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Derivative Instruments and Hedging Activities
 3 Months Ended
Mar. 31, 2013
Derivative Instruments and Hedging Activities [Abstract]  
Derivative Instruments and Hedging Activities
2. Derivative Instruments and Hedging Activities

The Company records all derivatives in accordance with ASC 815, Derivatives and Hedging (ASC 815), which requires all derivative instruments be reported on the consolidated balance sheets at fair value and establishes criteria for designation and effectiveness of hedging relationships. The Company is exposed to market risk such as changes in commodity prices, foreign currencies, and interest rates. The Company does not hold or issue derivative financial instruments for trading purposes.

Commodities

The primary objectives of the commodity risk management activities are to understand and mitigate the impact of potential price fluctuations on the Company's financial results and its economic well-being. While the Company's risk management objectives and strategies will be driven from an economic perspective, the Company attempts, where possible and practical, to ensure that the hedging strategies it engages in can be treated as "hedges" from an accounting perspective or otherwise result in accounting treatment where the earnings effect of the hedging instrument provides substantial offset (in the same period) to the earnings effect of the hedged item. Generally, these risk management transactions will involve the use of commodity derivatives to protect against exposure resulting from significant price fluctuations.

The Company primarily utilizes commodity contracts with maturities of less than 12 months. Such contracts are intended to offset the effect of price fluctuations on actual inventory purchases. There were two outstanding commodity forward contracts in place to hedge the Company's projected commodity purchases at March 31, 2012. The Company entered into these two commodity forward contracts, to purchase $4,533 and $1,935 of copper, in September 2011.  The contracts were effective from October 1, 2011, and terminated on June 30, 2012. There were one and three outstanding commodity forward contracts in place to hedge the Company's projected commodity purchases at December 31, 2012 and March 31, 2013, respectively.  In October 2012, the Company entered into a commodity forward contract to purchase $3,472 of copper.  The contract was effective from January 1, 2013, and terminates on September 30, 2013.  In February 2013, the Company entered into a commodity forward contract to purchase $2,677 of copper.  The contract was effective from March 1, 2013, and terminates on December 31, 2013.  In March 2013, the Company entered into a commodity forward contract to purchase $2,636 of copper.  The contract was effective from March 1, 2013, and terminates on December 31, 2013.

Total gains or losses recognized in the consolidated statement of comprehensive income on commodity contracts was a loss of $292 for the three months ended March 31, 2013 and a gain of $420 for the three months ended March 31, 2012.

Foreign Currencies

The Company is exposed to foreign currency exchange risk as a result of transactions denominated in other currencies. The Company periodically utilizes foreign currency forward purchase and sales contracts to manage the volatility associated with foreign currency purchases in the normal course of business. Contracts typically have maturities of 12 months or less. There were no foreign currency hedge contracts outstanding as of March 31, 2013 or 2012.
 
Interest Rates

The Company has two interest rate swap agreements outstanding as of March 31, 2013. Both interest rate swap agreements were entered into on April 1, 2011. The effective date of the first swap is July 1, 2012 with a notional amount of $200,000, a fixed LIBOR rate of 1.905% and an expiration date of July 1, 2013. The effective date of the second swap is October 1, 2012 with a notional amount of $100,000, a fixed LIBOR rate of 2.22% and an expiration date of October 1, 2013.

Prior to February 9, 2012, the Company entered into various interest rate swap agreements. The Company had formally documented all relationships between interest rate hedging instruments and hedged items, as well as its risk-management objectives and strategies for undertaking various hedge transactions, in order for such agreements to qualify as cash flow hedges. For derivatives that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative's change in fair value is reported as a component of accumulated other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The ineffective portion of the derivatives' change in fair value, if any, is immediately recognized in earnings. The Company assessed on an ongoing basis whether derivatives used in hedging transactions were highly effective in offsetting changes in cash flows of hedged items.  The impact of hedge ineffectiveness on earnings was not material for the periods prior to February 9, 2012.

