Derivative Financial Instruments

3 Months Ended

Mar. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

7. Derivative Financial Instruments

The Company’s Korean subsidiary from time to time has entered into zero cost collar contracts to hedge the risk of changes in the functional-currency-equivalent cash flows attributable to currency rate changes on U.S. dollar denominated revenues.

Details of derivative contracts as of March 31, 2016 are as follows:

Date of transaction	Type of derivative		Total notional amount		Month of settlement
September 30, 2015		Zero cost collar	$	30,000		April to June 2016

The zero cost collar contracts qualify as cash flow hedges under Accounting Standards Codification 815, “Derivatives and Hedging,” since at both the inception of the contracts and on an ongoing basis, the hedging relationship was and is expected to be highly effective in achieving offsetting cash flows attributable to the hedged risk during the term of the contracts. The Company is utilizing the “hypothetical derivative” method to measure the effectiveness by comparing the changes in value of the actual derivative versus the change in fair value of the “hypothetical derivative.”

The fair values of the Company’s outstanding zero cost collar contracts recorded as assets and liabilities as of March 31, 2016 and December 31, 2015 are as follows:

Derivatives designated as hedging instruments:		March 31, 2016		December 31, 2015
Asset Derivatives:
Zero cost collars	Other current assets	$	57	$	—
Liabilities Derivatives:
Zero cost collars	Other current liabilities	$	—	$	40

Offsetting of derivative assets as of March 31, 2016 is as follows:

As of March 31, 2016	Gross amounts of recognized assets		Gross amounts offset in the balance sheets		Net amounts of assets presented in the balance sheets		Gross amounts not offset in the balance sheets				Net amount
							Financial instruments		Cash collateral received/ pledged
Asset Derivatives:
Zero cost collars	$	57	$	—	$	57	$	—	$	—	$	57

Offsetting of derivative liabilities as of December 31, 2015 is as follows:

As of December 31, 2015	Gross amounts of recognized liabilities		Gross amounts offset in the balance sheets		Net amounts of liabilities presented in the balance sheets		Gross amounts not offset in the balance sheets				Net amount
							Financial instruments		Cash collateral received/ pledged
Liabilities Derivatives:
Zero cost collars	$	40	$	—	$	40	$	—	$	—	$	40

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of accumulated other comprehensive income (“AOCI”) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative, representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness, are recognized in current earnings.

The following table summarizes the impact of derivative instruments on the consolidated statement of operations for the three months ended March 31, 2016 and 2015:

Derivatives in ASC 815 Cash Flow Hedging Relationships	Amount of Gain Recognized in AOCI on Derivatives (Effective Portion)				Location of Gain Reclassified from AOCI into Statement of Operations (Effective Portion)	Amount of Gain Reclassified from AOCI into Statement of Operations (Effective Portion)				Location of Gain Recognized in Statement of Operations on Derivative (Ineffective Portion)	Amount of Gain Recognized in Statement of Operations on Derivatives (Ineffective Portion)
	Three Months Ended March 31,					Three Months Ended March 31,					Three Months Ended March 31,
	2016		2015			2016		2015			2016		2015
Zero cost collars	$	65	$	—	Net sales	$	—	$	485	Other income, net	$	42	$	—
Total	$	65	$	—		$	—	$	485		$	42	$	—

As of March 31, 2016, the amount expected to be reclassified from accumulated other comprehensive income into income within the next twelve months is $24 thousand.

The Company set aside $2,000 thousand and $6,000 thousand cash deposits to the counterparty, Nomura Financial Investment (Korea) Co., Ltd. (“NFIK”) for the zero cost collar contracts outstanding as of March 31, 2016 and December 31, 2015, respectively.

The Company is required to deposit cash collateral with NFIK for any exposure in excess of $500 thousand and no such cash collateral was required as of March 31, 2016. These outstanding zero cost collar contracts are subject to termination if the sum of qualified and unrestricted cash and cash equivalents held by the Company is less than $30,000 thousand on the last day of a fiscal quarter.