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Derivative Instruments and Hedging Activities | 9 Months Ended
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Sep. 30, 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, it 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. The impact of such contracts is intended to offset the effect of price fluctuations on actual inventory purchases. Outstanding commodity forward contracts in place to hedge the Company’s projected commodity purchases were as follows.
As of September 30, 2013:
Commodity | Trade Date | Effective Date | Notional Amount | Termination Date
Copper | 2/26/2013 | 3/1/2013 | $2,677 | 12/31/2013
Copper | 3/1/2013 | 3/1/2013 | 2,636 | 12/31/2013
Copper | 4/15/2013 | 5/1/2013 | 4,033 | 12/31/2013
Copper | 6/21/2013 | 10/1/2013 | 2,169 | 6/30/2014
As of December 31, 2012:
Commodity | Trade Date | Effective Date | Notional Amount | Termination Date
Copper | 10/29/2012 | 1/1/2013 | $3,472 | 9/30/2013
As of September 30, 2012:
Commodity | Trade Date | Effective Date | Notional Amount | Termination Date
Copper | 5/18/2012 | 7/1/2012 | $1,898 | 12/31/2012
Because these contracts do not qualify for hedge accounting, gains and losses are recorded in cost of goods sold in the Company’s consolidated statements of comprehensive income. Total gains (losses) recognized for the three and nine months ended September 30, 2013 were $578 and $(540), respectively. Total gains recognized for the three and nine months ended September 30, 2012 were $68 and $322, respectively. 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 September 30, 2013, December 31, 2012 or September 30, 2012. Interest Rate Swaps The Company has one interest rate swap agreement outstanding as of September 30, 2013. The interest rate swap agreement was entered into on April 1, 2011. The effective date of the swap was 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. 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. As discussed in Note 8 – Credit Agreements, on February 9, 2012, a subsidiary of the Company entered into a new credit agreement with certain commercial banks and other lenders. From inception through February 9, 2012, the Company’s interest rate swap agreements qualified 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). The cash flows of the swaps are recognized as adjustments to interest expense each period. 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 are 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 noted above and in Note 8 – 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 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. Also as discussed in Note 8 – 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. 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 that 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 as of May 30, 2012. For the period between May 31, 2012 and September 30, 2013, the effective portion of the swaps prior to the change (i.e. amounts previously recorded in Accumulated Other Comprehensive Loss) were amortized into interest expense over the period of the hedged interest payments which had various dates through October 1, 2013. The following table presents the fair value of the Company’s derivatives not designated as hedging instruments:
|  | September 30, 2013 |  |  | December 31, 2012 |
Commodity contracts |  | $ | (28 | ) |  | $ | 111 |
Interest rate swaps |  |  | - |  |  |  | (2,973 | )
Net derivatives liability |  | $ | (28 | ) |  | $ | (2,862 | )
The fair value of the interest rate swaps is included in other current liabilities in the condensed consolidated balance sheets as of December 31, 2012. The fair value of the commodity contracts is included in other current liabilities and other assets in the condensed consolidated balance sheets as of September 30, 2013 and December 31, 2012, respectively. 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 September 30, 2013 and December 31, 2012 is a liability of $(28) 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 and nine months ended September 30, 2013 and 2012:
| Amount of gain recognized in Accumulated Other Comprehensive Loss for the three months ended September 30, | Location of gain (loss) recognized in net income on ineffective portion of hedges | Amount of loss reclassified from Accumulated Other Comprehensive Loss into net income for the three months ended September 30, | Amount of gain (loss) recognized in net income on hedges (ineffective portion) for the three months ended September 30,
| 2013 | 2012 |  | 2013 | 2012 | 2013 | 2012
Derivatives not designated as hedging instruments |  |  |  |
Interest rate swaps (2) | $ — | $ — | Interest expense | $ (376) | $ (809) | $ 501 | $ 462
Commodity contracts | $ — | $ — | Cost of goods sold | $ — | $ — | $ 578 | $ 68
| Amount of gain recognized in Accumulated Other Comprehensive Loss for the nine months ended September 30, | Location of gain (loss) recognized in net income on ineffective portion of hedges | Amount of loss reclassified from Accumulated Other Comprehensive Loss into net income for the nine months ended S eptember 30, | Amount of gain (loss) recognized in net income on hedges (ineffective portion) for the nine months ended September 30,
| 2013 | 2012 |  | 2013 | 2012 | 2013 | 2012
Derivatives designated as hedging instruments |  |  |  |
Interest rate swaps (1) | $ — | $ 365 | Interest expense | $ — | $ — | $ — | $ —
Derivatives not designated as hedging instruments |  |  |  |
Interest rate swaps (2) | $ — | $ — | Interest expense | $ (2,381) | $ (1,079) | $ 2,973 | $ 489
Commodity contracts | $ — | $ — | Cost of goods sold | $ — | $ — | $ (540) | $ 322
| (1) Periods prior to May 30, 2012, the date the hedging relationships were terminated
(2) Periods after May 30, 2012, the date the hedging relationships were terminated

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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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