Derivative Financial Instruments

12 Months Ended

Dec. 31, 2012

Derivative Financial Instruments

Note 16 — Derivative Financial Instruments

We are exposed to market risk from changes in foreign currency exchange rates, short term interest rates and price fluctuations of certain material commodities such as copper. Foreign currency exchange risks are attributable to sales to foreign customers not denominated in the seller’s functional currency, foreign plant operations, intercompany indebtedness and purchases from foreign suppliers and include exposures to the European Euro, Japanese Yen, Canadian Dollar, and Mexican Peso. The Company regularly enters into derivative contracts with the objective of managing its financial and operational exposure arising from this risk by offsetting gains and losses on the underlying exposures with gains and losses on the financial instruments used to hedge them. We do not enter into derivative financial instruments for speculative or trading purposes. Our hedging relationships are formally documented at the inception of the hedge, and hedges must be highly effective in offsetting changes to future cash flows on hedged transactions both at the inception of a hedge and on an ongoing basis. We record the ineffective portion of hedging instruments, if any, to other income (expense) in the consolidated statements of operations.

While W.E.T. continuously monitors the hedging program, derivative positions and hedging strategies and maintains documentation as to the hedging objectives, practices and procedures, W.E.T. has not typically designated its derivatives as hedging instruments for accounting purposes.

In March 2008, W.E.T. entered into a 10 year currency related interest rate swap (“CRS”) having a notional value of €10,000, or $13,203 as of December 31, 2012, in order to offset the interest rate risk associated with a debt financing which was repaid prior our acquisition of W.E.T. Under this agreement W.E.T. receives interest equal to the then six month Euro Interbank Offered Rate (“EUIBOR”), 0.43% at December 31, 2012, plus 1.40% and pays interest equal to the six month EUIBOR when the exchange rate between the European Euro (“EUR”) and the Swiss Franc (“CHF”), which was 1.21 at December 31, 2012, equals or exceeds 1.46 EUR to the CHF or pays interest equal to the six month EURIBOR plus a premium when this exchange rate is less than 1.46. The premium is calculated as [(1.46 — current EUR/CHF rate)/current EUR/CHF rate] x 100. In 2012, W.E.T. entered into offsetting derivative contracts designed to cancel out the payment due under the CRS through the end of the CRS agreement, in 2018.

In July, 2011, the Company entered into a series of interest rate swap contracts and an interest rate cap agreement designated as cash flow hedges in order to hedge the exposure to variable market interest rates on the Company’s senior debt. Gains and losses reported in accumulated other comprehensive income will be reclassified to earnings once the Company’s senior debt is repaid. Information on the interest rate swap contracts is as follows:

Contract Type	Contract Term	Notional Value		Hedged Instruments	Fixed Rate			Variable Rate	Rate Cap
Swap	June 30, 2014	$	8,000	US Term Note		1.27	%	3 month LIBOR		—
Swap	June 30, 2014	$	8,000	US Term Note		1.27	%	3 month LIBOR		—
Cap	March 31, 2016	€	14,250	W.E.T. Term Note		—		3 month EURIBOR		2.75

Information related to the recurring fair value measurement of derivative instruments in our consolidated balance sheet as of December 31, 2012 is as follows:

				Asset Derivatives			Liability Derivatives				Net Asset/ (Liabilities)
	Hedge Designation	Fair Value Hierarchy		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
CRS	Not a hedge		Level 2				Current liabilities	$	(2,631	)
							Non current liabilities		(13,245	)
Total CRS								$	(15,876	)	$	(15,876	)
Foreign currency derivatives	Not a hedge		Level 2	Current assets	$	3	Current liabilities	$	(471	)	$	(468	)
Foreign currency derivatives	Not a hedge		Level 2	Current assets	$	157					$	157
				Non current assets		4,141					$	4,141
Total foreign currency derivatives					$	4,301		$	(471	)	$	3,830
Interest rate swap derivatives	Cash flow hedge		Level 2				Current liabilities	$	(224	)	$	(224	)

Information related to the recurring fair value measurement of derivative instruments in our consolidated balance sheet as of December 31, 2011 is as follows:

				Asset Derivatives			Liability Derivatives				Net Asset/ (Liabilities)
	Hedge Designation	Fair Value Hierarchy		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
CRS	Not a hedge		Level 2				Current liabilities	$	(2,489	)
							Non current liabilities		(17,189	)
Total CRS			Level 2					$	(19,678	)	$	(19,678	)
Foreign currency derivatives	Not a hedge		Level 2	Current assets	$	2,675	Current liabilities	$	(2,262	)	$	413
Interest rate swap derivatives	Cash flow hedge		Level 2				Current liabilities	$	(206	)	$	(206	)
Commodity derivatives	Not a hedge		Level 2				Current liabilities	$	(144	)	$	(144	)

Information related to the effect of derivative instruments on our consolidated statements of operations is as follows:

	Location	Year Ended December 31, 2012			Year Ended December 31, 2011
Foreign currency derivatives	Cost of sales	$	—		$	(15	)
	Revaluation of derivatives		(3,926	)		(5,162	)
	Foreign currency gain (loss)		1,875			1,613
Total foreign currency derivatives		$	(2,051	)	$	(3,564	)
CRS	Revaluation of derivatives	$	1,491		$	(3,411	)
Commodity derivatives	Revaluation of derivatives	$	143		$	(155	)
Series C Convertible Preferred Stock embedded derivatives (see Note 7)	Revaluation of derivatives	$	—		$	2,610
Interest Rate Swap	Interest Expense	$	(57	)	$	(84	)
	Other Comprehensive Income		(18	)		(206	)

We did not incur any hedge ineffectiveness during the twelve months ended December 31, 2012 and 2011. We recorded an expense of $164 and $42 from interest payments on interest rate swap agreements designated as hedging instruments within interest expense during the years ended December 31, 2012 and 2011, respectively.