Derivative Financial Instruments |
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| Derivative Financial Instruments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Financial Instruments |
NOTE 8. 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.
At December 31, 2015, the Company’s derivative contracts had a remaining maturity of one and a half years or less. 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, 2015, there was no such exposure to the counterparty. The Company’s exposure to the counterparty credit risk is limited to the aggregate unrealized gain of $880 on all contracts at December 31, 2015. 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, 2015 and 2014:
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. 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 and reclassified to sales in the period the underlying hedge item is recognized in earnings. Gains of $5,787 and $462 were reclassified to sales during the years ended December 31, 2015 and 2014, respectively. Gains (losses) of $297 and $(149) were reclassified to discontinued operations, net of tax, during the years ended December 31, 2015 and 2014, respectively.
As of December 31, 2014, the Company reported an accumulated derivative instrument gain of $1,891. During the year ended December 31, 2015, the Company reported other comprehensive loss of $1,959, as a result of the change in fair value of these contracts and reclassifications to sales and discontinued operations as discussed above, resulting in an accumulated derivative instrument loss of $68 reported as of December 31, 2015.
The following table presents the balance sheet classification and fair value of derivative instruments as of December 31, 2015 and 2014:
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