Derivative Instruments

12 Months Ended

Dec. 31, 2012

Derivative Instruments [Abstract]

DERIVATIVE INSTRUMENTS:

NOTE 11 – DERIVATIVE INSTRUMENTS:

Certain of the Corporation’s operations are subject to risk from exchange rate fluctuations in connection with sales in foreign currencies. To minimize this risk, foreign currency sales contracts are entered into which are designated as cash flow or fair value hedges and are recorded in the consolidated balance sheet as either an asset or a liability measured at their fair value. The accounting for changes in the fair value of a derivative depends on the use of the derivative. To the extent that a derivative is designated and effective as a cash flow hedge of an exposure to future changes in value, the change in fair value of the derivative is deferred in accumulated other comprehensive income (loss). Any portion considered to be ineffective, including that arising from the unlikelihood of an anticipated transaction to occur, is reported as a component of earnings (other income/expense) immediately. Upon occurrence of the anticipated transaction, the derivative designated and effective as a cash flow hedge is de-designated as a fair value hedge and the change in fair value previously deferred in accumulated other comprehensive income (loss) is reclassified to earnings (net sales) with subsequent changes in fair value recorded as a component of earnings (other income/expense). To the extent that a derivative is designated and effective as a hedge of an exposure to changes in fair value, the change in the derivative’s fair value will be offset in the consolidated statement of operations by the change in the fair value of the item being hedged and is recorded as a component of earnings (other income/expense).

As of December, 2012, approximately $13,037 of anticipated foreign-denominated sales has been hedged which are covered by fair value contracts settling at various dates through October 2013. The fair value of assets held as collateral for the fair value contracts as of December 31, 2012 approximated $812. As of December 31, 2012, there are no cash flow contracts outstanding for future sales.

Additionally, certain of the Corporation’s divisions are subject to risk from increases in the price of commodities (copper and aluminum) used in the production of inventory. To minimize this risk, futures contracts are entered into which are designated as cash flow hedges. The change in fair value of the derivative is deferred in accumulated other comprehensive income (loss). Any portion considered to be ineffective, including that arising from the unlikelihood of an anticipated transaction to occur, is reported as a component of earnings (other income/expense) immediately. Upon occurrence of the anticipated transaction, the futures contract is settled and the change in fair value previously deferred in accumulated other comprehensive income (loss) is reclassified to earnings (costs of products sold, excluding depreciation) when the projected sales occur. At December 31, 2012, approximately 57% or $3,267 of anticipated copper purchases over the next nine months and 63% or $769 of anticipated aluminum purchases over the next six months are hedged. The fair value of assets held as collateral as of December 31, 2012 equaled $500.

The Corporation previously entered into foreign currency purchase contracts to manage the volatility associated with Euro-denominated progress payments to be made for certain machinery and equipment. As of December 31, 2010, all contracts had been settled and the underlying fixed assets were placed in service. The change in the fair value is included in accumulated other comprehensive income (loss) and is being amortized to pre-tax earnings (as an offset to depreciation expense) over the life of the underlying assets.

No portion of the existing cash flow or fair value hedges is considered to be ineffective, including any ineffectiveness arising from the unlikelihood of an anticipated transaction to occur. Additionally, no amounts have been excluded from assessing the effectiveness of the hedge.

At December 31, 2012, the Corporation has purchase commitments covering 46% or $7,000 of anticipated natural gas usage over approximately the next three years at one of its subsidiaries. The commitments qualify as normal purchases and, accordingly, are not reflected on the consolidated balance sheet.

The Corporation does not enter into derivative transactions for speculative purposes and, therefore, holds no derivative instruments for trading purposes.

The location and fair value of the foreign currency sales contracts recorded on the consolidated balance sheets as of December 31, 2012 and 2011 are as follows:

		December 31,
	Location	2012			2011
Cash flow hedge contracts	Other current assets	$	46		$	256
	Noncurrent assets		0			57
Fair value hedge contracts	Other current assets		218			107
	Noncurrent assets		0			112
Fair value hedged item	Accounts receivable		(94	)		(72	)
	Other current liability		223			174
	Noncurrent liability		0			116

The change in the fair value of the cash flow contracts is recorded as a component of accumulated other comprehensive income (loss). The balances as of December 31, 2012 and 2011 and the amount recognized as and reclassified from accumulated other comprehensive income (loss) for each of the years is summarized below. All amounts are after-tax.

For the Year Ended December 31, 2012	Comprehensive Gain (Loss) Beginning of the Year			Recognized as Comprehensive Income (Loss)			Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss)			Comprehensive Gain (Loss) End of the Year
Foreign currency sales contracts—cash flow hedges	$	114		$	10		$	124		$	0
Foreign currency sales contracts – fair value hedges		n/a			n/a			n/a			n/a
Foreign currency purchase contracts		309			0			17			292
Futures contracts – copper and aluminum		(314	)		92			(248	)		26
For the Year Ended December 31, 2011
Foreign currency sales contracts—cash flow hedges	$	281		$	(24	)	$	143		$	114
Foreign currency sales contracts – fair value hedges		n/a			n/a			n/a			n/a
Foreign currency purchase contracts		329			0			20			309
Futures contracts – copper and aluminum		589			(684	)		219			(314	)

The change in fair value reclassified or expected to be reclassified from accumulated other comprehensive income (loss) to earnings is summarized below. All amounts are pre-tax.

	Location of Gain (Loss) in Statements	Estimated to be Reclassified in the Next		Year Ended December 31,
	of Operations	12 Months		2012			2011		2010
Foreign currency sales contracts—cash flow hedges	Sales		n/a	$	197		$	228	$	999
Foreign currency sales contracts – fair value hedges	n/a		n/a		n/a			n/a		n/a
Foreign currency purchase contracts	Depreciation expense	$	27		27			32		16
Futures contracts – copper and aluminum	Costs of products sold (excluding depreciation)		40		(398	)		353		328

Gains (losses) on foreign exchange transactions included in other income (expense) approximated $107, $(371) and $655 for 2012, 2011 and 2010, respectively.