Derivative Instruments

6 Months Ended

Jun. 30, 2013

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Instruments

7. 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 June 30, 2013, approximately $15,785 of anticipated foreign-denominated sales has been hedged which are covered by fair value contracts settling at various dates through January 2014. The fair value of assets held as collateral for the fair value contracts as of June 30, 2013 approximated $760. As of June 30, 2013, there were 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 June 30, 2013, approximately 57% or $3,195 of anticipated copper purchases over the next nine months and 56% or $479 of anticipated aluminum purchases over the next six months are hedged. The fair value of assets held as collateral as of June 30, 2013 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 June 30, 2013, the Corporation has purchase commitments covering 46% or $5,617 of anticipated natural gas usage through 2015 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.

Gains (losses) on foreign exchange transactions included in other income (expense) approximated $(93) and $52 for the three months ended June 30, 2013 and 2012, respectively, and $(393) and $78 for the six months ended June 30, 2013 and 2012, respectively.

The location and fair value of the foreign currency sales contracts recorded on the consolidated balance sheets were as follows:

	Location	June 30, 2013		December 31, 2012
Cash flow hedge contracts	Other current assets	$	0	$	46
Fair value hedge contracts	Other current liabilities		555		0
	Other current assets		0		218
Fair value hedged items	Receivables		95		(94	)
	Other current assets		431		0
	Other current liabilities		0		223

The change in the fair value of the cash flow contracts is recorded as a component of accumulated other comprehensive income (loss). The fair value balances as of June 30, 2013 and 2012 and the amount recognized as and reclassified from accumulated other comprehensive income (loss) for each of the periods is summarized below. All amounts are after-tax.

Three Months Ended June 30, 2013	Comprehensive Income (Loss) Beginning of the Period			Plus Recognized as Comprehensive Income (Loss)			Less Gain (Loss)  Reclassified from Accumulated Other Comprehensive Income (Loss)			Comprehensive Income (Loss) End of the Period
Foreign currency sales contracts – cash flow hedges	$	0		$	0		$	0		$	0
Foreign currency purchase contracts		287			0			5			282
Futures contracts – copper and aluminum		(159	)		(236	)		(64	)		(331	)
	$	128		$	(236	)	$	(59	)	$	(49	)
Three Months Ended June 30, 2012
Foreign currency sales contracts – cash flow hedges	$	38		$	43		$	0		$	81
Foreign currency purchase contracts		305			0			4			301
Futures contracts – copper and aluminum		114			(271	)		25			(182	)
	$	457		$	(228	)	$	29		$	200
Six Months Ended June 30, 2013
Foreign currency sales contracts – cash flow hedges	$	0		$	0		$	0		$	0
Foreign currency purchase contracts		292			0			10			282
Futures contracts – copper and aluminum		26			(429	)		(72	)		(331	)
	$	318		$	(429	)	$	(62	)	$	(49	)
Six Months Ended June 30, 2012
Foreign currency sales contracts – cash flow hedges	$	114		$	17		$	50		$	81
Foreign currency purchase contracts		309			0			8			301
Futures contracts – copper and aluminum		(314	)		(20	)		(152	)		(182	)
	$	109		$	(3	)	$	(94	)	$	200

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			Three Months Ended June 30,					Six Months Ended June 30,
	of Operations	Next 12 Months			2013			2012		2013			2012
Foreign currency sales contracts - cash flow hedges	Net sales	$	0		$	0		$	0	$	0		$	79
Foreign currency purchase contracts	Depreciation		28			7			7		14			14
Futures contracts – copper and aluminum	Costs of products sold (excluding depreciation)		(532	)		(101	)		38		(115	)		(246	)