Derivative Instruments

3 Months Ended

Apr. 02, 2017

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 2, 2017			December 31, 2016
Currency	Notional Value	USD Equivalent		Notional Value	USD Equivalent
Derivatives Designated as Hedging Instruments:
Japanese Yen	187,500	$	1,695	342,500	$	2,960
Hungarian Forint	—	—		39,000	130
Singapore Dollar	—	—		150	97
Derivatives Not Designated as Hedging Instruments:
Japanese Yen	712,500	$	6,366	650,000	$	5,554
British Pound	1,540	1,920		1,350	1,658
Korean Won	1,900,000	1,702		1,750,000	1,450
Hungarian Forint	445,000	1,541		425,000	1,448
Singapore Dollar	1,760	1,258		1,350	929
Taiwanese Dollar	26,150	863		26,000	802

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 2, 2017		December 31, 2016		Sheet Location	April 2, 2017		December 31, 2016
Derivatives Designated as Hedging Instruments:
Cash flow hedge forward contracts	Prepaid expenses and other current assets	$	25	$	43	Accrued expenses	$	13	$	—
Derivatives Not Designated as Hedging Instruments:
Economic hedge forward contracts	Prepaid expenses and other current assets	$	7	$	1	Accrued expenses	$	41	$	11

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 2, 2017		December 31, 2016				April 2, 2017			December 31, 2016
Gross amounts of recognized assets	$	32	$	117		Gross amounts of recognized liabilities	$	78		$	11
Gross amounts offset	—		(73		)	Gross amounts offset	(24		)	—
Net amount of assets presented	$	32	$	44		Net amount of liabilities presented	$	54		$	11

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

	Location in Financial Statements	Three-months Ended
		April 2, 2017			April 3, 2016
Derivatives Designated as Hedging Instruments:
Gains (losses) recorded in shareholders' equity (effective portion)	Accumulated other comprehensive income (loss), net of tax	$	10		$	(375	)
Gains (losses) reclassified from accumulated other comprehensive income (loss) into current operations (effective portion)	Revenue	$	(55	)	$	(3	)
	Research, development, and engineering expenses	3			2
	Selling, general, and administrative expenses	8			5
	Total gains (losses) reclassified from accumulated other comprehensive income (loss) into current operations	$	(44	)	$	4
Gains (losses) recognized in current operations (ineffective portion and discontinued derivatives)	Foreign currency gain (loss)	$	—		$	—
Gains (losses) recognized in current operations	Foreign currency gain (loss)	$	(81	)	$	(360	)

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, 2016	$	37
Net unrealized loss on cash flow hedges	(71		)
Reclassification of net realized loss on cash flow hedges into current operations	44
Balance as of April 2, 2017	$	10

Net gains expected to be reclassified from accumulated other comprehensive income (loss), net of tax, into current operations within the next twelve months are $10,000.