Derivative Financial Instruments (Notes)

9 Months Ended

Sep. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Derivatives and Hedging Activities

Hedge Accounting and Hedging Program

The purpose of our hedging program is to manage the foreign currency exchange rate risk on forecasted expenses denominated in currencies other than the functional currency of the operating unit. We do not issue derivatives for trading or speculative purposes.

In May 2017, we entered into a two-year cross-currency par forward contract to hedge a portion of our Mexico forecasted expenses denominated in Pesos ("MXN"). To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge, and the hedges must be highly effective in offsetting changes to future cash

flows on hedged transactions. The par forward contract is designated and qualifies as a cash flow hedge. Our derivative instrument is recorded at fair value on the condensed consolidated balance sheets and is classified based on the instrument's maturity date. We record changes in the intrinsic value of the effective portion of the gain or loss on the derivative instrument as a component of Other Comprehensive Income and we reclassify that gain or loss into earnings in the same line item associated with the forecasted transaction and in the same period during which the hedged transaction affects earnings. This contract matured May 1, 2019. This derivative instrument had a fixed forward rate of 20.01MXN/USD over the term of the contract.

In January 2018, we entered into an additional six-month cross-currency par forward contract that extends our current hedge of a portion of our Mexico forecasted expenses denominated in MXN. The total notional amount of this outstanding derivative as of September 30, 2019 was approximately 61.3 million MXN. The term of the six-month contract is May 1, 2019 to November 1, 2019. The derivative instrument matures in equal monthly amounts at a fixed forward rate of 20.43 MXN/USD over the term of the six-month contract.

In November 2018, we entered into a one-year cross-currency par forward contract again extending the hedge of a portion of our Mexico forecasted expenses denominated in MXN. The total notional amount of this outstanding derivative as of September 30, 2019 was approximately 398.0 million MXN. The term of the one-year hedge is November 1, 2019 to November 3, 2020. The derivative instrument matures in equal monthly amounts at a fixed forward rate of 22.109 MXN/USD.

The following table presents the fair values of our derivative instruments included within the Condensed Consolidated Balance Sheet as of September 30, 2019 and December 31, 2018 (in thousands):

	Derivatives
	Condensed Consolidated Balance Sheet Location	September 30, 2019		December 31, 2018
Derivatives designated as cash flow hedging instruments
Foreign exchange forward contract:
	Prepaid expenses and other current assets	$	1,300	$	187
	Other assets	279		545
Total derivatives designated as cash flow hedging instruments		$	1,579	$	732

The following table presents the amounts affecting the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018 (in thousands):

	Line Item in the Condensed Consolidated Statements of Operations	Three months ended September 30,				Nine months ended September 30,
		2019		2018		2019		2018
Derivatives designated as cash flow hedging instruments
Foreign exchange forward contracts	Cost of goods sold	$	229	$	192	$	573	$	687

We recognized the following (losses) gains on our foreign exchange contracts designated as a cash flow hedge (in thousands):

	Amount of (Loss) Gain Recognized in Other Comprehensive Income on Derivatives					Amount of Gain Reclassified From Accumulated Other Comprehensive Income into Income
	Three months ended September 30,						Three months ended September 30,
	2019			2018		Location of Gain Reclassified From Accumulated Other Comprehensive Income into Income	2019		2018
Derivatives designated as cash flow hedges:
Foreign exchange forward contract	$	(264	)	$	1,743	Cost of goods sold	$	229	$	192
Total derivatives designated as cash flow hedging instruments	$	(264	)	$	1,743		$	229	$	192

	Amount of Gain Recognized in Other Comprehensive Income on Derivatives				Amount of Gain Reclassified From Accumulated Other Comprehensive Income into Income
	Nine months ended September 30,					Nine months ended September 30,
	2019		2018		Location of Gain Reclassified From Accumulated Other Comprehensive Income into Income	2019		2018
Derivatives designated as cash flow hedges:
Foreign exchange forward contract	$	1,421	$	2,256	Cost of goods sold	$	573	$	687
Total derivatives designated as cash flow hedging instruments	$	1,421	$	2,256		$	573	$	687

As of September 30, 2019, we expect approximately $1.4 million of the deferred gains on the outstanding derivatives in accumulated other comprehensive income to be reclassified to net income during the next 12 months concurrent with the underlying hedged transactions also being reported in net income.