Derivative Financial Instruments

9 Months Ended

Sep. 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 $13,508 as of September30, 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 nine month Euro Interbank Offered Rate (“EURIBOR”), 0.45% at September30, 2013, plus 1.40% and pays interest equal to the nine month EURIBOR when the exchange rate between the European Euro (“EUR”) and the Swiss Franc (“CHF”), which was 1.23 at September30, 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 €8,906 or $12,030 as of September30, 2013, plus additional accrued liabilities for past due payments under the CRS of approximately €4,930, or $6,659 as of September30, 2013. UniCredit has appealed the decision. 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 September30, 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.

Information related to the recurring fair value measurement of derivative instruments in our consolidated balance sheet as of September30, 2013 is as follows:

			Asset Derivatives			Liability Derivatives					NetAsset/ (Liabilities)
	HedgeDesignation	FairValue Hierarchy	BalanceSheet Location	Fair Value		BalanceSheet Location	Fair Value
CRS	Notahedge	Level2				Currentliabilities	$	(2,476	)
						Noncurrentliabilities		(9,553	)
Total CRS							$	(12,029	)	$		(12,029	)
Foreign currency derivatives	Not a hedge	Level 2	Currentassets	$	3	Currentliabilities	$	(57	)	$		(54	)
Foreign currency derivatives	Not a hedge	Level 2	Currentassets	$	289					$		289
			Non current assets		2,403					$		2,403
Total foreign currency derivatives				$	2,695		$	(57	)	$		2,638
Interest rate swap derivatives	Cashflowhedge	Level 2				Currentliabilities	$	(119	)	$		(119	)

Note 7 – Derivative Financial Instruments – Continued

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

	Location	Three MonthsEnded September 30, 2013			Nine MonthsEnded September 30, 2013
Foreign currency derivatives	Revaluation of derivatives	$	581		$	(694	)
	Foreign currency gain (loss)		(426	)		(844	)
Total foreign currency derivatives		$	155		$	(1,538	)
CRS	Revaluation of derivatives	$	(364	)	$	1,895
Commodity derivatives	Revaluation of derivatives	$	—		$	—
Interest Rate Swap	Interest Expense	$	8		$	8
	Other Comprehensive Income	$	30		$	105

	Location	Three MonthsEnded September 30, 2012			Nine MonthsEnded September 30, 2012
Foreign currency derivatives	Revaluationofderivatives	$	(2,036	)	$	(2,514	)
	Foreigncurrencygain(loss)		1,051			1,722
Total foreign currency derivatives		$	(985	)	$	(792	)
CRS	Revaluation of derivatives	$	1,045		$	1,315
Commodity derivatives	Revaluation of derivatives	$	(2	)	$	143
Interest Rate Swap	Interest Expense	$	(12	)	$	(54	)
	OtherComprehensiveIncome	$	(25	)	$	(55	)

We did not incur any hedge ineffectiveness during the nine months ended September30, 2013 and 2012.