Quarterly report pursuant to Section 13 or 15(d)

Derivative Financial Instruments

v3.8.0.1
Derivative Financial Instruments
9 Months Ended
Sep. 30, 2017
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.  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 September 30, 2017, the Company’s derivative contracts had a remaining maturity of one and one-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, which is $1,353 as of September 30, 2017.  The Company’s exposure of counterparty credit risk is limited to the aggregate unrealized gain on all contracts.  At September 30, 2017, there was no such exposure to the counterparty.  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 September 30, 2017 and December 31, 2016:







 

 

 

 



 

September 30, 2017



 

Notional

 

Latest



 

Amount

 

Maturity



 

 

 

 

Foreign exchange contracts - Norwegian Kroner

 

7,449

 

February 2018

Foreign exchange contracts - Canadian Dollars

 

13,345

 

February 2019

Foreign exchange contracts - British Pounds

 

2,343

 

February 2019

Foreign exchange contracts - Euros

 

22,200

 

February 2019







 

 

 

 



 

December 31, 2016



 

Notional

 

Latest



 

Amount

 

Maturity



 

 

 

 

Foreign exchange contracts - Canadian Dollars

 

11,001

 

February 2018

Foreign exchange contracts - British Pounds

 

1,842

 

February 2018

Foreign exchange contracts - Euros

 

14,366

 

February 2018





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 hedged transaction is recognized in earnings.  Losses of $(422) and $(152) were reclassified to sales during the three months ended September 30, 2017 and 2016, respectively, and $(36) and $(495) were reclassified to sales during the nine months ended September 30, 2017 and 2016, respectively.



The Company records ineffectiveness of hedged instruments resulting from changes in fair value of the instruments in earnings.  There were no gains (losses) recorded to Other, net, during the three and nine months ended September 30, 2017.  Gains (losses) of $34 and $(8) were recorded to Other, net, associated with ineffective hedge instruments during the three and nine months ended September 30, 2016.



The following table presents the balance sheet classification and fair value of derivative instruments as of September 30, 2017 and December 31, 2016:







 

 

 

 

 

 

 

 



 

Classification

 

September 30, 2017

 

December 31, 2016



 

 

 

 

 

 

 

 

Derivative instruments in asset positions:

 

 

 

 

 

 

 

 

Forward exchange contracts

 

Prepaid and other current assets

 

$

69 

 

$

1,165 

Forward exchange contracts

 

Other long-term assets

 

$

12 

 

$

116 



 

 

 

 

 

 

 

 

Derivative instruments in liability positions:

 

 

 

 

 

 

 

 

Forward exchange contracts

 

Accounts payable and accrued liabilities

 

$

1,284 

 

$

 -

Forward exchange contracts

 

Other long-term liabilities

 

$

150 

 

$

 -