Annual report pursuant to Section 13 and 15(d)

Derivative Financial Instruments

v3.20.1
Derivative Financial Instruments
12 Months Ended
Dec. 31, 2019
Derivative Financial Instruments [Abstract]  
Derivative Financial Instruments

NOTE 7.  DERIVATIVE FINANCIAL INSTRUMENTS



The Company’s primary exchange rate risk management objective is to mitigate the uncertainty of anticipated cash flows attributable to changes in foreign currency exchange rates.  The Company primarily focuses on mitigating changes in cash flows resulting from sales denominated in currencies other than the U.S. dollar.  The Company manages this risk primarily by using currency forward and option contracts.  If the anticipated transactions are deemed probable, the resulting relationships are formally designated as cash flow hedges.  The Company accounts for these contracts as cash flow hedges and tests effectiveness by determining whether changes in the expected cash flow of the derivative offset, within a range, changes in the expected cash flow of the hedged item.



At December 31, 2019, the Company’s derivative contracts had remaining maturities of less than one and one-half years.  The counterparty to these transactions had both long-term and short-term investment grade credit ratings.  The maximum net exposure of the Company’s credit risk to the counterparty is generally limited to the aggregate unrealized loss of all contracts with that counterparty.  At December 31, 2019, there was no such exposure to the counterparty.  The Company’s exposure of counterparty credit risk is limited to the aggregate unrealized gain of $45 on all contracts at December 31, 2019.  The Company’s derivative counterparty has strong credit ratings and as a result, the Company does not require collateral to facilitate transactions.



The Company held the following contracts designated as hedged instruments as of December 31, 2019 and 2018:







 

 

 

 



 

December 31, 2019



 

Notional

 

Latest



 

Amount

 

Maturity



 

 

 

 

Foreign exchange contracts - Canadian Dollars

 

$15,932

 

February 2021

Foreign exchange contracts - Euros

 

€ 18,168

 

February 2021

Foreign exchange contracts - Swiss Francs

 

CHF 661

 

August 2020







 

 

 

 



 

December 31, 2018



 

Notional

 

Latest



 

Amount

 

Maturity



 

 

 

 

Foreign exchange contracts - Canadian Dollars

 

$6,166

 

August 2019

Foreign exchange contracts - Euros

 

€ 10,710

 

February 2020



For contracts that qualify as effective hedge instruments, the effective portion of gains and losses resulting from changes in fair value of the instruments are included in accumulated other comprehensive (loss) income and reclassified to sales in the period the underlying hedged transaction is recognized.  Gains of $1,017 and $256 were reclassified to sales during the years ended December 31, 2019 and 2018, respectively.













The following table presents the balance sheet classification and fair value of derivative instruments as of December 31, 2019 and 2018:







 

 

 

 

 

 

 

 



 

Classification

 

December 31, 2019

 

December 31, 2018



 

 

 

 

 

 

 

 

Derivative instruments in asset positions:

 

 

 

 

 

 

 

 

Forward exchange contracts

 

Prepaid and other current assets

 

$

226 

 

$

729 



 

 

 

 

 

 

 

 

Derivative instruments in liability positions:

 

 

 

 

 

 

 

 

Forward exchange contracts

 

Accounts payable and accrued liabilities

 

$

152 

 

$

 -

Forward exchange contracts

 

Other long-term liabilities

 

$

29 

 

$