DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

3 Months Ended

Mar. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

NOTE 9. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Risk Management Objective of Using Derivatives

The Company is exposed to certain risk arising from both its business operations and economic conditions. To manage this risk, the Company enters into derivative financial instruments from time to time. Certain of the Company’s foreign operations expose the Company to fluctuations of foreign interest rates and exchange rates. These fluctuations may impact the value of the Company’s cash receipts and payments in terms of the Company’s functional currency. The Company enters into derivative financial instruments from time to time to protect the value or fix the amount of certain obligations in terms of its functional currency, the U.S. dollar.

Hedges of Foreign Exchange Risk

The Company is exposed to fluctuations in various foreign currencies against its functional currency, the US dollar. The Company uses foreign currency derivatives, specifically vanilla foreign currency forwards, to manage its exposure to fluctuations in the USD-CAD and AUD-USD exchange rates. Currency forward agreements involve fixing the foreign currency exchange rate for delivery of a specified amount of foreign currency on a specified date. The currency forward agreements are typically cash settled in US dollars for their fair value at or close to their settlement date.

The Company does not currently designate any of these foreign exchange forwards under hedge accounting, but rather reflects the changes in fair value immediately in earnings. Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to foreign exchange rates. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings and were equal to a loss of $0.6 million for the quarter ended March 31, 2016. As of March 31, 2016, the Company had the following outstanding derivatives that were not designated as hedges in qualifying hedging relationships (in thousands):

Non-Designated Derivative Summary
	Number of Instruments		Sell Notional		Buy Notional
FX Forward Contracts
Sell AUD/Buy USD Fwd Contract		3	$	475	$	334
Sell CAD/Buy USD Fwd Contract		3	$	13,700	$	10,109
Total		6			$	10,443

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Balance Sheet as of March 31, 2016 and December 31, 2015 (in thousands):

	Tabular Disclosure of Fair Values of Derivative Instruments
	Derivatives Asset				Derivative Liabilities
	Fair Value as of:
	March 31,		December 31,		March 31,			December 31,
	2016		2015		2016			2015
Derivatives Not Designated as Hedging Instruments
FX Forward Contracts
Balance Sheet Location	Other Assets		Other Assets		Other Liabilities			Other Liabilities
Sell AUD/Buy USD Fwd Contract	$	0	$	0	$	(26	)	$	0
Sell CAD/Buy USD Fwd Contract	$	0	$	0	$	(443	)	$	0
Total	$	0	$	0	$	(469	)	$	0

The table below presents the effect of the Company’s derivative financial instruments on the Income Statement as of March 31, 2016 and March 31, 2015 (in thousands):

Effect of Derivative Instruments on the Income Statement for Derivatives Not Designated as Hedging Instruments for the Three Months Ended March 31, 2016 and 2015
Derivatives Not Designated as Hedging Instruments	Location of Gain or (Loss) Recognized in Income	Amount of Gain or (Loss) Recognized in Income
		2016			2015
For the three months ended March 31,
Sell AUD/Buy USD Fwd Contract	Other Inc/Exp	$	(35	)	$	0
Sell CAD/Buy USD Fwd Contract	Other Inc/Exp	$	(545	)	$	0
Total		$	(580	)	$	0

The table below presents the total fair value classification within the fair value hierarchy for the complete portfolio of derivative transactions at March 31, 2016 (in thousands):

	Recurring Fair Value Measurements
	Quoted Prices in Active Markets for Identical Assets and Liabilities				Significant Other Observable Inputs					Significant Unobservable Inputs
	(Level 1)				(Level 2)					(Level 3)
	March 31,		March 31,		March 31,			March 31,		March 31,		March 31,
	2016		2015		2016			2015		2016		2015
Assets
Derivative Financial Instruments	$	0	$	0	$	0		$	0	$	0	$	0
Liabilities
Derivative Financial Instruments	$	0	$	0	$	(469	)	$	0	$	0	$	0

As of March 31, 2016, the fair value of derivatives in a net liability position was $0.5 million inclusive of counterparty credit risk. As of the balance sheet date, the Company has not posted any collateral related to these agreements. If the Company had breached any of these provisions at March 31, 2016, it could have been required to settle its obligations under the agreements at their termination value of $0.5 million.