Derivative Financial Instruments

6 Months Ended

Jun. 30, 2013

Derivative Financial Instruments

Note 7 – 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, Canadian Dollar, Japanese Yen, Hungarian Forint, Korean Won 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 to be designated for hedge accounting treatment. We record the ineffective portion of hedging instruments, if any, to other income (expense) in the consolidated condensed statements of operations.

Note 7 – Derivative Financial Instruments – Continued

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 $13,007 as of June30, 2013, in order to offset the interest rate risk associated with a debt financing which was repaid prior to our acquisition of W.E.T. Under this agreement W.E.T. receives interest equal to the then six month Euro Interbank Offered Rate (“EURIBOR”), 0.34% at June30, 2013, plus 1.40% and pays interest equal to the six month EURIBOR when the exchange rate between the European Euro (“EUR”) and the Swiss Franc (“CHF”), which was 1.23 at June30, 2013, 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 September 2011, W.E.T. brought a lawsuit against UniCredit Bank AG (“UniCredit”), a past financial advisor, stemming from the recommendation to invest in the aforementioned CRS. On March25, 2013, the Munich District Court in Munich, Germany ruled in favor of W.E.T., asserting that UniCredit violated its duty to properly advise W.E.T. with respect to the initial negative market value for the CRS and UniCredit’s inherent conflict of interest in recommending that W.E.T. invest in CRS. The Munich District Court ruled that UniCredit must (1)pay €144 to W.E.T. and (2)bear the costs of all future obligations under the CRS, which were €9,460 or $12,305 as of June30, 2013, plus additional accrued liabilities for past due payments under the CRS of approximately €4,047, or $5,264 as of June30, 2013. UniCredithas appealed thedecision. As a result, the Company cannot be certain that any portion of the decision by the Munich District Court will be realized by W.E.T. See the derivatives table below for information about our future obligations under the CRS as of June30, 2013.

In July 2011, the Company entered into a series of interest rate swap contracts designated as cash flow hedges and an interest rate cap agreement 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.

The Company uses a market approach to value derivative instruments, analyzing observable benchmark rates at commonly quoted intervals for the instrument’s full term.

Note 7 – Derivative Financial Instruments – Continued

Information related to the recurring fair value measurement of derivative instruments in our consolidated balance sheet as of June30, 2013 is as follows:

			Asset Derivatives				Liability Derivatives						NetAsset/ (Liabilities)
	HedgeDesignation	FairValue Hierarchy	BalanceSheet Location	Fair Value			BalanceSheet Location		Fair Value
CRS	Notahedge	Level2				Current liabilities		$		(2,300	)
						Noncurrent liabilities				(10,004	)
Total CRS								$		(12,304	)	$		(12,304	)
Foreign currency derivatives	Not a hedge	Level 2	Currentassets	$	5	Current liabilities		$		(288	)	$		(283	)
Foreign currency derivatives	Not a hedge	Level 2	Currentassets	$	118							$		118
			Non current assets		2,463							$		2,463
Total foreign currency derivatives				$	2,586			$		(288	)	$		2,298
Interest rate swap derivatives	Cashflowhedge	Level 2				Current liabilities		$		(149	)	$		(149	)

Information relating to the effect of derivative instruments on our consolidated income statements is as follows:

	Location	Three MonthsEnded June 30, 2013			Six MonthsEnded June 30, 2013
Foreign currency derivatives	Revaluation of derivatives	$	(301	)	$	(1,275	)
	Foreign currency gain (loss)		(127	)		(418	)
Total foreign currency derivatives		$	(428	)	$	(1,693	)
CRS	Revaluation of derivatives	$	940		$	2,260
Commodity derivatives	Revaluation of derivatives	$	—		$	—
Interest Rate Swap	Interest Expense	$	2		$	2
	Other Comprehensive Income	$	36		$	75

Note 7 – Derivative Financial Instruments – Continued

	Location	Three MonthsEnded June 30, 2012			Six MonthsEnded June 30, 2012
Foreign currency derivatives	Revaluationofderivatives	$	(1,565	)	$	(478	)
	Foreigncurrencygain(loss)		(226	)		671
Total foreign currency derivatives		$	(1,791	)	$	193
CRS	Revaluation of derivatives	$	123		$	270
Commodity derivatives	Revaluation of derivatives	$	19		$	145
Interest Rate Swap	Interest Expense	$	(14	)	$	(42	)
	OtherComprehensiveIncome	$	3		$	(30	)

We did not incur any hedge ineffectiveness during the six months ended June30, 2013 and 2012.