sales |  | (0.3 | )
Total |  | $ | (4.5 | ) |  |  |  | $ | (3.1 | )
Derivatives in Fair Value Hedging Relationships (in millions) |  | Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) |  | Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Commodity Contracts |  | Cost of sales |  | $ | 0.1 |
Total |  |  |  | $ | 0.1 |
Derivatives in Fair Value Hedging Relationships (in millions) |  | Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) |  | Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Interest Rate Swap Contracts |  | Interest Expense |  | $ | 22.3 |
Total |  |  |  | $ | 22.3 |
Derivatives Not Designated as Hedging Instruments (in millions) |  | Location of Gain or (Loss) recognized in Income on Derivative |  | Amount of Gain or (Loss) Recognized in Income on Derivative
Foreign Exchange Contracts |  | Other income |  | $ | (2.0 | )
Interest rate swap contracts |  | Other income |  | $ | 4.8 |
Total |  |  |  | $ | 2.8 |

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708775-113959 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624163-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708773-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41635-113959 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624258-113959 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5618551-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80748-113994 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624181-113959 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80784-113994 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41620-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624177-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579245-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5580258-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579240-113959 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41641-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41638-113959 Reference 20: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624171-113959 + Details
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