Derivatives.

Interest Rate Swap. A portion of our debt bears interest at variable interest rates and, therefore, we are subject to variability in the cash paid for interest expense. In an effort to mitigate a portion of this risk, we use a hedging strategy to reduce the variability of cash flows in the interest payments associated with a portion of the variable-rate debt outstanding under the Second Amended Credit Agreement that is solely due to changes in the benchmark interest rate.

On December 19, 2012, we entered into a pay-fixed, receive-variable interest rate swap having an initial notional amount of $150 million with Wells Fargo to fix the one-month LIBOR rate at 0.98%. The variable portion of the interest rate swap is tied to the one-month LIBOR rate (the benchmark interest rate). On a monthly basis, the interest rates under both the interest rate swap and the underlying debt reset, the swap is settled with the counterparty, and interest is paid. The notional amount of the interest rate swap decreases quarterly until its expiration date, which is currently December 19, 2017.

On August 5, 2016, we entered into a pay-fixed, receive-variable interest rate swap having an initial notional amount of $42.5 million with Wells Fargo to fix the one-month LIBOR rate at 1.12%. The variable portion of the interest rate swap is tied to the one-month LIBOR rate (the benchmark interest rate). On a monthly basis, the interest rates under both the interest rate swap and the underlying debt reset, the swap is settled with the counterparty, and interest is paid. The notional amount of the interest rate swap increases quarterly by an amount equal to the decrease of the hedge entered into on December 19, 2012, up to the amount of $175 million. The interest rate swap is scheduled to expire on July 6, 2021.

At September 30, 2016 and December 31, 2015, each of our interest rate swaps qualified as a cash flow hedge. The fair value of our interest rate swaps at September 30, 2016 was a liability of approximately $982,000, which was partially offset by approximately $382,000 in deferred taxes. The fair value of our interest rate swap at December 31, 2015 was an asset of approximately $2,000, which was offset by approximately $1,000 in deferred taxes.

During the three and nine-month periods ended September 30, 2016 and 2015, respectively, the amounts reclassified from accumulated other comprehensive income to earnings due to hedge effectiveness were included in interest expense in the accompanying consolidated statements of income and were not material.

Foreign Currency Forward Contracts. We forecast our net exposure to various currencies and enter into foreign currency forward contracts in an effort to mitigate that exposure. As of September 30, 2016, we had entered into the following foreign currency forward contracts (amounts in thousands and in local currencies):



Currency	Symbol	Forward Notional Amount
Euro	EUR	250
British Pound	GBP	767
Chinese Yuan Renminbi	CNY	28,425
Brazilian Real	BRL	3,900
Australian Dollar	AUD	3,450
Hong Kong Dollar	HKD	11,000
Swiss Franc	CHF	210
Swedish Krona	SEK	3,500
Canadian Dollar	CAD	3,150

We enter into similar transactions at various times during the year to partially offset exchange rate risks we bear throughout the year. These contracts are marked to market at each month-end, and the fair value of our open positions at September 30, 2016 was not material. The effect on our consolidated statements of income for the three and nine-month periods ended September 30, 2016 and 2015 of all forward contracts was not material.