Quarterly report pursuant to Section 13 or 15(d)

Derivative Financial Instruments

v3.8.0.1
Derivative Financial Instruments
3 Months Ended
Mar. 31, 2018
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 March 31, 2018, the Company’s derivative contracts had a remaining maturity of less than one year.  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 $697 as of March 31, 2018.  The Company’s exposure of counterparty credit risk is limited to the aggregate unrealized gain on all contracts.  At March 31, 2018, 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 March 31, 2018 and December 31, 2017:







 

 

 

 



 

March 31, 2018



 

Notional

 

Latest



 

Amount

 

Maturity



 

 

 

 

Foreign exchange contracts - Canadian Dollars

 

11,981

 

February 2019

Foreign exchange contracts - British Pounds

 

1,290

 

February 2019

Foreign exchange contracts - Euros

 

14,899

 

February 2019







 

 

 

 



 

December 31, 2017



 

Notional

 

Latest



 

Amount

 

Maturity



 

 

 

 

Foreign exchange contracts - Norwegian Kroner

 

2,629

 

February 2018

Foreign exchange contracts - Canadian Dollars

 

9,538

 

February 2019

Foreign exchange contracts - British Pounds

 

1,737

 

February 2019

Foreign exchange contracts - Euros

 

15,928

 

February 2019





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 income and reclassified to sales in the period the underlying hedged transaction is recognized in earnings.  Gains (losses) of $(325) and $296 were reclassified to sales during the three months ended March 31, 2018 and 2017, respectively.



The following table presents the balance sheet classification and fair value of derivative instruments as of March 31, 2018 and December 31, 2017:







 

 

 

 

 

 

 

 



 

Classification

 

March 31, 2018

 

December 31, 2017



 

 

 

 

 

 

 

 

Derivative instruments in asset positions:

 

 

 

 

 

 

 

 

Forward exchange contracts

 

Prepaid and other current assets

 

$

229 

 

$

40 

Forward exchange contracts

 

Other long-term assets

 

$

 -

 

$



 

 

 

 

 

 

 

 

Derivative instruments in liability positions:

 

 

 

 

 

 

 

 

Forward exchange contracts

 

Accounts payable and accrued liabilities

 

$

926 

 

$

919 

Forward exchange contracts

 

Other long-term liabilities

 

$

 -

 

$

74