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Derivative Instruments and Hedging Activities | 9 Months Ended
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Sep. 28, 2013
Derivative Instruments and Hedging Activities [Abstract] |
Derivative Instruments and Hedging Activities | Note 9 – 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 is recognized as a component of accumulated other comprehensive income (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 accumulated other comprehensive income into earnings. In the next 12 months, the Company will reclassify into earnings realized gains or losses on cash flow hedges; at September 28, 2013, the net fair value of these contracts was a $172 thousand loss position. At September 28, 2013, the Company held open futures contracts to purchase approximately $18.5 million of copper over the next 18 months related to fixed price sales orders. The fair value of those futures contracts was a $140 thousand loss position, which was determined by obtaining quoted market prices (Level 1 hierarchy as defined by ASC 820, Fair Value Measurements and Disclosures (ASC 820)). Derivative instruments designated as cash flow hedges under ASC 815 are reflected in the Condensed Consolidated Financial Statements as follows:
| September 28, 2013 |
(In thousands) | Location |  | Fair Value |
Commodity contracts | Other current liabilities: | Gain positions |  | $ | 222 |
|  | Loss positions |  |  | (362 | )
| December 29, 2012 |
(In thousands) | Location |  | Fair Value |
Commodity contracts | Other current liabilities: | Gain positions |  | $ | 172 |
|  | Loss positions |  |  | (420 | )
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 Quarter Ended |  |  | For the Nine Months Ended |
(In thousands) |  | September 28, 2013 |  |  | September 29, 2012 |  |  | September 28, 2013 |  |  | September 29, 2012 |
Commodity contracts |  | $ | 474 |  |  | $ | 562 |  |  | $ | (3,056 | ) |  | $ | 455 |
|  | Loss (Gain) Reclassified from Accumulated OCI into Income (Effective Portion), Net of Tax |
|  | For the Quarter Ended |  |  | For the Nine Months Ended |
(In thousands) |  | September 28, 2013 |  |  | September 29, 2012 |  |  | September 28, 2013 |  |  | September 29, 2012 |
Commodity contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cost of goods sold |  | $ | 788 |  |  | $ | (2 | ) |  | $ | 3,309 |  |  | $ | 428 |
Fair Value Hedges The Company enters into futures contracts in order to protect the value of inventory against market fluctuations. These futures contracts have been designated as fair value hedges in accordance with ASC 815. For fair value hedges, the changes in value of the hedging instrument, as well as the changes in value of the related hedged item, are reflected in current earnings. Hedge ineffectiveness is reflected in current earnings in the period in which it occurs. At September 28, 2013, the Company held open futures contracts to sell approximately $61.0 million of copper over the next six months related to inventory. The fair value of those futures contracts was a $1.2 million loss position and was recorded in other current liabilities. The fair value was determined by obtaining quoted market prices (Level 1 hierarchy as defined by ASC 820). Derivative instruments designated as fair value hedges under ASC 815 are reflected in the Condensed Consolidated Financial Statements as follows:
| September 28, 2013 |
(In thousands) | Location |  | Fair Value |
Commodity contracts | Other current liabilities: | Gain positions |  | $ | 203 |
|  | Loss positions |  |  | (1,355 | )
| December 29, 2012 |
(In thousands) | Location |  | Fair Value |
Commodity contracts | Other current assets: | Gain positions |  | $ | 1,047 |
|  | Loss positions |  |  | (548 | )
The following tables summarize the gains (losses) on the Company’s fair value hedges:
| (Losses) Gains on Fair Value Hedges for the Three Months Ended September 28, 2013 |
(In thousands) | Location |  | Amount |
(Loss) on the derivatives in designated and qualifying fair value hedges: |  |  |  |
Commodity Contracts | Cost of goods sold |  | $ | (846 | )
Gain on the hedged item in designated and qualifying fair value hedges: |  |  |  |  |
Inventory | Cost of goods sold |  | $ | 1,042 |
| (Losses) Gains on Fair Value Hedges for the Three Months Ended September 29, 2012 |
(In thousands) | Location |  | Amount |
(Loss) on the derivatives in designated and qualifying fair value hedges: |  |  |  |
Commodity Contracts | Cost of goods sold |  | $ | (2,261 | )
Gain on the hedged item in designated and qualifying fair value hedges: |  |  |  |  |
Inventory | Cost of goods sold |  | $ | 2,344 |
