Derivative Financial Instruments

12 Months Ended

Dec. 31, 2019

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Note 18 – Derivative Financial Instruments

In accordance with ASC 815 we recognize derivative instruments on our balance sheet, and we measure them at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate the derivative as being in a hedging relationship, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivative instruments that are designated, and qualify as hedges of the exposure to changes in the fair value are considered fair value hedges. Derivative instruments that are designated, and qualify as hedges of the exposure to variability in expected future cash flows are considered cash flow hedges. Derivative instruments may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. We currently only utilize cash flow hedges and do not use derivatives for trading or speculative purposes.                  

Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge, or the earnings effect of the hedged forecasted transactions in a cash flow hedge. We may enter into derivative contracts that are intended to economically hedge certain risks, even though we elect not to apply hedge accounting under ASC 815. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in the consolidated statements of income. Specific information about the valuations of derivatives is described in Note 1 and classification of derivatives in the fair value hierarchy is described in Note 3.  Currently our interest rate swaps and interest rate collars are designated as hedges while our foreign exchange contracts are not designated as hedges.

The effective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges is recorded in accumulated other comprehensive loss and is subsequently reclassified into earnings in the period in which the hedged forecasted transaction affects earnings.

Certain of the Company's agreements with its derivative counterparties contain provisions where if certain merger activity, a change of control, or a capital structure change occurs that materially changes the Company's creditworthiness in an adverse manner, the Company’s counterparty may have the right to terminate any derivative transactions under such agreement.

The company has agreements with each of its derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company's default on the indebtedness.

Hedges of Foreign Currency Risk

We are exposed to fluctuations in various foreign currencies against our different functional currencies. We use foreign currency forward agreements to manage this exposure. At December 31, 2019 and 2018, we had outstanding foreign currency forward contracts that are intended to preserve the economic value of foreign currency denominated monetary assets and liabilities; these instruments are not designated for hedge accounting treatment in accordance with ASC 815.  There is no fair value of our foreign exchange hedges; therefore they are not recorded in our Consolidated Balance Sheets.  As of December 31, 2019 and 2018, the total notional amounts of these foreign exchange contracts was $106.0 million and $122.4 million, respectively.

The tables below set forth outstanding foreign currency forward contracts at December 31, 2019 and 2018:

Notional Amount		Effective Date	Maturity Date	Index*	Weighted Average Strike Rate	Cash Flow Hedge Designation
$	1,844	December 2019	February 2020	EUR/GPB	0.8471	Non-designated
	3,375	December 2019	February 2020	EUR/USD	1.123	Non-designated
	25,957	December 2019	February 2020	GPB/USD	1.3257	Non-designated
	39,340	December 2019	February 2020	USD/CNY	6.9762	Non-designated
	763	December 2019	February 2020	USD/JPY	108.732	Non-designated
	33,621	December 2019	February 2020	USD/TWD	29.988	Non-designated
	500	January 2019	January 2020	USD/TWD	30.635	Non-designated
	500	October 2019	February 2020	USD/TWD	30.571	Non-designated
$	1,221	December 2018	February 2019	EUR/GPB	0.8981	Non-designated
	12,538	December 2018	February 2019	EUR/USD	1.1479	Non-designated
	8,463	December 2018	February 2019	GPB/USD	1.2785	Non-designated
	44,946	December 2018	February 2019	USD/CNY	6.8738	Non-designated
	844	December 2018	February 2019	USD/JPY	110.14	Non-designated
	54,041	December 2018	February 2019	USD/TWD	30.559	Non-designated
	300	December 2018	January 2019	USD/TWD	30.669	Non-designated
*  EUR = Euro
GBP = British Pound Sterling
USD = United States Dollar
CNY = Chinese Yuan Renminbi
JPY =  Japan Yen
TWD = Taiwan dollar

Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps, including interest rate collars, as part of its interest rate risk management strategy.  Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

The table below sets forth information related to the number of and the notional amount of our interest rate related derivative instruments at December 31 2019 and December 31, 2018:

	Number of Instruments		Notional Amount
	2019	2018	2019		2018
Interest rate swaps and collars	9	12	$	200,000	$	210,000

The table below sets forth the fair value of the Company’s interest rate related derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of December 31, 2019 and December 31, 2018:

	Fair Value
	Other Current Assets				Other Assets				Other Current Liabilities				Other Liabilities
	2019		2018		2019		2018		2019		2018		2019		2018
Interest rate swaps and collars	$	194	$	1,936	$	36	$	2,795	$	51	$	-	$	127	$	-

The tables below sets forth the effect of the Company’s derivative financial instruments on the Consolidated Statements of Income for the years ended December 31 2019, 2018 and 2017:  

	Amount of Gain or (Loss) Recognized in OCI on Derivative							Location of Gain or (Loss) Reclassified from Accumulated OCI into Income							Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion  Excluded from Effectiveness Testing)	Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Derivative Instruments Designated as Hedging Instruments									Amount of Gain or (Loss) Reclassified from Accumulated OCI into Net Income
	December 31,								December 31,							December 31,
	2019			2018		2017			2019		2018		2017			2019		2018		2017
Interest rate swaps and collars	$	(2,997	)	$	1,790	$	1,567	Interest expense	$	1,248	$	860	$	577	N/A	$	-	$	-	$	-
Cross currency swaps		(298	)		-		-	N/A		-		-		-	Interest income		688		-

We estimate that $0.3 million of net derivative gains included in accumulated other comprehensive income (“AOCI”) as of December 31, 2019, will be reclassified into earnings within the following 12 months. No gains or losses were reclassified from AOCI into earnings as a result of forecasted transactions that failed to occur during fiscal year 2019.

	Amount of Gain or (Loss) Recognized in Net Income								Location of Gain or (Loss) Recognized in Net Income
Derivatives Not Designated As Hedging Instruments
	December 31,
	2019			2018			2017
Foreign currency forward contracts	$	(3,662	)	$	(8,493	)	$	1,491	Foreign currency loss, net

At December 31, 2019 and 2018, the fair value of derivatives in a net asset position, which includes accrued interest but excludes any adjustments for nonperformance risk, related to these agreements was $0.1 million and $4.7 million, respectively.  As of December 31, 2019 and 2018, the Company had not posted any collateral related to these agreements.