Foreign Currency Hedging

12 Months Ended

Dec. 31, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Foreign Currency Hedging

6. 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 Consolidated Balance Sheets as we have entered into a netting arrangement with the counterparty. As of December 31, 2014 and 2013, all outstanding Euro forward contracts and option 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. In October 2014, we entered an additional series of Euro forward contracts covering the quarters in which our licensees' sales occurred through December 2015.

During the third quarter of 2012, we reduced our forecasted exposure to the Euro for 2013 royalties. We de-designated and terminated certain forward contracts, due to our determination that certain cash flows under the de-designated contracts were not probable to occur, and recorded a gain of approximately $391,000 to "Interest and other income, net," which was reclassified from other comprehensive income (loss) net of tax effects. The termination of these contracts was effected through a reduction in the notional amount of the original hedge contracts.

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

Euro Forward Contracts			December 31, 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	1.256	Sell Euro	6,000		241		—		—
Euro	1.257	Sell Euro	15,750		728		—		—
Euro	1.259	Sell Euro	16,125		752		—		—
Euro	1.260	Sell Euro	33,000		1,468		—		—
Euro	1.270	Sell Euro	7,000		377		44,450		(3,760		)
Euro	1.281	Sell Euro	8,000		503		36,814		(2,785		)
Euro	1.300	Sell Euro	—		—		19,500		(1,119		)
Total			$	85,875	$	4,069	$	111,614	$	(8,871	)

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

		December 31,
Cash Flow Hedge	Location	2014		2013
(In thousands)
Euro forward contracts	Prepaid and other current assets	$	3,352	$	—
Euro forward contracts	Other assets	$	717	$	—
Euro forward contracts	Accrued liabilities	$	—	$	7,355
Euro forward contracts	Other long-term liabilities	$	—	$	1,516

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

	Year Ended December 31,
	2014			2013			2012
(In thousands)
Net gain (loss) recognized in OCI, net of tax (1)	$	4,834		$	(2,432	)	$	(5,040	)
Gain (loss) reclassified from accumulated OCI into "Queen et al. royalty revenue," net of tax (2)	$	(3,768	)	$	(1,510	)	$	(1,859	)
Net gain (loss) recognized in "Interest and other income, net" -- cash flow hedges (3)	$	5		$	11		$	(169	)
Net gain (loss) recognized in "Interest and other income, net" -- non-designated contracts (4)	$	—		$	—		$	391

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(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 ($5), ($11) and $8 for the years ended December 31, 2014, 2013 and 2012, respectively. Net loss from restructuring hedges was approximately zero, zero and $161 for the years ended December 31, 2014, 2013 and 2012, respectively

(4) Gain on de-designation classified as "Interest and other income, net"

A gain of approximately $2.1 million, net of tax, is expected to be reclassified from other comprehensive income (loss) against earnings in the next 12 months.