Derivative Financial Instruments

6 Months Ended

Jun. 30, 2014

Derivative Financial Instruments

Note 7 – 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 these risks 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.

Note 7 – Derivative Financial Instruments – Continued

The Company uses a market approach to value derivative instruments, analyzing observable benchmark rates at commonly quoted intervals for the instrument’s full term.   For information about notional values and expected maturities of derivative instruments, see Part I, Item 3. “Quantitative and Qualitative Disclosures About Market Risk” included in this Report.

Information related to the recurring fair value measurement of derivative instruments in our consolidated condensed balance sheet as of June 30, 2014 is as follows:

			Asset Derivatives				Liability Derivatives			Net Asset/ (Liabilities)
	Hedge  Designation	Fair ValueHierarchy	Balance Sheet Location		Fair Value		Balance SheetLocation	Fair Value
CRS	Not a hedge	Level 2					Current liabilities	$	2,630
							Non-current  liabilities		8,288
Total CRS								$	10,918	$	(10,918	)
Foreign currency derivatives	Cash flow hedge	Level 2		Current assets	$	264	Current liabilities	$	103	$	161
Foreign currency derivatives	Not a hedge	Level 2		Current assets	$	61				$	61
				Non-current  assets		1,343				$	1,343
Total foreign currency derivatives					$	1,668		$	103	$	1,565
Interest rate swap derivatives	Cash flow hedge	Level 2					Current liabilities	$	43	$	(43	)

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

	Location	Three Months Ended June 30, 2014			Six Months Ended June 30, 2014		Three Months Ended June 30, 2013			Six Months Ended June 30, 2013
Foreign currency derivatives	Revaluation of derivatives	$	(421	)	(159	)		(301	)	(1,275	)
	Cost of Sales		83		30			—		—
	Selling, general and administrative		(20	)	(68	)		—		—
	Other Comprehensive Income		99		160			—		—
	Foreign currency gain (loss)		5		(448	)		(127	)	(418	)
Total foreign currency derivatives		$	(254	)	(485	)	$	(428	)	(1,693	)
CRS	Revaluation of derivatives	$	81		(428	)	$	940		2,260
Interest Rate Swap	Interest Expense	$	(1	)	(1	)	$	2		2
	Other Comprehensive Income		—		39			36		75

We did not incur any hedge ineffectiveness during the six months ended June 30, 2014 and 2013.