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Financial Instruments and Fair Value Measurements | 12 Months Ended
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Dec. 31, 2013
Financial Instruments and Fair Value Measurements [Abstract] |
Financial Instruments and Fair Value Measurements | 9. Financial Instruments and Fair Value Measurements Financial Instruments A financial instrument is cash or a contract that imposes an obligation to deliver, or conveys a right to receive cash or another financial instrument. The carrying values of cash and cash equivalents, accounts receivable and accounts payable are considered to be representative of fair value because of the short maturity of these instruments. The estimated fair value of the Company’s senior secured notes with a face value of $175,000 (fixed rate debt) at December 31, 2013 and 2012 was $190,103 and $188,895, respectively, and was determined using market quotes classified as Level 2 input within the fair value hierarchy. Derivative Instruments and Hedging Activities On December 31, 2013, the Company had open foreign currency forward contracts, fixed price commodity contracts and an interest rate swap. These contracts are used solely for hedging and not for speculative purposes. Management believes that its use of these instruments to reduce risk is in the Company’s best interest. The counterparties to these financial instruments are financial institutions with investment grade credit ratings. Foreign Currency Exchange Rate Risk The Company conducts business internationally and therefore is exposed to foreign currency exchange rate risk. The Company uses derivative financial instrument s as cash flow and fair value hedges to mitigate its exposure to fluctuations in foreign currency exchange rates by reducing the effect of such fluctuations on foreign currency denominated intercompany transactions and other foreign cu rrency exposures. The currencies hedged by the Company during 2013 include the euro and Mexican peso. In certain instances, t he foreign currency forward contracts do not qualify for hedge accounting and are marked to market, with gains and losses recognized in the Company’s consolidated statement s of operations as a component of o ther expense, net. The Company’s for eign currency forward contracts offset some of the gains and losses on the underlying foreign currency denominated transactions as follows: Euro-denominated and Swedish krona-denominated Foreign Currency Forward Contracts At December 31, 2013 and 2012, the Company held a foreign currency forward contract with an underlying notional amount of $13,335 and $12,643, respectively, to reduce the exposure related to the Company’s euro-denominated intercompany loans. This contract expires in March 2014. During 2012, the Company also held a foreign currency forward contract to reduce the exposure related to the Company’s Swedish krona-denominated intercompany loans. This contract expired on November 30, 2012. The euro-denominated and Swedish krona-denominated foreign currency forward contracts have not been designated as hedging instruments. For the years ended December 31, 2013 and 2012, the Company recognized a loss of $638 and $492, respectively, in the consolidated statements of operations as a component of other expense, net related to the euro- and Swedish krona-denominated contract s. For the year ended December 31, 2011, the Company recognized a $225 gain related to foreign currency forward contracts. Mexican peso-denominated Foreign Currency Forward Contracts – Cash Flow Hedge The Company holds Mexican peso-denominated foreign currency contracts with notional amounts at December 31, 2013 totaling $45,000 which expire ratably on a monthly basis from January 2014 through December 2014. The Company held Mexican peso-denominated foreign currency contracts with notional amounts at December 31, 2012 of 36,500 which expired ratably on a monthly basis from January 2013 through December 2013. These contracts were executed to hedge forecasted transactions and are accounted for as cash flow hedges. As such, the effective portion of the unrealized gain or loss is deferred and reported in the Company’s consolidated balance sheets as a component of accumulated other comprehensive loss. The cash flow hedges are highly effective and the Company expects them to remain highly effective in future periods. The effectiveness of the transactions has been and will be measured on an ongoing basis using regression analysis and forecasted future Mexican peso purchases. Commodity Price Risk - Cash Flow Hedge T o mitigate the risk of future price volatility and, consequently, fluctuations i n gross margins, the Company entered into fixed price commodity contracts with a financial institution to fix the cost of a portion of the Company’s copper purchases as copper is a significant raw material. The Company has fixed price commodity contracts at December 31, 2013 with an aggregate notional amount of 1,582 pounds, which expire on a monthly basis over the period from January through December 2014, compared to an aggregate notional amount of 2,436 pounds at December 31, 2012. All of these contracts represent a portion of the Company’s forecasted copper purchases. These contracts were executed to hedge a portion of forecasted transactio ns and the contracts are accounted for as cash flow hedges. T he unrealized gain or loss for the effective portion of the hedges is deferred and reported in the Company’s consolidated balance sheets as a component of a ccumulated other com prehensive loss while the ineffective portion, if any, is reported in the consolidated statements of operations. The effectiveness of the transaction s is measured on an ongoing basis using regression analysis and forecasted future copper purchases. Based upon the results of the regression analysis, the Company has concluded that these cash flow hedges are highly effective. Interest Rate Risk - Fair Value Hedge The Company has a fixed-to-floating interest rate swap agreement (the “Swap”) with a notional amount of $45,000 to hedge its exposure to fair value fluctuations on a portion of its senior secured notes. The Swap was designated as a fair value hedge of the fixed interest rate obligation under the Company’s $175,000 9.5% senior secured notes due October 15, 2017. The critical terms of the Swap are aligned with the terms of the senior secured notes, including maturity of October 15, 2017, resulting in no hedge ineffectiveness. The unrealized gain or loss for the effective portion of the hedge is deferred and reported in the Company’s consolidated balance sheets as an asset or liability, as applicable, with the offset to the carrying value of the senior secured notes. Under the Swap, the Company pays a variable interest rate equal to the six-month London Interbank Offered Rate (“LIBOR”) plus 7.2% and it receives a fixed interest rate of 9.5%. The Swap requires semi-annual settlements on April 15 and October 15. The difference between amounts to be received and paid under the Swap is recognized as a component of interest expense, net on the consolidated statements of operations. The Swap reduced interest expense by $810, $736 and $473 for the years ended December 31, 2013, 2012 and 2011, respectively. The notional amounts and fair values of derivative instruments in the consolidated balance sheets were as follows:
|  | Notional amounts | (A) | Prepaid expenses and other current assets / other long-term assets |  | Accrued expenses and other current liabilities
|  | December 31, |  | December 31, |  | December 31,
|  | 2013 |  | 2012 |  | 2013 |  | 2012 |  | 2013 |  | 2012
Derivatives designated as hedging instruments: |  |  |  |  |  |
Cash Flow Hedges: |  |  |  |  |  |  |  |  |  |  |  |
Forward currency contracts | $ 45,000 |  | $ 36,500 |  | $ - |  | $ 1,800 |  | $ 263 |  | $ -
Fixed price commodity contracts | 1,582 |  | 2,436 |  | 152 |  | 340 |  | - |  | -
Fair Value Hedge: |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swap contract | $ 45,000 |  | $ 45,000 |  | $ 793 |  | $ 2,212 |  | $ - |  | $ -
Derivatives not designated as hedging instruments: |  |  |  |  |  |
Forward currency contracts | $ 13,335 |  | $ 12,643 |  | $ - |  | $ - |  | $ 18 |  | $ 191
(A) Notional amounts represent the gross contract / notional amount of the derivatives outstanding.
