Note 14 — Derivative Financial Instruments

We are exposed to market risk from changes in foreign currency exchange rates and short term interest rates. Market risks for changes in interest rates relate primarily to our debt obligations under our Bank of America credit facilities. Foreign currency exchange risks are attributable to sales to foreign customers and purchases from foreign suppliers not denominated in the location’s functional currency, foreign plant operations, intercompany indebtedness and include exposures to the European Euro, Mexican Peso, Canadian Dollar, Hungarian Forint, Ukraine Hryvnia and Korean Won. 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 income. Though we continuously monitor the hedging program, derivative positions and hedging strategies, foreign currency forward exchange agreements have not always been designated 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 $13,779 as of December 31, 2013, 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 (“EURIBOR”), 0.39% at December 31, 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 December 31, 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 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 March 25, 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 €8,584 or $11,828 as of December 31, 2013, plus additional accrued liabilities for past due payments under the CRS of approximately €5,380, or $7,413 as of December 31, 2013. UniCredit has appealed the decision and an extension has been granted. As a result, the Company cannot be certain that any portion of the award 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 December 31, 2013 and 2012, respectively. The Company has entered into offsetting derivative contracts designed to cancel out the market risk of payments due under the CRS through the end of the CRS agreement, in 2018.

In July 2011, the Company entered into two interest rate swap contracts with separate financial institutions and an interest rate cap agreement in order to hedge the exposure to variable market interest rates on the Company’s Bank of America credit facilities. The interest rate swap contracts qualified for and are designated as cash flow hedges. Swap gains and losses are reported in accumulated other comprehensive income and will be reclassified to earnings once the Company’s Bank of America credit facilities are repaid. Cap gains and losses are reported in foreign currency gains and losses on the consolidated statement of income. Information on the interest rate swap contracts is as follows:

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

Note 14 — Derivative Financial Instruments (Continued)

Information related to the recurring fair value measurement of derivative instruments in our consolidated balance sheet as of December 31, 2013 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			Net Asset/ (Liabilities)
CRS	Not a hedge	Level 2					Current liabilities	$	(2,471	)
							Non current liabilities		(9,358	)
Total CRS								$	(11,829	)	$	(11,829	)
Foreign currency derivatives	Not a hedge	Level 2		Current assets	$	1					$	1
Foreign currency derivatives	Not a hedge	Level 2		Current assets	$	66					$	66
Non current assets						1,969					$	1,969
Total foreign currency derivatives					$	2,036					$	2,036
Interest rate swap derivatives	Cash flow hedge	Level 2					Current liabilities	$	(81	)	$	(81	)

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			Net Asset/ (Liabilities)
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 effect of derivative instruments on our consolidated statements of income is as follows:

	Location	Year Ended December 31, 2013			Year Ended December 31, 2012
Foreign currency derivatives	Revaluation of derivatives	$	(1,329	)		(3,926	)
	Foreign currency gain (loss)		(761	)		1,875
Total foreign currency derivatives		$	(2,090	)	$	(2,051	)
CRS	Revaluation of derivatives	$	2,335		$	1,491
Commodity derivatives	Revaluation of derivatives	$	—		$	143
Interest Rate Swap	Interest Expense	$	(2	)	$	(57	)
	Other Comprehensive Income		143			(18	)

We did not incur any hedge ineffectiveness during the twelve months ended December 31, 2013 and 2012.