DERIVATIVE FINANCIAL INSTRUMENTS

6 Months Ended

Jun. 30, 2017

Derivative Instruments And Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

NOTE 11—DERIVATIVE FINANCIAL INSTRUMENTS

We enter into derivative financial instruments primarily to hedge certain firm purchase commitments and forecasted transactions denominated in foreign currencies. We record these contracts at fair value on our Consolidated Balance Sheets. Depending on the hedge designation at the inception of the contract, the related gains and losses on these contracts are either: (1) deferred as a component of Accumulated Other Comprehensive Income (“AOCI”) until the hedged item is recognized in earnings; (2) offset against the change in fair value of the hedged firm commitment through earnings; or (3) recognized immediately in earnings. At inception and on an ongoing basis, we assess the hedging relationship to determine its effectiveness in offsetting changes in cash flows or fair value attributable to the hedged risk. We exclude from our assessment of effectiveness the portion of the fair value of the forward contracts attributable to the difference between spot exchange rates and forward exchange rates. The ineffective portion of a derivative’s change in fair value and any portion excluded from the assessment of effectiveness are immediately recognized in earnings. Gains and losses on derivative financial instruments that are immediately recognized in earnings are included as a component of Other non-operating income (expense), net in our Consolidated Statements of Operations.

As of June 30, 2017, the majority of our foreign currency forward contracts were designated as cash flow hedging instruments. In addition, we deferred approximately $14 million of net losses on those derivative financial instruments in AOCI, and we expect to reclassify approximately $8 million of deferred losses out of AOCI by June 30, 2018, as hedged items are recognized. The notional value of our outstanding derivative contracts totaled $270 million at June 30, 2017, with maturities extending through March 2019. Of this amount, approximately $135 million is associated with various foreign currency expenditures we expect to incur on one of our ASA segment’s EPCI projects. These instruments consist of contracts to purchase or sell foreign-denominated currencies. As of June 30, 2017, the fair value of these contracts was in a net asset position totaling approximately $2 million. The fair value of outstanding derivative instruments is determined using observable financial market inputs, such as quoted market prices, and is classified as Level 2 in nature.

The following tables summarize our derivative financial instruments:

Asset and Liability Derivatives

	June 30,		December 31,
	2017		2016
	(In thousands)
Derivatives Designated as Hedges:
Location:
Accounts receivable—other	$	3,543	$	2,631
Total derivatives asset	$	3,543	$	2,631
Accounts payable	$	1,283	$	9,361
Other liabilities		24		4
Total derivatives liability	$	1,307	$	9,365

The Effects of Derivative Instruments on our Financial Statements

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
	(in thousands)
Derivatives Designated as Hedges:
Amount of gain (loss) recognized in other comprehensive income (loss)	$	4,610		$	(10,304	)	$	10,212		$	10,230
(Loss) gain reclassified from AOCI to Cost of operations		784			14,932			(2,731	)		24,611
Ineffective portion and amount excluded from effectiveness testing: loss recognized in Other non-operating expense		(1,225	)		(344	)		(919	)		(1,549	)