Note 9 — Financial instruments

The Company uses derivative instruments for risk management purposes. Forward rate contracts are used to manage foreign currency transaction exposure. These derivative instruments are designated as cash flow hedges and are recorded on the balance sheet at fair market value. The effective portion of the gains or losses on derivatives is reported as a component of other comprehensive income and thereafter is recognized in the statement of income (loss) in the period or periods during which the hedged transaction affects earnings. Gains and losses on the derivatives representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. As of December 31, 2013, the Company had no open forward rate contracts. See Note 10 to the consolidated financial statements.

The following table presents the balance sheet location and fair values of derivative instruments designated as hedging instruments in the consolidated balance sheet as of December 31, 2013 and 2012:

	December 31, 2013 Fair Value		December 31, 2012 Fair Value
	(Dollars in thousands)
Asset derivatives:
Foreign currency exchange contracts
Other assets – current	$	—	$	1,279
Total asset derivatives	$	—	$	1,279
Liability derivatives:
Foreign currency exchange contracts
Derivative liabilities – current	$	—	$	598
Total liability derivatives	$	—	$	598

The following table provides information as to the gains and losses attributable to derivatives in cash flow hedging relationships that were reported in other comprehensive income (“OCI”) for the years ended December 31, 2013, 2012 and 2011:

	After Tax Gain/(Loss) Recognized in OCI
	2013		2012			2011
	(Dollars in thousands)
Interest rate swap	$	—	$	7,032		$	8,330
Foreign currency exchange contracts		381		(156	)		(325	)
Total	$	381	$	6,876		$	8,005

See Note 11 to the consolidated financial statements for information on the location and amount of gains and losses attributable to derivatives that were reclassified from accumulated other comprehensive income (“AOCI”) to expense (income), net of tax.

For the years ended December 31, 2013, 2012 and 2011, there was no ineffectiveness related to the Company’s derivatives.

During 2012, the Company entered into forward exchange contracts for Singapore dollars and US dollars in anticipation of the acquisition of substantially all of the assets of LMA. In accordance with applicable accounting guidance, a forecasted transaction is not eligible for hedge accounting if the forecasted transaction involves a business combination. Therefore, gains and losses relating to this arrangement were recognized as incurred. The Company realized a pre-tax loss of $7.6 million upon settlement of the forward exchange contracts. See Note 3 to the consolidated financial statements for additional information on the LMA acquisition.

In 2011, the Company terminated its interest rate swap covering a notional amount of $350 million designated as a hedge against the variability of the cash flows in the interest payments under the Company’s term loan. As of December 31, 2012, all unrealized losses within AOCI associated with this interest rate swap had been reclassified into earnings. See Note 8 to the consolidated financial statements for additional information on the termination of the interest rate swap.

Concentration of Credit Risk

Concentration of credit risk with respect to trade accounts receivable is generally limited due to the Company’s large number of customers and their diversity across many geographic areas. A portion of the Company’s trade accounts receivable outside the United States, however, include sales to government-owned or supported healthcare systems in several countries which are subject to payment delays. Payment is dependent upon the financial stability and creditworthiness of those countries’ economies.

In the ordinary course of business, the Company grants non-interest bearing trade credit to its customers on normal credit terms. In an effort to reduce its credit risk, the Company (i) establishes credit limits for all of its customer relationships, (ii) performs ongoing credit evaluations of its customers’ financial condition, (iii) monitors the payment history and aging of its customers’ receivables, and (iv) monitors open orders against an individual customer’s outstanding receivable balance.

An allowance for doubtful accounts is maintained for accounts receivable based on the Company’s historical collection experience and expected collectability of the accounts receivable, considering the period an account is outstanding, the financial position of the customer and information provided by credit rating services. The adequacy of this allowance is reviewed each reporting period and adjusted as necessary.

In light of the disruptions in global economic markets, the Company instituted enhanced measures, within countries where the Company has collectability concerns, to facilitate customer-by-customer risk assessment when estimating the allowance for doubtful accounts. Such measures included, among others, monthly credit control committee meetings, at which customer credit risks are identified after review of, among other things, accounts that exceed specified credit limits, payment delinquencies and other customer issues. In addition, for some of the Company’s non-government customers, the Company instituted measures designed to reduce its risk exposures, including issuing dunning letters, reducing credit limits, requiring that payments accompany orders and instituting legal action with respect to delinquent accounts. With respect to government customers, the Company evaluates receivables for potential collection risks associated with the availability of government funding and reimbursement practices.

Some of the Company’s customers, particularly in Europe, have extended or delayed payments for products and services already provided. Collectability concerns regarding the Company’s accounts receivable from these customers, for the most part in Greece, Italy, Spain and Portugal resulted in an increase in the allowance for doubtful accounts related to these countries. If the financial condition of these customers or the healthcare systems in these countries deteriorate such that the ability of an increasing number of customers to make payments is uncertain, additional allowances may be required in future periods. The aggregate net current and long-term accounts receivables for Spain, Italy, Greece and Portugal and the percentage of the Company’s total net current and long-term accounts receivables represented by the net current and long-term accounts receivables in those countries at December 31, 2013 and 2012 are as follows:

	December 31, 2013			December 31, 2012
	(Dollars in thousands)
Current and long-term accounts receivable (net of allowances of $7.9 million and $6.3 million in 2013 and 2012, respectively) in Spain, Italy, Greece and Portugal	$	97,852		$	101,009
Percentage of total net current and long-term accounts receivables		31	%		34	%

For the years ended December 31, 2013, 2012 and 2011, net revenues to customers in Spain, Italy, Greece and Portugal were $142.6 million, $132.5 million and $138.4 million, respectively.