Derivative Financial Instruments

12 Months Ended

Dec. 31, 2015

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

18. Derivative Financial Instruments

The Company utilizes derivative instruments to manage exposures to risks that have been identified and measured and are capable of being controlled. The primary risks managed by the company by using derivative instruments are commodity price risk associated with copper and foreign currency exchange risk associated with a number of currencies, principally the U.S. dollar, the Canadian dollar, the New Zealand dollar, the Euro and British pounds. Swap contracts on copper are used to manage the price risk associated with forecasted purchases of materials used in the Company’s manufacturing processes. Generally, the Company will not hedge cash flow exposures for durations longer than 30 months and the Company has hedged certain volumes of copper through December 2018. The Company enters into foreign currency forward contracts to manage foreign currency risk associated with the Company’s receivable and payable balances. Generally, the Company enters into master netting arrangements with the counterparties and offsets net derivative positions with the same counterparties. Currently, the Company’s agreements do not require cash collateral.

ASC Topic 815-10, “Derivatives and Hedging,” requires companies to recognize all derivative instruments as either assets or liabilities at fair value in the balance sheet. Derivative instruments’ fair value is determined using significant other observable inputs, or Level 2 in the fair value hierarchy. In accordance with ASC Topic 815-10, the Company designates certain of its commodity swaps as cash flow hedges of forecasted purchases of commodities. 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 (loss) income and is 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. The amount of hedge ineffectiveness charged to profit and loss is not material for any period presented.

As of December 31, 2015, the Company has outstanding copper swap contracts designated as cash flow hedges totaling 17.3 million pounds and the fair value of these swap contracts was $(9.9) million which is classified in accrued liabilities and $0.1 million which is classified in other current assets in the consolidated balance sheet. The amount of loss recognized in other comprehensive loss totaled $6.1 million, net of tax, at December 31, 2015 and the amount charged to expense related to ineffectiveness totaled $0.1 million for each of the years ended December 31, 2015 and 2014. In the next twelve months the Company estimates that $6.1 million of unrealized losses, net of tax, related to commodity price hedging will be reclassified from other comprehensive loss into earnings.

As of December 31, 2015, the Company had outstanding copper swap contracts not designated as cash flow hedges totaling 4.0 million pounds and the fair value of these swap contracts was $(0.7) million which is classified in accrued liabilities in the consolidated balance sheet. The amount of loss recognized in earnings from changes in the fair value of these copper swap contracts totaled $0.7 million for the year ended December 31, 2015.

Forward contracts related to foreign currency are not designated as hedges and fair value changes in these contracts are immediately charged to earnings and are classified in other income in the condensed consolidated statement of income. As of December 31, 2015, the Company has outstanding foreign currency forward contracts with a fair value totaling $1.9 million, recognized as a liability in accrued liabilities in the consolidated balance sheet. The currency units outstanding at December 31, 2015 were British Pound of GBP 5.9 million, New Zealand Dollar of NZD 22.5 million and United States Dollar of USD 40.0 million.