DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

6 Months Ended

Jun. 30, 2016

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 June 30, 2016, the Company has recorded the fair value of foreign currency forward exchange contracts of $1.1million in prepaid and other, $4.9 million in accounts payable and accrued liabilities and $27 thousand in deferred and other non-current liabilities in the balance sheet.  All forward exchange contracts outstanding as of June 30, 2016 had an aggregate contract amount of $111.0 million.

Fair Value of Derivative Instruments in the Condensed Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015

Derivative Contracts Not Designated		June 30,		December 31,
as Hedging Instruments	Balance Sheet Location	2016		2015
Derivative Assets
Foreign Exchange Contracts	Prepaid and other	$	1,050	$	1,924
Foreign Exchange Contracts	Miscellaneous other assets		—		112
		$	1,050	$	2,036
Derivative Liabilities
Foreign Exchange Contracts	Accounts payable and accrued liabilities	$	4,911	$	1,152
Foreign Exchange Contracts	Deferred and other non-current liabilities		27		45
		$	4,938	$	1,197

The Effect of Derivative Instruments on the Condensed Consolidated Statements of Income for the Quarters Ended June 30, 2016 and June 30, 2015

		Amount of (Loss)
Derivatives Not Designated	Location of (Loss) Recognized	Recognized in Income
as Hedging Instruments	in Income on Derivatives	on Derivatives
		2016		2015
Foreign Exchange Contracts	Other (Expense) Income: Miscellaneous, net	$	(2,660)	$	(3,301)
		$	(2,660)	$	(3,301)

The Effect of Derivative Instruments on the Condensed Consolidated Statements of Income for the Six Months Ended June 30, 2016 and June 30, 2015

		Amount of (Loss)
Derivatives Not Designated	Location of (Loss) Recognized	Recognized in Income
as Hedging Instruments	in Income on Derivatives	on Derivatives
		2016		2015
Foreign Exchange Contracts	Other (Expense) Income: Miscellaneous, net	$	(5,066)	$	(48)
		$	(5,066)	$	(48)

						Gross Amounts not Offset
				Net Amounts		in the Statement of
			Gross Amounts	Presented in		Financial Position
	Gross		Offset in the	the Statement of		Financial	Cash Collateral	Net
	Amount		Financial Position	Financial Position		Instruments	Received	Amount
Description
June 30, 2016
Derivative Assets	$	1,050	—	$	1,050	—	—	$	1,050
Total Assets	$	1,050	—	$	1,050	—	—	$	1,050
Derivative Liabilities	$	4,938	—	$	4,938	—	—	$	4,938
Total Liabilities	$	4,938	—	$	4,938	—	—	$	4,938
December 31, 2015
Derivative Assets	$	2,036	—	$	2,036	—	—	$	2,036
Total Assets	$	2,036	—	$	2,036	—	—	$	2,036
Derivative Liabilities	$	1,197	—	$	1,197	—	—	$	1,197
Total Liabilities	$	1,197	—	$	1,197	—	—	$	1,197