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Derivative Instruments
12 Months Ended
Dec. 31, 2013
Derivative Instruments And Hedging Activities Disclosure [Abstract]  
Derivative Instruments

NOTE 13:  Derivative Instruments

The Company is exposed to certain risks relating to its ongoing business operations including foreign currency exchange rate risk and interest rate risk. The Company currently mitigates certain foreign currency exchange rate risks with derivative instruments. The Company does not currently manage its interest rate risk with derivative instruments.

The Company faces exposure to foreign currency exchange rate fluctuations, as a significant portion of its revenues, expenses, assets, and liabilities are denominated in currencies other than the functional currencies of the Company’s subsidiaries or the reporting currency of the Company, which is the U.S. Dollar. The Company faces two types of foreign currency exchange rate exposures:

 

 

Transactional currency/functional currency exchange rate exposures from transactions that are denominated in currencies other than the functional currency of the subsidiary. These transactions gains and losses are reported on the Consolidated Statements of Operations as a component of “Foreign currency gain (loss).”

 

 

Functional currency/reporting currency exchange rate exposures from the revaluation of the assets and liabilities of our foreign subsidiaries, whose functional currency is generally their local currency, to the Company’s reporting currency, which is the U.S. Dollar. The net effect of these translation gains and losses are reported in “Accumulated other comprehensive loss” on the Consolidated Balance Sheets and also on the Consolidated Statements of Comprehensive Income.

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 largely offset by the changes in the fair value of the assets and liabilities being hedged. 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.

 

The Company had the following outstanding forward contracts that were entered into to mitigate foreign currency exchange rate risk (in thousands):

 

     As of December 31,
2013
     As of December 31,
2012
 

Currency

   Notional
Value
     USD
Equivalent
     Notional
Value
     USD
Equivalent
 

Derivatives Designated as Hedging Instruments:

           

Japanese Yen

     625,000       $ 6,122         -       $ -   

Hungarian Forint

     570,175         2,603         -         -   

Singapore Dollar

     2,867         2,346         -         -   

British Pound

     613         1,010         -         -   

Canadian Dollar

     985         932         -         -   

Derivatives Not Designated as Hedging Instruments:

           

Euro

     2,828       $ 3,887         2,743       $ 3,590   

Japanese Yen

     294,500         2,797         -         -   

British Pound

     1,100         1,820         -         -   

Chinese Renminbi

     9,000         1,467         -         -   

Taiwanese Dollar

     27,000         908         -         -   

Korean Won

     650,000         620         -         -   

Hungarian Forint

     123,000         568         -         -   

Brazilian Real

     250         106         -         -   

Information regarding the fair value of the forward contracts outstanding as of December 31, 2013 and December 31, 2012 were as follows (in thousands):

 

    Asset Derivatives     Liability Derivatives  
    Balance
Sheet
    Location    
  Fair Value     Balance
Sheet
Location
  Fair Value  
      December 31,
2013
    December 31,
2012
      December 31,
2013
    December 31,
2012
 

Derivatives Designated as Hedging Instruments:

           

Cash flow hedge forward contracts

  Prepaid

expenses and

other current

assets

  $ 204      $ -      Accrued

expenses

  $ 98      $ -   

Derivatives Not Designated as Hedging Instruments:

           

Economic hedge forward contracts

  Prepaid
expenses and
other current
assets
  $ 6      $ 44      Accrued
expenses
  $ 24      $ 14   

 

Information regarding the effect of the derivative instruments, net of the underlying exposure, on the consolidated financial statements for each of the periods presented were as follows (in thousands):

 

    

Location in Financial
Statements

       2013             2012             2011      

Derivatives Designated as Hedging Instruments:

         

Gains (losses) in Shareholders’ equity on derivatives (effective portion)

   Accumulated other comprehensive income (loss)    $ 104      $ -      $ -   

Gains (losses) recognized in earnings on derivatives (ineffective portion and discontinued derivatives)

   Foreign currency gain (loss)    $ -      $ -      $ -   

Derivatives Not Designated as Hedging Instruments:

         

Gains (losses) recognized in earnings

   Foreign currency gain (loss)    $ (193   $ (722   $ 34   

The following table provides the balances and changes in accumulated other comprehensive income (loss) related to derivative instruments for the indicated periods (in thousands):

 

Beginning balance December 31, 2012

   $ -   

Amount reclassified to earnings

     -   

Net change

     104   
  

 

 

 

Ending balance December 31, 2013

   $ 104   
  

 

 

 

The net amount of existing gains and losses expected to be reclassified from accumulated other comprehensive income (loss) into earnings within the next twelve months is $111,000.