As discussed in Note 7–Credit Agreements, on February 9, 2012, a subsidiary of the Company entered into a new credit agreement ("Credit Agreement") with certain commercial banks and other lenders. The Credit Agreement provided for a $150,000 revolving credit facility, a $325,000 tranche A term loan facility and a $250,000 tranche B term loan facility. Proceeds received by the Company from loans made under the Credit Agreement were used to repay in full all outstanding borrowings under the Company's former credit agreement, dated November 10, 2006, as amended from time to time. The future cash flows associated with the Credit Agreement were materially consistent with that of the former credit agreement, resulting in the continued designation of the interest rate swap agreements as cash flow hedges. However, as a result of a change in certain critical terms between the Credit Agreement and former credit agreement, the interest rate swap agreements in place on the date of refinancing were required to be measured for hedge effectiveness. The ineffective portion of the change in fair value of the cash flow hedges was not material for the period from February 9, 2012 to May 30, 2012. 

As discussed in Note 7–Credit Agreements, on May 30, 2012, a subsidiary of the Company amended and restated its existing Credit Agreement by entering into a new credit agreement ("Term Loan Credit Agreement") with certain commercial banks and other lenders.  Proceeds received by the Company from loans made under the Term Loan Credit Agreement were used to repay the Company's previous Credit Agreement.  Due to the incorporation of a new interest rate floor provision in the Term Loan Credit Agreement, which constitutes a change in critical terms, the Company concluded as of May 30, 2012, the outstanding swaps would no longer be highly effective in achieving offsetting changes in cash flows during the periods the hedges are designated.  As a result, the Company was required to de-designate the hedges outstanding as of May 30, 2012.  Beginning May 31 2012, the effective portion of the swaps prior to the change (i.e. amounts previously recorded in Accumulated Other Comprehensive Loss) have been and will continue to be amortized as interest expense over the period of the originally designated hedged transactions which have various expiration dates through October of 2013.  Future changes in fair value of the swaps have been and will continue to be immediately recognized in the condensed consolidated statements of comprehensive income as interest expense.

The following table presents the fair value of the Company's derivatives not designated as hedging instruments:
 
   
March 31,
2013
  
December 31,
2012
 
Commodity contracts
 $(226) $111 
Interest rate swaps
  (1,766)  (2,973)
Net derivatives liability
 $(1,992) $(2,862)
 
The fair value of derivatives not designated as hedging instruments included in other current liabilities is $1,992 as of March 31, 2013.  The fair value of derivatives not designated as hedging instruments included in other current liabilities and other assets was $2,973 and $111 respectively, as of December 31, 2012.

The fair value of the derivative contracts considers the Company's credit risk.  Excluding the impact of credit risk, the fair value of the derivative contracts as of March 31, 2013 and December 31, 2012 is a net liability of $2,036 and $2,936, respectively, which represents the amount the Company would need to pay to exit the agreements on those dates.

The following presents the impact of interest rate swaps and commodity contracts on the condensed consolidated statements of comprehensive income for the three months ended March 31, 2013 and 2012:
 
 Amount of loss Location of gain (loss) Amount of loss reclassified from  Amount of gain (loss) 
 
recognized in Accumulated Other Comprehensive Loss for
 
recognized in net income
 
Accumulated Other Comprehensive Loss
 
recognized in net income (loss) on hedges
 
 
the three months ended
 
on ineffective
 
into net income for the three months ended
 
(ineffective portion) for the
 
 
March 31,
   portion of hedges 
March 31,
 
three months ended
 
         
March 31,
 
 
2013
 2012     2013 
2012
 
2013
 
2012
 
Derivatives designated as hedging instruments
                
Interest rate swaps (1)
$— $(69 ) 
Interest  expense
 $— $—  $— $— 
Derivatives not designated as hedging instruments
                     
Interest rate swaps (2)
$— $—  
Interest  expense
 $(1002 )$—  $1,206 $— 
Commodity contracts
$— $—  
Cost of goods sold
 $— $—  $(292 )$420 
                         
(1) Periods prior to May 30, 2012
                      
(2) Period subsequent to May 30, 2012