42 ITEM 7A. QUANTIT A TIVE AND QUALIT A TIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to various market risks, including changes in interest rates, foreign currency exchange rates and raw material (commodity) prices. T o manage risk associated with the volatility of these natural business exposures, the Company enters into interest rate, commodity and foreign currency derivative agreements as well as copper and aluminum forward pricing agreements. The Company does not purchase or sell derivative instruments for trading purposes. The Company does not engage in trading activities involving commodity contracts for which a lack of marketplace quotations would necessitate the use of fair value estimation techniques. Inter est Rate Risk The Company utilizes interest rate swaps to manage its interest expense exposure by fixing its interest rate on a portion of the Company’ s floating rate debt. Under the swap agreements, the Company typically pays a fixed rate while the counterparty pays to the Company the floating rate per the terms of the debt being hedged. The Company has entered into interest rate swaps on the Company’ s Spanish T erm Loans, as discussed in Note 9 - Long-T erm Debt. As of December 31, 2012 , the Spanish T erm Loans related interest rate swaps have a notional value of $ 15.3 million which provides for a fixed interest rate of 4.20%, 4.58%, 4.48% for the term loans maturing in February , April and June of 2013 and a fixed interest rate of 1.54% for the term loan maturing in August 2014 . The Company does not provide or receive any collateral specifically for these contracts. The fair value of these financial derivatives which are designated as and qualify as cash flow hedges are based on quoted market prices which reflect the present values of the dif ference between estimated future variable- rate receipts and future fixed-rate payments. At December 31, 2012 and 201 1 , the net unrealized loss on interest rate derivatives and the related carrying value was $0.2 million and $0.6 million , respectively . A 10% decline in the variable rate would have an immaterial ef fect on the unrealized gain in 201 1. All interest rate derivatives are marked-to-market with changes in the fair value of qualifying cash flow hedges recorded as other comprehensive income. Raw Material Price Risk The costs of copper and aluminum, the most significant raw materials we use, have been subject to considerable volatility caused by supply conditions, weather , political and economic variables as well as other unknown and unpredictable variables. During the past few years, global copper prices have established average record highs as demonstrated in Item 1 - Business – Raw Materials Sources and A vailability . This copper and aluminum price volatility is representative of all reportable segments. In addition, the Company has historically experienced volatility on raw materials other than copper and aluminum used in cable manufacturing, such as insulating compounds, steel and wood reels, freight costs and ener gy costs. Generally , the Company attempts to adjust selling prices in most of its markets in order to of fset the impact of this raw material price and other cost volatility on reported earnings. The Company’ s ability to execute and ultimately realize price adjustments is influenced by competitive conditions in its markets, including manufacturing capacity utilization. The Company enters into commodity instruments to hedge the purchase of copper , aluminum as well as other raw materials in future periods. Principal transactions hedged during the year were firm sales and purchase commitments. The Company accounts for these commodity instruments as cash flow or economic hedges. Changes in the fair value of derivatives that are designated as cash flow hedges are recorded in other comprehensive income and reclassified to cost of sales when the ef fects of the items being hedged are realized. Changes in the fair value of economic hedges are recognized in current period earnings in other income (expense). At December 31, 2012 and 201 1 , the Company had an unrealized loss of $0.9 million and $10.2 million , respectively , on the commodity futures. A 10% decline in the price of copper and aluminum would result in a decrease in the fair value of $2.2 million in 2012 . As of December 31, 2012 there were no contracts held by the Company that required collateral to secure the Company's derivative liability positions. In addition, the Company enters into forward pricing agreements for the purchase of copper and aluminum for delivery in a future month to match certain sales transactions. The Company accounts for these forward pricing arrangements under the “normal purchases and normal sales” scope exemption because these arrangements are for purchases of copper and aluminum that will be delivered in quantities expected to be used by the Company over a reasonable period of time in the normal course of business. For these arrangements, it is probable at the inception and throughout the life of the arrangements that the arrangements will not settle net and will result in physical delivery of the inventory . At December 31, 2012 and 201 1 , the Company had $ 37.7 million and $ 36.3 million , respectively , of future copper and aluminum purchases that were under forward pricing agreements. At December 31, 2012 and 201 1 , the Company had an unrealized gain of $ 0.3 million and an unrealized loss of $ 1.0 million , respectively , related to these transactions. The Company expects the unrealized gains under these agreements to of fset firm sales price commitments with customers. T able of Contents