DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

9 Months Ended

Sep. 30, 2015

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

NOTE 8 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company maintains a foreign exchange risk management policy designed to establish a framework to protect the value of the Company’s non-functional denominated transactions from adverse changes in exchange rates.  Sales of the Company’s products can be denominated in a currency different from the currency in which the related costs to produce the product are denominated.  Changes in exchange rates on such inter-country sales or intercompany loans can impact the Company’s results of operations.  The Company’s policy is not to engage in speculative foreign currency hedging activities, but to minimize our net foreign currency transaction exposure, defined as firm commitments and transactions recorded and denominated in currencies other than the functional currency.  The Company may use foreign currency forward exchange contracts, options and cross currency swaps to economically hedge these risks.

For derivative instruments designated as hedges, the Company formally documents the nature and relationships between the hedging instruments and the hedged items, as well as the risk management objectives, strategies for undertaking the various hedge transactions, and the method of assessing hedge effectiveness.  Additionally, in order to designate any derivative instrument as a hedge of an anticipated transaction, the significant characteristics and expected terms of any anticipated transaction must be specifically identified, and it must be probable that the anticipated transaction will occur.

HEDGE OF NET INVESTMENTS IN FOREIGN OPERATIONS

A significant number of the Company’s operations are located outside of the United States.  Because of this, movements in exchange rates may have a significant impact on the translation of the financial condition and results of operations of the Company’s foreign subsidiaries.  A strengthening U.S. dollar relative to foreign currencies has a dilutive translation effect on the Company’s financial condition and results of operations.  Conversely, a weakening U.S. dollar has an additive effect.  The Company in some cases maintains debt in these subsidiaries to offset the net asset exposure.  The Company does not otherwise actively manage this risk using derivative financial instruments.  In the event the Company plans on a full or partial liquidation of any of our foreign subsidiaries where the Company’s net investment is likely to be monetized, the Company will consider hedging the currency exposure associated with such a transaction.

OTHER

As of September 30, 2015, the Company has recorded the fair value of foreign currency forward exchange contracts of $4.9 million in prepaid and other, $0.1 million in miscellaneous other assets, and $0.5 million in accounts payable and accrued liabilities in the balance sheet.  All forward exchange contracts outstanding as of September 30, 2015 had an aggregate contract amount of $83.4 million.

Fair Value of Derivative Instruments in the Condensed Consolidated Balance Sheets as of September 30, 2015

and December 31, 2014

Derivative Contracts Not Designated as Hedging Instruments	Balance Sheet Location	September 30, 2015		December 31, 2014
Derivative Assets
Foreign Exchange Contracts	Prepaid and other	$	4,900	$	1,037
Foreign Exchange Contracts	Miscellaneous other assets	119		7
		$	5,019	$	1,044
Derivative Liabilities
Foreign Exchange Contracts	Accounts payable and accrued liabilities	$	541	$	2,378
Foreign Exchange Contracts	Deferred and other non-current liabilities	27		115
		$	568	$	2,493

The Effect of Derivative Instruments on the Condensed Consolidated Statements of Income

for the Quarters Ended September 30, 2015 and September 30, 2014

Derivatives Not Designated as Hedging Instruments	Location of Gain or (Loss) Recognized in Income on Derivatives	Amount of Gain or (Loss) Recognized in Income on Derivative
		2015		2014
Foreign Exchange Contracts	Other Income (Expense) Miscellaneous, net	$	5,924	$	(1,965	)
		$	5,924	$	(1,965	)

The Effect of Derivative Instruments on the Condensed Consolidated Statements of Income

for the Nine Months Ended September 30, 2015 and September 30, 2014

Derivatives Not Designated as Hedging Instruments	Location of Gain or (Loss) Recognized in Income on Derivatives	Amount of Gain or (Loss) Recognized in Income on Derivative
		2015		2014
Foreign Exchange Contracts	Other Income (Expense) Miscellaneous, net	$	5,876	$	(3,459	)
		$	5,876	$	(3,459	)

				Net Amounts		Gross Amounts not Offset in the
			Gross Amounts	Presented in		Statement of Financial Position
	Gross		Offset in the	the Statement of		Financial	Cash Collateral	Net
	Amount		Financial Position	Financial Position		Instruments	Received	Amount
Description
September 30, 2015
Derivative Assets	$	5,019	--	$	5,019	--	--	$	5,019
Total Assets	$	5,019	--	$	5,019	--	--	$	5,019
Derivative Liabilities	$	568	--	$	568	--	--	$	568
Total Liabilities	$	568	--	$	568	--	--	$	568
December 31, 2014
Derivative Assets	$	1,044	--	$	1,044	--	--	$	1,044
Total Assets	$	1,044	--	$	1,044	--	--	$	1,044
Derivative Liabilities	$	2,493	--	$	2,493	--	--	$	2,493
Total Liabilities	$	2,493	--	$	2,493	--	--	$	2,493