Amounts recorded for the cash flow hedges in other comprehensive income (loss) in shareholders’ equity and in net income for the years ended December 31 were as follows:
|  |  |  |  |  |  |  | Gain (loss) reclassified from
|  | Gain (loss) recorded in other |  | other comprehensive income
|  | comprehensive income (loss) |  | (loss) into net income
|  | 2013 |  | 2012 |  | 2011 |  | 2013 |  | 2012 |  | 2011
Derivatives designated as cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |
Forward currency contracts | $ | 683 | $ | 5,717 | $ | (7,118) | $ | 2,746 | $ | (241) | $ | (2,960)
Fixed price commodity contracts |  | (1,008) |  | 1,389 |  | (4,686) |  | (820) |  | (2,515) |  | (1,122)
Total derivatives designated as cash flow hedges | $ | (325) | $ | 7,106 | $ | (11,804) | $ | 1,926 | $ | (2,756) | $ | (4,082)
Gains and losses reclassified from comprehensive income (loss) into net income were recognized in cost of goods sold in the Company’s consolidated statements of operations. The net deferred losses of $111 on the cash flow hedge derivatives will be reclassified from other comprehensive income (loss) to the consolidated statements of operations in 2014. The Company has measured the ineffectiveness of the forward currency and commodity contracts and any amounts recognized in the consolidated financial statements were immaterial for the years ended December 31, 2013, 2012 and 2011. Fair Value Measurements The following table present s our assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value.
|  |  |  |  |  |  |  |  |  | December 31, |  | December 31,
|  |  |  |  |  | 2013 |  | 2012
|  |  |  |  |  | Fair value estimated using |  |
|  |  |  | Fair value |  | Level 1 inputs (A) |  | Level 2 inputs (B) |  | Level 3 inputs (C) |  | Fair value
Financial assets carried at fair value: |  |  |  |  |  |  |  |  |
Interest rate swap contract | $ 793 |  | $ - |  | $ 793 |  | $ - |  | $ 2,212
Forward currency contracts | - |  | - |  | - |  | - |  | 1,800
Fixed price commodity contracts | 152 |  | - |  | 152 |  | - |  | 340
Total financial assets carried at fair value | $ 945 |  | $ - |  | $ 945 |  | $ - |  | $ 4,352
Financial liabilities carried at fair value: |  |  |  |  |  |  |  |  |
Forward currency contracts | $ 281 |  | $ - |  | $ 281 |  | $ - |  | $ 191
Total financial liabilities carried at fair value | $ 281 |  | $ - |  | $ 281 |  | $ - |  | $ 191
(A) | Fair values estimated using Level 1 inputs, which consist of quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. The Company did not have any fair value estimates using Level 1 inputs at December 31, 2013 or 2012.
(B) | Fair values estimated using Level 2 inputs, other than quoted prices, that are observable for the asset or liability, either directly or indirectly and include among other things, quoted prices for similar assets or liabilities in markets that are active or inactive as well as inputs other than quoted prices that are observable. For forward currency, fixed price commodity and interest rate swap contracts, inputs include foreign currency exchange rates, commodity indexes and the six-month forward LIBOR.
(C) | Fair values estimated using Level 3 inputs consist of significant unobservable inputs. The Company did not have any fair value estimates using Level 3 inputs at December 31, 2013 or 2012.
For the year ended December 31, 2011, the Company recorded a fair value adjustment of $4,945 related to the BCS goodwill. The Company utilized Level 3 inputs to estimate the fair value adjustment for nonfinancial assets. For additional information, see the discussion of Goodwill and Other Intangible Assets in Note 2. No adjustments to fair value were required for nonfinancial assets for the years ended December 31, 2013 or 2012.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=28364263&loc=d3e13537-108611 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=28364263&loc=d3e13433-108611 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=25499696&loc=d3e19207-110258 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=28364263&loc=d3e13504-108611 + Details
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