Note 7 - Derivative Instruments

9 Months Ended

Sep. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

NOTE G—DERIVATIVE INSTRUMENTS

The Company accounts for derivative instruments in accordance with FASB. ASC No. 815 "Derivatives and Hedging" ("ASC 815"). Due to the Company’s global operations, it is exposed to foreign currency exchange rate fluctuations in the normal course of its business. The Company’s treasury policy allows it to offset the risks associated with the effects of certain foreign currency exposures through the purchase of foreign exchange forward contracts and put options (collectively, "hedging contracts"). The policy, however, prohibits the Company from speculating on hedging contracts for profit.

To protect against the increase in value of forecasted foreign currency cash flows resulting from salary and lease payments of its Israeli facilities denominated in the Israeli currency, the New Israeli Shekels ("NIS"), during the year, the Company instituted a foreign currency cash flow hedging program. The Company hedges portions of the anticipated payroll and lease payments denominated in NIS for a period of one to twelve months with hedging contracts. Accordingly, when the dollar strengthens against the foreign currencies, the decline in present value of future foreign currency expenses is offset by losses in the fair value of the hedging contracts. Conversely, when the dollar weakens, the increase in the present value of future foreign currency cash flows is offset by gains in the fair value of the hedging contracts. These hedging contracts are designated as cash flow hedges, as defined by ASC 815 and are all effective hedges of these expenses.

In accordance with ASC 815, for derivative instruments that are designated and qualify as a cash flow hedge (i.e. hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Any gain or loss on a derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item is recognized in current earnings during the period of change. As of September 30, 2015, the Company had no outstanding foreign exchange forward contracts and outstanding option contracts in the amount of $10,000. These hedging contracts do not contain any credit-risk-related contingency features. See Note K for information on the fair value of these hedging contracts.

The fair value of derivative assets and derivative liabilities were $63 and $138, respectively, at September 30, 2015. The Company recorded a net amount of $75 in accrued expenses and other accounts payable in the condensed consolidated balance sheets at September 30, 2015.

The amount recorded as additional expense in research and development expenses, sales and marketing expenses and general and administrative expenses in the condensed consolidated statements of income for the nine months ended September 30, 2015 that resulted from the above referenced hedging transactions was $487, $48 and $85, respectively.

The amount recorded as additional income in research and development expenses, sales and marketing expenses and general and administrative expenses in the condensed consolidated statements of income for the three months ended September 30, 2015 that resulted from the above referenced hedging transactions was $3, $0 and $1, respectively.

The fair value of the outstanding derivative instruments at September 30, 2015 and December 31, 2014 is summarized below:

		Fair Value of Derivative Instruments
	Balance Sheet Location	September 30, 2015			December 31, 2014
Derivative Assets (Liabilities)
Foreign exchange forward and options contracts	Accrued expenses and other accounts payable (*)	$	(75	)	$	(618	)
	Other accounts receivable and prepaid expenses		-			-
		$	(75	)	$	(618	)

(*) Estimated to be reclassified into earnings during 2015 and 2016.

The effect of derivative instruments in cash flow hedging transactions on income and other comprehensive income ("OCI") for the three and nine months ended September 30, 2015 and 2014 is summarized below:

	Losses on Derivatives Recognized in OCI
	for the three months ended September 30,						for the nine months ended September 30,
	2015			2014			2015			2014
Foreign exchange forward and option contracts	$	(240	)	$	(528	)	$	(77	)	$	(516	)

	Gains (Losses) Reclassified from OCI into Income
		for the three months ended September 30					for the nine months ended September 30,
	Location	2015		2014			2015			2014
Foreign exchange forward and option contracts	Operating expenses	$	4	$	(97	)	$	(620	)	$	(92	)