Derivative Financial Instruments (notes)

12 Months Ended

Dec. 31, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure

Foreign Currency Exchange Rate Risk

The Company’s foreign businesses enter into contracts with customers and vendors that are denominated in currencies other than their functional currencies. To protect the functional currency equivalent cash flows associated with certain of these contracts, the Company enters into foreign currency forward contracts. The Company’s activities involving foreign currency forward contracts are designed to hedge the changes in the functional currency equivalent cash flows due to movements in foreign exchange rates compared to the functional currency. The foreign currencies hedged are primarily the euro and the Swedish kroner. The Company manages exposure to counterparty non-performance credit risk by entering into foreign currency forward contracts only with major financial institutions that are expected to fully perform under the terms of such contracts. Changes in fair value of foreign currency forward contracts are recognized in income at the end of each reporting period based on the difference between the contract rate and the spot rate. The net amount of the gains and losses related to derivative instruments recorded in other expense for the year ended December 31, 2014, 2013 and 2012 were a loss of $8.3 million, a loss of $4.6 million and a gain of $5.1 million, respectively.

In general, these gains and losses are offset in the Consolidated Statement of Income by the reciprocal gains and losses from the underlying assets or liabilities which originally gave rise to the exposure.

Notional amounts are used to measure the volume of foreign currency forward contracts and do not represent the Company's total exposure to foreign currency gains or losses. The table below presents the net notional amounts of the Company’s outstanding foreign currency forward contracts by currency at December 31, 2014 and 2013 (in thousands):

	Year Ended December 31,
	2014		2013
Swedish kronor	$	67,809	$	99,214
Canadian dollar	17,446		2,914
British pound sterling	14,928		5,641
Australian dollar	6,566		5,986
Euro	5,391		265
Japanese yen	3,718		4,462
Other	3,150		3,448
	$	119,008	$	121,930

At December 31, 2014, the Company’s foreign currency forward contracts, in general, had maturities of six months or less.

The carrying amount of the foreign exchange contracts included in the Consolidated Balance Sheets are as follows (in thousands):

	December 31, 2014				December 31, 2013
	Other Current Assets		Other Current Liabilities		Other Current Assets		Other Current Liabilities
Foreign exchange contracts	$	112	$	3,247	$	392	$	613

Interest Rate Swap Contracts

The Company's outstanding long-term debt at December 31, 2014 consists of fixed rate notes and a floating rate term loan. The Company maintains its floating rate revolver for flexibility to fund working capital needs and for other uses of cash. Interest expense on the Company's floating rate debt is typically calculated based on a fixed spread over a reference rate, such as LIBOR (also known as the Eurocurrency rate). Therefore, fluctuations in market interest rates will cause interest expense increases or decreases on a given amount of floating rate debt.

Note 3. Derivative Financial Instruments - (Continued)

Interest Rate Swap Contracts - (Continued)

The Company is managing its interest rate risk related to floating rate debt through interest rate swaps in which the Company receives floating rate payments and makes fixed rate payments. The impact of the interest rate swaps is to fix the floating rate basis for the calculation of interest on the term loan at the levels indicated in the table below. The effective interest rate paid is equal to the fixed rates shown below plus the credit spread then in effect. At December 31, 2014, the effective interest rate on the term loan was 2.49 percent. As of December 31, 2014, the following interest rate swaps were outstanding:

Contract Date	Notional Amount (in millions)		Fixed Rate		Effective Date	Maturity Date
March 15, 2013	$	61.9	1.02	%	April 5, 2013	March 31, 2019
March 29, 2013	$	61.9	0.97	%	April 5, 2013	March 31, 2019

These interest rate swaps are cash flow hedges and are recorded as an asset or liability in the Company's Consolidated Balance Sheet at fair value. Fair value adjustments are recorded as an adjustment to accumulated other comprehensive (loss) earnings, except that any gains and losses on ineffectiveness of the interest rate swaps would be recorded as an adjustment to other expense (income). The net fair value carrying amount of the Company's interest rate swaps was $1.3 million, of which $2.1 million and $0.8 million have been recorded to other assets and other current liabilities, respectively, in the Consolidated Balance Sheet as of December 31, 2014. The amount recognized in other comprehensive (loss) income during the year ended December 31, 2014 was a loss of $0.7 million, which is net of tax effects.