Derivative Instruments and Hedging Activities

12 Months Ended

Dec. 31, 2011

Derivative Instruments and Hedging Activities [Abstract]

Derivative Instruments and Hedging Activities

Note 13 – Derivative Instruments and Hedging Activities

Cash Flow Hedges

Copper and brass represent the largest component of the Company's variable costs of production.  The cost of these materials is subject to global market fluctuations caused by factors beyond the Company's control.  The Company occasionally enters into forward fixed-price arrangements with certain customers; the risk of these arrangements is generally managed with commodity futures contracts.  The Company accounts for these futures contracts in accordance with ASC 815, Derivatives and Hedging (ASC 815).  These futures contracts have been designated as cash flow hedges.  The fair value of open futures contracts are recognized as a component of OCI until the position is closed which corresponds to the period when the related hedged transaction is recognized in earnings.  Should these contracts no longer meet hedge criteria in accordance with ASC 815, either through lack of effectiveness or because the hedged transaction is no longer probable of occurring, all deferred gains and losses related to the hedge would be immediately reclassified from OCI into earnings as a component of other income.  In the next nine months, the Company will reclassify into earnings realized gains or losses of cash flow hedges; at December 31, 2011, the net value included in OCI was approximately a $675 thousand loss.

At December 31, 2011, the Company held open futures contracts to purchase approximately $21.1 million of copper over the next nine months related to fixed price sales orders.  The fair value of those futures contracts was a $679 thousand loss position, which was determined by obtaining quoted market prices (Level 1 hierarchy as defined by ASC 820).  

Derivative instruments designated as cash flow hedges under ASC 815 are reflected in the Consolidated Financial Statements as follows:

	December 31, 2011
(In thousands)	Location		Fair value
Commodity contracts	Other current assets:	Gain positions	$	85
		Loss positions		(25	)
	Other current liabilities:	Gain positions		339
		Loss positions		(1,078	)

	December 25, 2010
(In thousands)	Location		Fair value
Commodity contracts	Other current assets:	Gain positions	$	891

The following tables summarize activities related to the Company's derivative instruments, classified as cash flow hedges in accordance with ASC 815:

	Gain (Loss) Recognized in Accumulated OCI (Effective Portion), Net of Tax
			For the Year Ended
(In thousands)			December 31, 2011				December 25, 2010
Commodity contracts		$		(427	)	$		1,684

	(Gain) Loss Reclassified from Accumulated OCI into Income (Effective Portion), Net of Tax
		For the Year Ended
(In thousands)	Location	December 31, 2011			December 25, 2010
Commodity contracts	Cost of goods sold	$	(561	)	$	(1,308	)

The Company enters into futures contracts that closely match the terms of the underlying transactions.  As a result, the ineffective portion of the hedge contracts is not material to the Consolidated Statements of Income.  

Fair Value Hedges

The Company occasionally enters into futures contracts in order to protect the value of inventory against market fluctuations.  The Company accounts for these futures contracts in accordance with ASC 815.  These futures contracts have been designated as fair value hedges.  For fair value hedges, the changes in value of the hedging derivative, as well as the changes in value of the related hedged item due to the risk being hedged, are reflected in current earnings.  Hedge ineffectiveness is reflected in current earnings in the period in which it occurs.  At December 31, 2011, the Company held no open contracts designated as fair value hedges.

The following tables summarize the gains (losses) on the Company's fair value hedges:

	Gains (Losses) on Fair Value Hedges for the Year Ended December 31, 2011
	Location	Amount
(In thousands)
Gain on the derivatives in designated and qualifying fair value hedges:
Commodity Contracts	Cost of goods sold	$	4,509
(Loss) on the hedged item in designated and qualifying fair value hedges:
Inventory	Cost of goods sold	$	(4,344	)

The Company enters into futures contracts that closely match the terms of the underlying transactions.  As a result, the ineffective portion of the open cash flow and fair value hedge contracts through December 31, 2011, was not material to the Condensed Consolidated Statements of Income.

The Company does not offset fair value of amounts for derivative instruments and fair value amounts recognized for the right to reclaim cash collateral.  At December 31, 2011, the Company had recorded restricted cash of $1.9 million related to open futures contracts.