Foreign Currency Hedging

6 Months Ended

Jun. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Foreign Currency Hedging

5. Foreign Currency Hedging

We designate the foreign currency exchange contracts used to hedge our royalty revenues based on underlying Euro-denominated sales as cash flow hedges. Euro forward contracts are presented on a net basis on our Condensed Consolidated Balance Sheets as we have entered into a netting arrangement with the counterparty. As of June 30, 2014, and December 31, 2013, all outstanding Euro forward contracts were classified as cash flow hedges.

In January 2012, we modified our existing Euro forward and option contracts related to our licensees’ sales through December 2012 into Euro forward contracts with more favorable rates. Additionally, we entered into a series of Euro forward contracts covering the quarters in which our licensees’ sales occur through December 2014.

The notional amounts, Euro exchange rates and fair values of our Euro forward contracts designated as cash flow hedges were as follows:

Euro Forward Contracts			June 30, 2014					December 31, 2013
			(In thousands)					(In thousands)
Currency	Settlement Price ($ per Euro)	Type	Notional Amount		Fair Value			Notional Amount		Fair Value
Euro	1.240	Sell Euro	$	—	$	—		$	10,850	$	(1,207	)
Euro	1.270	Sell Euro	27,940		(2,126		)	44,450		(3,760		)
Euro	1.281	Sell Euro	30,732		(2,073		)	36,814		(2,785		)
Euro	1.300	Sell Euro	—		—			19,500		(1,119		)
Total			$	58,672	$	(4,199	)	$	111,614	$	(8,871	)

 The location and fair values of our Euro contracts in our Condensed Consolidated Balance Sheets were as follows:

Cash Flow Hedge	Location	June 30, 2014		December 31, 2013
(In thousands)
Euro contracts	Accrued liabilities	$	4,199	$	7,355
Euro contracts	Other long-term liabilities	$	—	$	1,516

The effect of our derivative instruments in our Condensed Consolidated Statements of Income and our Condensed Consolidated Statements of Comprehensive Income was as follows:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
(In thousands)
Net gain (loss) recognized in OCI, net of tax (1)	$	264		$	(1,265	)	$	331		$	2,303
Gain (loss) reclassified from accumulated OCI into royalty revenue, net of tax (2)	$	(2,027	)	$	268		$	(2,755	)	$	(979	)
Net gain (loss) recognized in interest and other income, net -- cash flow hedges (3)	$	1		$	2		$	3		$	5

 _______________________________

(1) Net change in the fair value of the effective portion of cash flow hedges classified in OCI.

(2) Effective portion classified as royalty revenue.

(3) Ineffectiveness from excess hedge was approximately ($1) and ($2) for the three months ended June 30, 2014 and 2013, respectively, and $(3) and ($5) for the six months ended June 30, 2014, and 2013, respectively.