Quarterly report pursuant to Section 13 or 15(d)

Derivative Financial Instruments

v3.3.0.814
Derivative Financial Instruments
9 Months Ended
Sep. 30, 2015
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 September 30, 2015, 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.  At September 30, 2015 there was no such exposure to the counterparty.  The Company’s exposure of counterparty credit risk is limited to the aggregate unrealized gain of $3,150 on all contracts at September 30, 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 September 30, 2015 and December 31, 2014:

 

 

 

 

 

 

 

 

 

September 30, 2015

 

 

Notional

 

Latest

 

 

Amount

 

Maturity

 

 

 

 

 

Foreign exchange contracts - Canadian Dollars

 

5,858

 

February 2016

Foreign exchange contracts - British Pounds

 

1,180

 

February 2016

Foreign exchange contracts - Euros

 

18,866

 

February 2016

Foreign exchange contracts - Swiss Francs

 

12,724

 

February 2016

 

 

 

 

 

 

 

 

 

December 31, 2014

 

 

Notional

 

Latest

 

 

Amount

 

Maturity

 

 

 

 

 

Foreign exchange contracts - Canadian Dollars

 

12,053

 

February 2016

Foreign exchange contracts - British Pounds

 

2,739

 

February 2016

Foreign exchange contracts - Euros

 

36,673

 

February 2016

Foreign exchange contracts - Swiss Francs

 

31,344

 

February 2016

 

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 hedged item is recognized in earnings.  Gains (losses) of $1,530 and $332 were reclassified to sales during the three months ended September 30, 2015 and 2014, respectively, and $4,126 and $(218) were reclassified to sales during the nine months ended September 30, 2015 and 2014, respectively.  Gains (losses) of $76 and $(31) were reclassified to discontinued operations, net of tax, during the three months ended September 30, 2015 and 2014, respectively, and $183 and $(76) were reclassified to discontinued operations, net of tax, during the nine months ended September 30, 2015 and 2014, respectively.

 

As of December 31, 2014, the Company reported an accumulated derivative instrument gain of $1,891.  During the nine months ended September 30, 2015, the Company reported accumulated other comprehensive loss of $821, 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 gain of $1,070 reported as of September 30, 2015.

 

The following table presents the balance sheet classification and fair value of derivative instruments as of September 30, 2015 and December 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

Classification

 

September 30, 2015

 

December 31, 2014

 

 

 

 

 

 

 

 

 

Derivative instruments in asset positions:

 

 

 

 

 

 

 

 

Forward exchange contracts

 

Prepaid and other current assets

 

$

2,821 

 

$

2,908 

Forward exchange contracts

 

Assets held for sale

 

$

329 

 

$

158 

Forward exchange contracts

 

Other long-term assets

 

$

 -

 

$

446 

 

 

 

 

 

 

 

 

 

Derivative instruments in liability positions:

 

 

 

 

 

 

 

 

Forward exchange contracts

 

Accounts payable and accrued liabilities

 

$

 -

 

$

79 

Forward exchange contracts

 

Other long-term liabilities

 

$

 -

 

$

11