Derivative and Hedging Activities Derivative and Hedging Activities (Notes)

12 Months Ended

Dec. 31, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

DERIVATIVES AND HEDGING ACTIVITIES

The Company uses forward contracts, to manage exposures to foreign currency exchange rates. The Company's primary objective in holding derivative instruments is to reduce the volatility of earnings and cash flows associated with fluctuations in foreign currency exchange rates and the Company does not use derivative instruments for trading purposes. The use of derivative instruments expose the Company to credit risk to the extent that the counterparties may be unable to meet their contractual obligations, as such, the potential risk of loss with any one counterparty is closely monitored by the Company.

Cash Flow Hedges

In December 2014, the Company entered into forward currency contracts to hedge forecasted operating expenses and service costs related to employee salaries and benefits denominated in Israeli shekels ("ILS") for its subsidiaries in Israel. These ILS forward contacts mature generally within twelve months and are designated as cash flow hedges. For derivatives that are designated as hedges of forecasted foreign currency denominated operating expenses and service costs, we assess effectiveness based on changes in spot currency exchange rates. Changes in spot rates on the derivative are recorded as a component of "Accumulated other comprehensive income (loss)" ("OCI") in the Consolidated Balance Sheet until such time as the hedged transaction impacts earnings. The change in fair value of the forward points, which reflects the interest rate differential between the two countries on the derivative, is excluded from the effectiveness assessment. Gains or losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.

Balance Sheet Hedges

Balance sheet hedges consist of foreign currency forward contracts, mature generally within three months, are carried at fair value and they are used to minimize the short-term impact of foreign currency exchange rate fluctuation on cash and certain trade and inter-company receivables and payables. Changes in the fair value of these foreign currency forward contracts are recognized in "Other income (expense), net" in the Consolidated Statement of Operations and are largely offset by the changes in the fair value of the assets or liabilities being hedged.

The locations and fair value amounts of the Company's derivative instruments reported in its Consolidated Balance Sheets are summarized as follows (in thousands):

		Asset Derivatives					Asset Liabilities
	Balance Sheet Location	December 31, 2014		December 31, 2013		Balance Sheet Location	December 31, 2014		December 31, 2013
Derivatives designated as hedging instruments:
Foreign currency contracts	Prepaid expenses and other current assets	$	329	$	—	Accrued Liabilities	$	—	$	—
Total		$	329	$	—		$	—	$	—
Derivatives not designated as hedging instruments:
Foreign currency contracts	Prepaid expenses and other current assets	$	12	$	196	Accrued Liabilities	$	7	$	195
Total		$	12	$	196		$	7	$	195

The Company recognizes all derivative instruments on a gross basis in the Consolidated Balance Sheets. However, the arrangement with its counterparties allows for net settlement, which are designed to reduce credit risk by permitting net settlement with the same counterparty. To further limit credit risk, the Company also enters into cash collateral security arrangement with the same counterparty. As of December 31, 2014 and 2013, there was no potential effect of rights of offset associated with the outstanding foreign currency forward contracts that would result in a net derivative asset or net derivative liability.

The Company started its cash flow hedging program with effect from the fourth quarter of 2014. The pre-tax effect of derivative instruments designated as cash flow hedges in "Accumulated OCI" in the Consolidated Balance Sheet and the Consolidated Statement of Operations for the year ended December 31, 2014 are summarized as follows (in thousands):

		Year ended December 31,
	Financial Statement Location	2014
Gains in Accumulated OCI on derivatives (effective portion)	Accumulated OCI	$	311
Gains recognized in income on derivatives (ineffectiveness portion and amount excluded from effectiveness testing)	Other income (expense), net	$	18

The Company did not reclassify any gain or loss in accumulated OCI on cash flow hedge derivatives to income for the year ended December 31, 2014. The Company anticipates the accumulated OCI balance of $0.3 million at December 31, 2014 relating to cash flow hedges will be reclassified to earnings in 2015.

The pre-tax effect of the changes in the fair values of non-designated foreign currency forward contracts are summarized as follows (in thousands):

	Years ended December 31,
	2014			2013		2012
Gain (loss) recorded in other expense, net	$	(72	)	$	596	$	(437	)

The U.S. dollar equivalent of all outstanding notional amounts of foreign currency forward contracts are summarized as follows (in thousands):

	December 31,
	2014		2013
Derivatives designated as cash flow hedges:
Purchase	$	16,903	$	—
Derivatives not designated as hedging instruments:
Purchase	$	1,043	$	15,039
Sell	$	4,925	$	20,945