| Gains (Losses) on Fair Value Hedges for the Nine Months Ended September 28, 2013 |
(In thousands) | Location |  | Amount |
Gain on the derivatives in designated and qualifying fair value hedges: |  |  |  |
Commodity Contracts | Cost of goods sold |  | $ | 4,344 |
(Loss) on the hedged item in designated and qualifying fair value hedges: |  |  |  |  |
Inventory | Cost of goods sold |  | $ | (3,770 | )
| (Losses) Gains on Fair Value Hedges for the Nine Months Ended September 29, 2012 |
(In thousands) | Location |  | Amount |
(Loss) on the derivatives in designated and qualifying fair value hedges: |  |  |  |
Commodity Contracts | Cost of goods sold |  | $ | (2,261 | )
Gain on the hedged item in designated and qualifying fair value hedges: |  |  |  |  |
Inventory | Cost of goods sold |  | $ | 2,344 |
Foreign Currency Hedges During 2012 and 2013, the Company entered into contracts to purchase heavy machinery and equipment. These contracts are denominated in euros. In anticipation of entering into these contracts, the Company has entered into forward contracts to purchase euros to protect itself against adverse exchange rate fluctuations. At September 28, 2013, the Company held open forward contracts to purchase approximately 13.7 million euros over the next 18 months. The fair value of these contracts, which was determined by obtaining quoted market prices (Level 1 hierarchy as defined by ASC 820), was not material to the Company’s financial position, results of operations, or cash flows at September 28, 2013. Interest Rate Swap On February 20, 2013, the Company entered into a two-year forward-starting interest rate swap agreement with an effective date of January 12, 2015, and an underlying notional amount of $200.0 million, pursuant to which the Company receives variable interest payments based on one-month LIBOR and pays fixed interest at a rate of 1.4 percent. Based on the Company’s current variable premium pricing on its Term Loan Facility, the all-in fixed rate on the effective date is 2.7 percent. The interest rate swap will mature on December 11, 2017, and is structured to fix the interest rate risk associated with the Company’s floating-rate, LIBOR-based Term Loan Facility Agreement. The swap was designated and accounted for as a cash flow hedge from inception. The fair value of the interest rate swap is estimated based on the present value of the difference between expected cash flows calculated at the contracted interest rate and the expected cash flows at the current market interest rate using observable benchmarks for LIBOR forward rates at the end of the period (Level 2 hierarchy as defined by ASC 820). The effective portion of the mark-to-market gain or loss is reported as a component of accumulated OCI and subsequently reclassified into earnings when the hedged transactions occur and affect earnings. Interest payable and receivable under the swap agreement will be accrued and recorded as an adjustment to interest expense. The fair value of the interest rate swap was a $1.0 million gain position and was recorded in other assets at September 28, 2013. The following tables summarize the activity related to the interest rate swap:
|  | Gain (Loss) Recognized in Accumulated OCI (Effective Portion), Net of Tax |
|  | For the Quarter Ended |  |  | For the Nine Months Ended |
(In thousands) |  | September 28, 2013 |  |  | September 29, 2012 |  |  | September 28, 2013 |  |  | September 29, 2012 |
Interest rate swap |  | $ | (747 | ) |  | $ | — |  |  | $ | 649 |  |  | $ | — |
The Company enters into futures and forward 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 September 28, 2013 was not material to the Condensed Consolidated Statements of Income. The Company does not offset the fair value of amounts for derivative instruments and the fair value amounts recognized for the right to reclaim cash collateral. At September 28, 2013, the Company had recorded restricted cash of $2.9 million related to open futures contracts.

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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 Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80748-113994 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41638-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624181-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41635-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708773-113959 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624258-113959 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5618551-113959 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624163-113959 Reference 11: 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. 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