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DERIVATIVE INSTRUMENTS: | 6 Months Ended
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Jun. 30, 2012
DERIVATIVE INSTRUMENTS: |
DERIVATIVE INSTRUMENTS: |
NOTE 6 — DERIVATIVE INSTRUMENTS: As part of its risk management policy, the Company occasionally uses derivative instruments to (i) safeguard the corporate assets, (ii) insure the value of its future revenue stream, and (iii) lessen the impact of unforeseen market swings of its sales revenues. To comply with these objectives the Company, from time to time, enters into commodity price derivatives, interest rate derivatives, exchange rate derivatives and other instruments. The Company does not enter into derivative contracts unless it anticipates a future activity that is likely to occur that will result in exposing the Company to market risk. Copper hedges: In 2011, the Company entered into copper swaps and zero cost collar derivative contracts to reduce price volatility and to protect its sales value as shown below. These transactions meet the requirements of hedge accounting. The realized gains and losses from these derivatives were recorded in net sales on the condensed consolidated statement of earnings and included in operating activities on the condensed consolidated statement of cash flow. The following table summarizes the copper derivative activity related to copper sales transactions realized in the second quarter and first six months of 2012 and 2011, respectively:
|  | Second quarter |  | First six months |
|  | 2012 |  | 2011 |  | 2012 |  | 2011 |
Zero cost collar contracts: |  |  |  |  |  |  |  |  |
Pounds (in millions) |  | — |  | 105.8 |  | 46.3 |  | 211.6 |
Average LME cap price |  | — |  | $ | 4.84 |  | $ | 5.18 |  | $ | 4.84 |
Average LME floor price |  | — |  | $ | 3.02 |  | $ | 3.50 |  | $ | 3.02 |
Swap contracts: |  | — |  |  |  |  |  |  |
Pounds (in millions) |  | — |  | 112.4 |  | — |  | 232.0 |
Weighted average COMEX price |  | — |  | $ | 4.08 |  | — |  | $ | 4.08 |
Realized loss on copper derivatives (in millions) |  | — |  | $ | 8.6 |  | — |  | $ | 44.3 |
The hedge instruments are based on LME copper prices. The Company performed statistical analysis on the difference between the average monthly copper price on the LME and the COMEX exchanges and determined that the correlation coefficient is greater than 0.999. Based on this analysis, the Company considers that the LME underlying price matches its sales priced at COMEX prices. These cash flow hedge relationships qualify as critical matched terms hedge relationships and as a result have no ineffectiveness. The Company performs periodic quantitative assessments to confirm that the relationship was highly effective and that the ineffectiveness was de minimis. During the second quarter of 2012 and as of June 30, 2012, the Company did not hold copper derivative contracts. Transactions under these metal price protection programs are accounted for as cash flow hedges under ASC 815-30 “Derivatives and Hedging-Cash Flow Hedges” as they meet the requirements for this treatment and are adjusted to fair market value based on the metal prices as of the last day of the respective reporting period with the gain or loss recorded in other comprehensive income until settlement, at which time the gain or loss, if realized, is reclassified to net sales in the condensed consolidated statements of earnings.

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- Definition The entire disclosure for the entity's entire derivative instruments and hedging activities. Describes an entity's risk management strategies, derivatives in hedging activities and non-hedging derivative instruments, the assets, obligations, liabilities, revenues and expenses arising therefrom, and the amounts of and methodologies and assumptions used in determining the amounts of such items. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 44 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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