Derivative Financial Instruments

12 Months Ended

Dec. 31, 2012

Derivative Financial Instruments

Derivative Financial Instruments

Note 6. Derivative Financial Instruments

        The company is exposed to certain risks relating to its ongoing business operations. At times the company utilizes derivative instruments to mitigate commodity margin risk, interest rate risk, and foreign currency exchange rate risk. Forward contracts on various commodities are routinely entered into to manage the price risk associated with forecasted purchases and sales of nonferrous materials (specifically aluminum, copper, nickel and silver) from the company's metals recycling operations. Interest rate swaps may be entered into to manage interest rate risk associated with the company's fixed and floating-rate borrowings. No such interest rate swaps have been entered into during the three year period ended December 31, 2012. Forward exchange contracts on various foreign currencies may be entered into to manage the foreign currency exchange rate risk as necessary. No significant foreign currency exchange contracts have been entered into during the three year period ended December 31, 2012.

        Commodity futures contracts.    If the company is "long" on futures contracts, it means the company has more futures contracts purchased than futures contracts sold for the underlying commodity. If the company is "short" on a futures contract, it means the company has more futures contracts sold than futures contracts purchased for the underlying commodity. The following summarizes the company's commodity futures contract commitments as of December 31, 2012 (MT represents metric tons and Lbs represents pounds):

Commodity	Long/Short	Total
Aluminum	Long		4,050	MT
Aluminum	Short		4,950	MT
Copper	Long		2,948	MT
Copper	Short		19,493	MT
Nickel	Short		120	MT
Silver	Short		343	Lbs

        The following summarizes the location and amounts of the fair values reported on the company's balance sheets and gains or losses related to derivatives included in the company's statements of income as of and for the years ended December 31 (in thousands):

		Fair Value
Balance Sheets, as of December 31		2012		2011
Commodity futures net liability	Accrued expenses	$	—	$	1,219
Commodity futures net asset	Other current assets		2,170		—

		Gain (Loss)
Statements of Income, Years Ended December 31		2012			2011		2010
Commodity futures and option contracts	Costs of goods sold	$	(892	)	$	12,531	$	(5,907	)