DERIVATIVE FINANCIAL INSTRUMENTS

9 Months Ended

Jun. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

11. DERIVATIVE FINANCIAL INSTRUMENTS

Market risks relating to the Company’s operations result primarily from changes in interest rates and changes in foreign currency exchange rates. The Company is exposed to market risk related to changes in interest rates and selectively uses derivative financial instruments, including forward contracts and swaps, to manage these risks. In June 2014, the Company entered into a forward contract to sell 10.9 million Euros ($14.7 million USD) on November 3, 2014 to hedge the foreign currency risk related to an intercompany transaction. The Company expects hedging gains or losses to be essentially offset by losses or gains on the related underlying exposures. The amounts ultimately recognized may differ for open positions, which remain subject to ongoing market price fluctuations until settlement. Gains and losses on foreign currency derivatives are reported in other expenses (income), net, on the Company’s Consolidated Statements of Operations and the amounts were de minimis for the third quarter 2014. There were no such derivative instruments in the prior year period.

 

The following is a summary of the notional transaction amounts and fair values for the Company’s outstanding derivative financial instruments as of June 30, 2014.

(In thousands)	Notional Amount (Euros)		Fair Value
Forward contract		10,891	$	(233)
Forward contract		788	$	28

Fair Value of Financial Instruments

The Company’s forward contracts are classified within Level 2 of the valuation hierarchy in accordance with FASB Accounting Standards Codification (ASC) 825, as presented below as of June 30, 2014:

(In thousands)	Level 1		Level 2		Level 3		Total
Liabilities:
Forward contracts	$	-	$	205	$	-	$	205

Valuation was based on third party evidence of similarly priced derivative instruments.