Derivative Instruments

3 Months Ended

Apr. 03, 2016

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):

	April 3, 2016			December 31, 2015
Currency	Notional Value	USD Equivalent		Notional Value	USD Equivalent
Derivatives Designated as Hedging Instruments:
United States Dollar	18,430	$	18,430	16,720	$	16,720
Japanese Yen	932,500	8,068		942,500	7,605
Hungarian Forint	364,000	1,317		547,000	1,893
Singapore Dollar	1,356	981		2,063	1,425
Canadian Dollar	—	—		41	37
British Pound	—	—		25	34
Derivatives Not Designated as Hedging Instruments:
Japanese Yen	550,000	$	4,889	700,000	$	5,800
British Pound	1,700	2,418		1,650	2,441
Korean Won	1,500,000	1,304		1,400,000	1,187
Hungarian Forint	265,000	962		250,000	857
Singapore Dollar	1,300	962		1,525	1,074
Taiwanese Dollar	23,900	742		26,425	800

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	April 3, 2016		December 31, 2015		Sheet Location	April 3, 2016		December 31, 2015
Derivatives Designated as Hedging Instruments:
Cash flow hedge forward contracts	Prepaid expenses and other current assets	$	16	$	441	Accrued expenses	$	460	$	201
Derivatives Not Designated as Hedging Instruments:
Economic hedge forward contracts	Prepaid expenses and other current assets	$	—	$	9	Accrued expenses	$	40	$	43

The following table presents 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
	April 3, 2016			December 31, 2015				April 3, 2016			December 31, 2015
Gross amounts of recognized assets	$	33		$	479		Gross amounts of recognized liabilities	$	502		$	279
Gross amounts offset	(17		)	(29		)	Gross amounts offset	(2		)	(35		)
Net amount of assets presented	$	16		$	450		Net amount of liabilities presented	$	500		$	244

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
		April 3, 2016			April 5, 2015
Derivatives Designated as Hedging Instruments:
Gains (losses) recorded in shareholders' equity (effective portion)	Accumulated other comprehensive income (loss), net of tax	$	(375	)	$	(378	)
Gains (losses) reclassified from accumulated other comprehensive income (loss) into current operations (effective portion)	Revenue	$	3		$	(152	)
	Research, development, and engineering expenses	(2		)	1
	Selling, general, and administrative expenses	(5		)	41
	Total gains (losses) reclassified from accumulated other comprehensive income (loss) into current operations	$	(4	)	$	(110	)
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)	$	(360	)	$	78

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, 2015	$	206
Reclassification of net realized loss on cash flow hedges into current operations	4
Net unrealized loss on cash flow hedges	(585		)
Balance as of April 3, 2016	$	(375	)

Net losses expected to be reclassified from accumulated other comprehensive income (loss), net of tax, into current operations within the next twelve months are $375,000.