Derivative Instruments

9 Months Ended

Sep. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

7. Derivative Instruments

Certain operations of the Corporation 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. As of September 30, 2014, approximately $13,493 of anticipated foreign-denominated sales has been hedged which are covered by fair value and cash flow contracts settling at various dates through October 2015. The fair value of assets held as collateral for the fair value contracts as of September 30, 2014 approximated $811.

Additionally, certain divisions of the Air and Liquid Processing segment 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. At September 30, 2014, approximately 57% or $2,835 of anticipated copper purchases over the next nine months and 38% or $485 of anticipated aluminum purchases over the next six months are hedged.

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.

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 a hedge.

At September 30, 2014, the Corporation has purchase commitments covering 35% or $3,716 of anticipated natural gas usage through 2017 for one of its subsidiaries. The commitments qualify as normal purchases and, accordingly, are not reflected on the condensed consolidated balance sheet.

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

Losses on foreign exchange transactions included in other income (expense) approximated $(236) and $(135) for the three months ended September 30, 2014 and 2013 and $(55) and $(528) for the nine months ended September 30, 2014 and 2013, respectively.

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

	Location	September 30, 2014			December 31, 2013
Fair value hedge contracts	Other current assets	$	251		$	426
	Other noncurrent assets		9			17
	Other current liabilities		291			0
	Other noncurrent liabilities		21			0
Fair value hedged items	Receivables		(18	)		(36	)
	Other current assets		246			0
	Other noncurrent assets		19			0
	Other current liabilities		200			488
	Other noncurrent liabilities		16			40
Cash flow hedge contracts	Other current liabilities		13			0

The change in the fair value of the cash flow contracts is recorded as a component of accumulated other comprehensive loss. The balances as of September 30, 2014 and 2013 and the amount recognized as and reclassified from accumulated other comprehensive loss for each of the periods is summarized below. All amounts are after-tax.

Three Months Ended September 30, 2014	Comprehensive Income (Loss) Beginning of the Period			Plus Recognized as Comprehensive Income (Loss)			Less Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss			Comprehensive Income (Loss) End of the Period
Foreign currency sales contracts – cash flow hedges	$	(21	)	$	31		$	13		$	(3	)
Foreign currency purchase contracts		265			0			3			262
Futures contracts – copper and aluminum		29			(103	)		(3	)		(71	)
	$	273		$	(72	)	$	13		$	188
Three Months Ended September 30, 2013
Foreign currency sales contracts – cash flow hedges	$	0		$	0		$	0		$	0
Foreign currency purchase contracts		282			0			4			278
Futures contracts – copper and aluminum		(331	)		152			(148	)		(31	)
	$	(49	)	$	152		$	(144	)	$	247

Nine Months Ended September 30, 2014	Comprehensive Income (Loss) Beginning of the Period		Plus Recognized as Comprehensive Income (Loss)			Less Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss			Comprehensive Income (Loss) End of the Period
Foreign currency sales contracts – cash flow hedges	$	0	$	10		$	13		$	(3	)
Foreign currency purchase contracts		275		0			13			262
Futures contracts – copper and aluminum		38		(190	)		(81	)		(71	)
	$	313	$	(180	)	$	(55	)	$	188
Nine Months Ended September 30, 2013
Foreign currency sales contracts – cash flow hedges	$	0	$	0		$	0		$	0
Foreign currency purchase contracts		292		0			14			278
Futures contracts – copper and aluminum		26		(277	)		(220	)		(31	)
	$	318	$	(277	)	$	(206	)	$	247

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

	Location of Gain (Loss) in Statements of Operations	Estimated to be Reclassified in the Next 12 Months			Three Months Ended September 30,						Nine Months Ended September 30,
					2014			2013			2014			2013
Foreign currency sales contracts – cash flow hedges	Sales	$	(7	)	$	22		$	0		$	22		$	0
Foreign currency purchase contracts	Depreciation		28			6			6			20			20
Futures contracts – copper and aluminum	Costs of products sold (excluding depreciation)		(120	)		(7	)		(237	)		(130	)		(352	)