Derivative Financial Instruments

9 Months Ended

Sep. 30, 2017

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.  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. 

At September 30, 2017, the Company’s derivative contracts had a remaining maturity of one and one-half years or less.  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, which is $1,353 as of September 30, 2017.  The Company’s exposure of counterparty credit risk is limited to the aggregate unrealized gain on all contracts.  At September 30, 2017, there was no such exposure to the counterparty.  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 September 30, 2017 and December 31, 2016:

	September 30, 2017
	Notional	Latest
	Amount	Maturity
Foreign exchange contracts - Norwegian Kroner	7,449	February 2018
Foreign exchange contracts - Canadian Dollars	13,345	February 2019
Foreign exchange contracts - British Pounds	2,343	February 2019
Foreign exchange contracts - Euros	22,200	February 2019

	December 31, 2016
	Notional	Latest
	Amount	Maturity
Foreign exchange contracts - Canadian Dollars	11,001	February 2018
Foreign exchange contracts - British Pounds	1,842	February 2018
Foreign exchange contracts - Euros	14,366	February 2018

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 hedged transaction is recognized in earnings.  Losses of $(422) and $(152) were reclassified to sales during the three months ended September 30, 2017 and 2016, respectively, and $(36) and $(495) were reclassified to sales during the nine months ended September 30, 2017 and 2016, respectively.

The Company records ineffectiveness of hedged instruments resulting from changes in fair value of the instruments in earnings.  There were no gains (losses) recorded to Other, net, during the three and nine months ended September 30, 2017.  Gains (losses) of $34 and $(8) were recorded to Other, net, associated with ineffective hedge instruments during the three and nine months ended September 30, 2016.

The following table presents the balance sheet classification and fair value of derivative instruments as of September 30, 2017 and December 31, 2016:

	Classification	September 30, 2017		December 31, 2016
Derivative instruments in asset positions:
Forward exchange contracts	Prepaid and other current assets	$	69	$	1,165
Forward exchange contracts	Other long-term assets	$	12	$	116
Derivative instruments in liability positions:
Forward exchange contracts	Accounts payable and accrued liabilities	$	1,284	$	-
Forward exchange contracts	Other long-term liabilities	$	150	$	-