Derivative Financial Instruments

6 Months Ended

Jun. 30, 2015

Derivative Financial Instruments [Abstract]

Derivative Financial Instruments

NOTE 8.  DERIVATIVE FINANCIAL INSTRUMENTS

The Company’s primary exchange rate risk management objective is to mitigate the uncertainty of anticipated cash flows attributable to changes in foreign currency exchange rates.  The Company primarily focuses on mitigating changes in cash flows resulting from sales denominated in currencies other than the U.S. dollar.  The Company manages this risk primarily by using currency forward and option contracts.  If the anticipated transactions are deemed probable, the resulting relationships are formally designated as cash flow hedges.

At June 30, 2015, the Company’s derivative contracts had a remaining maturity of less than one year.  The counterparty to these transactions had both long-term and short-term investment grade credit ratings.  The maximum net exposure of the Company’s credit risk to the counterparty is generally limited to the aggregate unrealized loss of all contracts with that counterparty.  At June 30, 2015 there was no such exposure to the counterparty.  The Company’s exposure of counterparty credit risk is limited to the aggregate unrealized gain of $3,839 on all contracts at June 30, 2015.  The Company’s derivative counterparty has strong credit ratings and as a result, the Company does not require collateral to facilitate transactions.

The Company held the following contracts designated as hedged instruments as of June 30, 2015 and December 31, 2014:

	June 30, 2015
	Notional	Latest
	Amount	Maturity
Foreign exchange contracts - Canadian Dollars	7,471	February 2016
Foreign exchange contracts - British Pounds	1,497	February 2016
Foreign exchange contracts - Euros	23,332	February 2016
Foreign exchange contracts - Swiss Francs	16,924	February 2016

	December 31, 2014
	Notional	Latest
	Amount	Maturity
Foreign exchange contracts - Canadian Dollars	12,053	February 2016
Foreign exchange contracts - British Pounds	2,739	February 2016
Foreign exchange contracts - Euros	36,673	February 2016
Foreign exchange contracts - Swiss Francs	31,344	February 2016

The Company accounts for these contracts as cash flow hedges and tests effectiveness by determining whether changes in the expected cash flow of the derivative offset, within a range, changes in the expected cash flow of the hedged item.  For contracts that qualify as effective hedge instruments, the effective portion of gains and losses resulting from changes in fair value of the instruments are included in accumulated other comprehensive loss and reclassified to sales in the period the underlying hedge item is recognized in earnings.  Gains (losses) of $1,058 and $(287) were reclassified to sales during the three months ended June 30, 2015 and 2014, respectively, and $2,764 and $(621) were reclassified to sales during the six months ended June 30, 2015 and 2014, respectively.

As of December 31, 2014, the Company reported an accumulated derivative instrument gain of $1,891.  During the six months ended June 30, 2015, the Company reported an adjustment to accumulated other comprehensive income of $111, as a result of the change in fair value of these contracts and reclassifications to sales, resulting in an accumulated derivative instrument gain of $2,002 reported as of June 30, 2015.

The following table presents the balance sheet classification and fair value of derivative instruments as of June 30, 2015 and December 31, 2014:

	Classification	June 30, 2015		December 31, 2014
Derivative instruments in asset positions:
Forward exchange contracts	Prepaid and other current assets	$	3,839	$	3,066
Forward exchange contracts	Other long-term assets	$	-	$	446
Derivative instruments in liability positions:
Forward exchange contracts	Accounts payable and accrued liabilities	$	-	$	79
Forward exchange contracts	Other long-term liabilities	$	-	$	11