| 12. | ACCUMULATED OTHER COMPREHENSIVE INCOME |
OCI refers to certain gains and losses that under GAAP are included in comprehensive income but are excluded from net earnings as these amounts are initially recorded as an adjustment to stockholders’ equity. Amounts in OCI may be reclassified to net earnings upon the occurrence of certain events.
Our OCI is comprised of foreign currency translation adjustments, unrealized gains and losses on cash flow hedges, unrealized gains and losses on available-for-sale securities, and amortization of prior service costs and unrecognized gains and losses in actuarial assumptions on our defined benefit plans. Foreign currency translation adjustments are reclassified to net earnings upon sale or upon a complete or substantially complete liquidation of an investment in a foreign entity. Unrealized gains and losses on cash flow hedges are reclassified to net earnings when the hedged item affects net earnings. Unrealized gains and losses on available-for-sale securities are reclassified to net earnings if we sell the security before maturity or if the unrealized loss is considered to be other-than-temporary. We typically hold our available-for-sale securities until maturity and are able to realize their amortized cost and therefore we do not have reclassification adjustments to net earnings on these securities. Amounts related to defined benefit plans that are in OCI are reclassified over the service periods of employees in the plan. The reclassification amounts are allocated to all employees in the plans and therefore the reclassified amounts may become part of inventory to the extent they are considered direct labor costs. See Note 14 for more information on our defined benefit plans.
The following table shows the changes in the components of OCI, net of tax (in millions):
| Foreign Currency Translation |
Cash Flow Hedges |
Unrealized Gains on Securities |
Defined Benefit Plan Items |
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Balance December 31, 2012 |
$ | 445.5 | $ | 4.1 | $ | 0.4 | $ | (106.1 | ) | |||||||
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OCI before reclassifications |
(44.4 | ) | 33.4 | 0.1 | 30.6 | |||||||||||
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Reclassifications |
– | (4.4 | ) | – | 7.9 | |||||||||||
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Balance December 31, 2013 |
$ | 401.1 | $ | 33.1 | $ | 0.5 | $ | (67.6 | ) | |||||||
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The following table shows the reclassification adjustments from OCI (in millions):
| Amount of Gain / (Loss) Reclassified from OCI |
Location on Statement of Earnings |
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| Component of OCI | 2013 | 2012 | 2011 | |||||||||||
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Cash flow hedges |
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Foreign exchange forward contracts |
$ | 8.0 | $ | (12.0 | ) | $ | (32.9 | ) | Cost of products sold | |||||
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Foreign exchange options |
(0.2 | ) | (0.4 | ) | – | Cost of products sold | ||||||||
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Cross-currency interest rate swaps |
– | 0.2 | (8.3 | ) | Interest expense | |||||||||
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| 7.8 | (12.2 | ) | (41.2 | ) | Total before tax | |||||||||
| 3.4 | (8.9 | ) | (16.7 | ) | Provision for income taxes | |||||||||
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| $ | 4.4 | $ | (3.3 | ) | $ | (24.5 | ) | Net of tax | ||||||
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Defined benefit plans |
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Prior service cost |
$ | 3.9 | $ | 2.9 | $ | 0.8 | * | |||||||
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Unrecognized actuarial (loss) |
(16.6 | ) | (13.3 | ) | (7.4 | ) | * | |||||||
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| (12.7 | ) | (10.4 | ) | (6.6 | ) | Total before tax | ||||||||
| (4.8 | ) | (3.9 | ) | (2.6 | ) | Provision for income taxes | ||||||||
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| $ | (7.9 | ) | $ | (6.5 | ) | $ | (4.0 | ) | Net of tax | |||||
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Total reclassifications |
$ | (3.5 | ) | $ | (9.8 | ) | $ | (28.5 | ) | Net of tax | ||||
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* These OCI components are included in the computation of net periodic pension expense (see Note 14).
The following table shows the tax effects on each component of OCI recognized in our consolidated statements of comprehensive income (in millions):
| Before Tax | Tax | Net of Tax | ||||||||||||||||||||||||||||||||||
| For the Years Ended December 31, | 2013 | 2012 | 2011 | 2013 | 2012 | 2011 | 2013 | 2012 | 2011 | |||||||||||||||||||||||||||
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Foreign currency cumulative translation adjustments |
$ | (44.4 | ) | $ | 46.1 | $ | 4.6 | $ | – | $ | – | $ | – | $ | (44.4 | ) | $ | 46.1 | $ | 4.6 | ||||||||||||||||
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Unrealized cash flow hedge gains/(losses) |
63.6 | 15.2 | (34.9 | ) | 30.2 | 4.3 | (4.3 | ) | 33.4 | 10.9 | (30.6 | ) | ||||||||||||||||||||||||
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Reclassification adjustments on foreign currency hedges |
(7.8 | ) | 12.2 | 41.2 | (3.4 | ) | 8.9 | 16.7 | (4.4 | ) | 3.3 | 24.5 | ||||||||||||||||||||||||
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Unrealized gains on securities |
0.1 | 0.4 | 0.2 | – | – | – | 0.1 | 0.4 | 0.2 | |||||||||||||||||||||||||||
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Adjustments to prior service cost and unrecognized actuarial assumptions |
50.3 | 20.3 | (71.3 | ) | 11.8 | 8.5 | (23.0 | ) | 38.5 | 11.8 | (48.3 | ) | ||||||||||||||||||||||||
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Total Other Comprehensive Gain/(Loss) |
$ | 61.8 | $ | 94.2 | $ | (60.2 | ) | $ | 38.6 | $ | 21.7 | $ | (10.6 | ) | $ | 23.2 | $ | 72.5 | $ | (49.6 | ) | |||||||||||||||
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