Derivative Financial Instruments

12 Months Ended

Dec. 31, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

The Company measures its derivatives at fair value on a recurring basis using significant observable inputs, which is Level 2 as defined in the fair value hierarchy. The Company uses a present value technique that incorporates the LIBOR swap curve, foreign currency spot rates and foreign currency forward rates to value its derivatives, including its interest rate swap agreements and foreign currency exchange contracts, and also incorporates the effect of its subsidiary and counterparty credit risk into the valuation.

Foreign Currency Derivatives: HBB held forward foreign currency exchange contracts with total notional amounts of $7.2 million and $5.0 million at December 31, 2014 and December 31, 2013, respectively, denominated primarily in Canadian dollars. The fair value of these contracts approximated a net receivable of $0.3 million and $0.1 million at December 31, 2014 and 2013, respectively.

Forward foreign currency exchange contracts that qualify for hedge accounting are used to hedge transactions expected to occur within the next twelve months. The mark-to-market effect of forward foreign currency exchange contracts that are considered effective as hedges has been included in AOCI. Based on market valuations at December 31, 2014, $0.1 million of the amount included in AOCI is expected to be reclassified as income into the Consolidated Statement of Operations over the next twelve months, as the hedged transactions occur.

Interest Rate Derivatives: HBB has interest rate swaps that hedge interest payments on its one-month LIBOR borrowings. The following table summarizes the notional amounts, related rates and remaining terms of interest rate swap agreements active at December 31 in millions:

	Notional Amount				Average Fixed Rate				Remaining Term at
	2014		2013		2014		2013		December 31, 2014
HBB	$	20.0	$	20.0	1.4	%	1.4	%	extending to January 2020

The fair value of HBB's interest rate swap agreements was a net receivable of $0.2 million and $0.8 million at December 31, 2014 and 2013, respectively. The mark-to-market effect of interest rate swap agreements that are considered effective as hedges has been included in AOCI. Based on market valuations at December 31, 2014, less than $0.1 million of the amount included in AOCI is expected to be reclassified as income into the Consolidated Statement of Operations over the next twelve months, as cash flow payments are made in accordance with the interest rate swap agreements. The interest rate swap agreements held by HBB on December 31, 2014 are expected to continue to be effective as hedges.

NACoal has interest rate swaps that hedge interest payments on its one-month LIBOR borrowings. The following table summarizes the notional amounts, related rates and remaining terms of the interest rate swap agreement active at December 31 in millions:

	Notional Amount				Average Fixed Rate				Remaining Term at
	2014		2013		2014		2013		December 31, 2014
NACoal	$	100.0	$	100.0	1.4	%	1.4	%	extending to May 2018

The fair value of NACoal's interest rate swap agreement was a net payable of $0.4 million at December 31, 2014. The mark-to-market effect of the interest rate swap agreement that is considered effective as a hedge has been included in AOCI. Based on market valuations at December 31, 2014, $0.8 million of the amount included in AOCI is expected to be reclassified as income into the Consolidated Statement of Operations over the next twelve months, as cash flow payments are made in accordance with the interest rate swap agreement. The interest rate swap agreement held by NACoal on December 31, 2014 is expected to continue to be effective as a hedge.

The following table summarizes the fair value of derivative instruments at December 31 as recorded in the Consolidated Balance Sheets:

	Asset Derivatives					Liability Derivatives
	Balance sheet location	2014		2013		Balance sheet location	2014		2013
Derivatives designated as hedging instruments
Interest rate swap agreements
Current	Prepaid expenses and other	$	39	$	128	Other current liabilities	$	121	$	—
Long-term	Other non-current assets	142		809		Other long-term liabilities	291		—
Foreign currency exchange contracts
Current	Prepaid expenses and other	292		83		Other current liabilities	—		—
Long-term	Other non-current assets	—		—		Other long-term liabilities	—		—
Total derivatives designated as hedging instruments		$	473	$	1,020		$	412	$	—
Derivatives not designated as hedging instruments
Foreign currency exchange contracts
Current	Prepaid expenses and other	$	—	$	—	Prepaid expenses and other	$	—	$	14
Total derivatives not designated as hedging instruments		$	—	$	—		$	—	$	14
Total derivatives		$	473	$	1,020		$	412	$	14

The following table summarizes the pre-tax impact of derivative instruments for each year ended December 31 as recorded in the Consolidated Statements of Operations:

Derivatives in Cash Flow Hedging Relationships	Amount of Gain or (Loss) Recognized in AOCI on Derivative (Effective Portion)								Location of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)									Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain or (Loss) Recognized in Income on Derivative  (Ineffective Portion and Amount Excluded from Effectiveness Testing)
	2014			2013		2012				2014			2013			2012				2014		2013		2012
Interest rate swap agreements	$	(2,664	)	$	933	$	(138	)	Interest expense	$	(1,495	)	$	(460	)	$	(1,207	)	N/A	$	—	$	—	$	—
Foreign currency exchange contracts	308			354		(282		)	Cost of sales	108			213			87			N/A	—		—		—
Total	$	(2,356	)	$	1,287	$	(420	)		$	(1,387	)	$	(247	)	$	(1,120	)		$	—	$	—	$	—

		Amount of Gain or (Loss) Recognized in Income on Derivative
Derivatives Not Designated as Hedging Instruments	Location of Gain or (Loss) Recognized in Income on Derivative	2014		2013			2012
Foreign currency exchange contracts	Cost of sales or Other	$	25	$	(14	)	$	(162	)
Total		$	25	$	(14	)	$	(162	)