Derivatives and Other Financial Instruments

6 Months Ended

Jun. 30, 2014

Derivatives and Other Financial Instruments [Abstract]

Derivatives and Other Financial Instruments

Note 9.   Derivatives and Other Financial Instruments

The Company has exposure to certain risks relating to its ongoing business operations, including financial, market, political and economic risks.  The following discussion provides information regarding our exposure to the risks of changing foreign currency exchange rates.  The Company has not entered into these contracts for trading or speculative purposes in the past, nor do we currently anticipate entering into such contracts for trading or speculative purposes in the future.  The foreign exchange contracts are used to mitigate uncertainty and volatility, and to cover underlying exposures.

Foreign Currency Forward Contracts

We manage the risk of changes in foreign currency exchange rates, primarily at our Asian operation, through the use of foreign currency contracts.  Foreign exchange contracts are used to protect the Company from the risk that the eventual cash flows resulting from transactions in foreign currencies, including sales and purchases transacted in a currency other than the functional currency, will be adversely affected by changes in exchange rates.  We report the fair value of the derivatives on our condensed consolidated balance sheets and changes in the fair value are recognized in earnings in the period of the change.

At June 30, 2014, we marked these contracts to market, recording $14,000 as a current asset on the condensed consolidated balance sheet.  For the three and six month periods ended June 30, 2014, we recorded a net gain on these contracts of $14,000 and $23,000, respectively, as a component of our net income.  For the three and six month periods ended June 30, 2013, we recorded a net gain on these contracts of $3,000 and $24,000, respectively, as a component of our net income.

The following table summarizes the gross fair market value of all derivative instruments, which are not designated as hedging instruments and their location in our condensed consolidated balance sheets at June 30, 2014 and December 31, 2013, in thousands:

Asset Derivatives
Derivative Instrument	Location	June 30, 2014		December 31, 2013
Foreign Currency     Exchange Contracts	Other Current Assets	$	14	$	-
Liability Derivatives
Derivative Instrument	Location		June 30, 2014		December 31, 2013
Foreign Currency     Exchange Contracts	Accrued Expenses	$	-	$	14

The following table summarizes, in thousands, the impact of the Company's derivatives on the condensed consolidated financial statements of income for the quarters ended June 30, 2014 and 2013:

	Location of Gain	Amount of Gain Recognized in Operations
Derivative	on Derivative	Three Months Ended June 30,				Six Month Ended June 30,
Instrument	Instrument	2014		2013		2014		2013
Foreign Currency     Exchange Contracts	Gain on foreign currency   exchange rate	$	14	$	3	$	23	$	24