Derivative Instruments

6 Months Ended

Jul. 05, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

The Company’s foreign currency risk management strategy is principally designed to mitigate the potential financial impact of changes in the value of transactions and balances denominated in foreign currencies resulting from changes in foreign currency exchange rates. Currently, the Company enters into two types of hedges to manage this risk. The first are economic hedges which utilize foreign currency forward contracts with maturities of up to 45 days to manage the exposure to fluctuations in foreign currency exchange rates arising primarily from foreign-denominated receivables and payables. The gains and losses on these derivatives are intended to be offset by the changes in the fair value of the assets and liabilities being hedged. These economic hedges are not designated as hedging instruments for hedge accounting treatment. The second are cash flow hedges which utilize foreign currency forward contracts with maturities of up to 18 months to hedge specific forecasted transactions of the Company's foreign subsidiaries with the goal of protecting our budgeted revenues and expenses against foreign currency exchange rate changes compared to our budgeted rates. These cash flow hedges are designated as hedging instruments for hedge accounting treatment.

The Company had the following outstanding forward contracts (in thousands):

	As of July 5, 2015			As of December 31, 2014
Currency	Notional Value	USD Equivalent		Notional Value	USD Equivalent
Derivatives Designated as Hedging Instruments:
Japanese Yen	1,151,500	$	9,186	1,225,000	$	10,211
Hungarian Forint	791,500	2,809		803,000	3,099
Singapore Dollar	3,071	2,144		3,515	2,564
Canadian Dollar	290	263		758	688
British Pound	179	246		491	732
Derivatives Not Designated as Hedging Instruments:
Japanese Yen	600,000	$	4,877	345,000	$	2,878
British Pound	1,700	2,655		1,400	2,183
Singapore Dollar	1,425	1,056		1,225	922
Taiwanese Dollar	29,000	940		28,000	883
Korean Won	950,000	845		940,000	858
Hungarian Forint	220,000	772		410,000	1,569

Information regarding the fair value of the outstanding forward contracts was as follows (in thousands):

	Asset Derivatives					Liability Derivatives
	Balance	Fair Value				Balance	Fair Value
	Sheet Location	July 5, 2015		December 31, 2014		Sheet Location	July 5, 2015		December 31, 2014
Derivatives Designated as Hedging Instruments:
Cash flow hedge forward contracts	Prepaid expenses and other current assets	$	151	$	108	Accrued expenses	$	243	$	84
Derivatives Not Designated as Hedging Instruments:
Economic hedge forward contracts	Prepaid expenses and other current assets	$	2	$	5	Accrued expenses	$	8	$	13

The table below details the gross activity for all derivative assets and liabilities which were presented on a net basis on the Consolidated Balance Sheets due to the right of offset with each counterparty (in thousands):

Asset Derivatives						Liability Derivatives
	July 5, 2015		December 31, 2014				July 5, 2015			December 31, 2014
Gross amounts of recognized assets	$	153	$	187		Gross amounts of recognized liabilities	$	412		$	149
Gross amounts offset	—		(74		)	Gross amounts offset	(161		)	(52		)
Net amount of assets presented	$	153	$	113		Net amount of liabilities presented	$	251		$	97

Information regarding the effect of derivative instruments, net of the underlying exposure, on the consolidated financial statements was as follows (in thousands):

	Location in Financial Statements	Three-months Ended						Six-months Ended
		July 5, 2015			June 29, 2014			July 5, 2015			June 29, 2014
Derivatives Designated as Hedging Instruments:
Gains (losses) recorded in shareholders' equity (effective portion)	Accumulated other comprehensive income (loss), net of tax	$	(72	)	$	(74	)	$	(72	)	$	(74	)
Gains (losses) reclassified from accumulated other comprehensive income (loss) into current operations (effective portion)	Product revenue	$	(159	)	$	4		$	(311	)	$	17
	Research, development, and engineering expenses	18			(9		)	19			(25		)
	Selling, general, and administrative expenses	72			(19		)	113			(49		)
	Total gains (losses) reclassified from accumulated other comprehensive income (loss) into current operations	$	(69	)	$	(24	)	$	(179	)	$	(57	)
Gains (losses) recognized in current operations (ineffective portion and discontinued derivatives)	Foreign currency gain (loss)	$	—		$	—		$	—		$	—
Derivatives Not Designated as Hedging Instruments:
Gains (losses) recognized in current operations	Foreign currency gain (loss)	$	233		$	(15	)	$	342		$	(137	)

The following table provides the changes in accumulated other comprehensive income (loss), net of tax, related to derivative instruments (in thousands):

Balance as of December 31, 2014	$	32
Reclassification of net realized loss on cash flow hedges into current operations	179
Net unrealized loss on cash flow hedges	(283		)
Balance as of July 5, 2015	$	(72	)

Net losses expected to be reclassified from accumulated other comprehensive income (loss), net of tax, into current operations within the next twelve months are $65,000.