Derivative Financial Instruments

12 Months Ended

Dec. 31, 2018

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Note 12 — 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. Market risks for changes in interest rates relate primarily to our debt obligations under our Amended Credit Agreement. Foreign currency exchange risks are attributable to sales to foreign customers and purchases from foreign suppliers not denominated in a location’s functional currency, foreign plant operations, intercompany indebtedness, intercompany investments and include exposures to the European Euro, Mexican Peso, Canadian Dollar, Hungarian Forint, Macedonian Denar, Ukrainian Hryvnia, Japanese Yen, Chinese Renminbi, Korean Won and Vietnamese Dong.

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. The maximum length of time over which we hedge our exposure to foreign currency exchange risks is one year. We had foreign currency derivative contracts with a notional value of $33,250 and $29,273 outstanding at December 31, 2018 and 2017, respectively.

The maximum length of time over which we hedge our exposure to price fluctuations in material commodities is two years.  We had copper commodity swap contracts with a notional value of $0 and $404 outstanding at December 31, 2018 and 2017, respectively.  

Note 12 — Derivative Financial Instruments – (Continued)

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. For derivative contracts which can be classified as a cash flow hedge, the effective portion of the change in the fair value of the derivative is recorded to accumulated other comprehensive loss in the consolidated balance sheet.  When the underlying hedge transaction is realized, the gain or loss included in accumulated other comprehensive loss is recorded in earnings in the consolidated statement of income on the same line as the gain or loss on the hedged item attributable to the hedged risk.  We record the ineffective portion of foreign currency hedging instruments, if any, to foreign currency gain (loss) in the consolidated statements of income. See Note 14 for the amount of unrealized loss associated with foreign currency derivatives and copper commodity derivatives reported in accumulated other comprehensive income as of December 31, 2017 that was reclassified into earnings during 2018. 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.

The Company uses an income approach to value derivative instruments, analyzing quoted market prices to calculate the forward values and then discounts such forward values to the present value using benchmark rates at commonly quoted intervals for the instrument’s full term.

Information related to the recurring fair value measurement of derivative financial instruments in our consolidated balance sheet as of December 31, 2018 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
Foreign currency derivatives	Cash flow hedge	Level 2		Current assets	$	92	Current liabilities	$	—	$	92

Information related to the recurring fair value measurement of derivative financial instruments in our consolidated balance sheet as of December 31, 2017 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
Foreign currency derivatives	Cash flow hedge	Level 2		Current assets	$	141	Current liabilities	$	(1,050	)	$	(909	)
Commodity derivatives	Cash flow hedge	Level 2		Current assets	$	72					$	72

Note 12 — Derivative Financial Instruments – (Continued)

Information related to the effect of derivative instrument`s on our consolidated statements of income is as follows:  

	Location	Year Ended December 31, 2018			Year Ended December 31, 2017
Foreign currency derivatives	Product Revenues	$	—		$	(3	)
	Cost of sales		(444	)		2,209
	Selling, general and administrative		75			(216	)
	Other comprehensive income		1,096			302
	Foreign currency gain		50			(112	)
Total foreign currency derivatives		$	777		$	2,180
Commodity derivatives	Cost of sales	$	145		$	202
	Other comprehensive (loss) income	$	(218	)	$	54
Total commodity derivatives		$	(73	)	$	256

We did not incur any hedge ineffectiveness during the years ended December 31, 2018 and 2017.