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DERIVATIVES | 6 Months Ended
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Jun. 30, 2015
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVES | DERIVATIVES The Company uses derivatives to manage exposures to currency exchange rates, interest rates and commodity prices arising in the normal course of business. Derivative contracts to hedge currency and commodity exposures are generally written on a short-term basis but may cover exposures for up to two years while interest rate contracts may cover longer periods consistent with the terms of the underlying debt. The Company does not enter into derivatives for trading or speculative purposes. All derivatives are recognized at fair value on the Company’s Consolidated Balance Sheets. The accounting for gains and losses resulting from changes in fair value depends on the use of the derivative and whether it is designated and qualifies for hedge accounting. The Company formally documents the relationship of the hedge with the hedged item as well as the risk-management strategy for all designated hedges. Both at inception and on an ongoing basis, the hedging instrument is assessed as to its effectiveness, when applicable. If and when a derivative is determined not to be highly effective as a hedge, the underlying hedged transaction is no longer likely to occur, or the derivative is terminated, hedge accounting is discontinued. The cash flows from settled derivative contracts are recognized in operating activities in the Company’s Consolidated Statements of Cash Flows. Hedge ineffectiveness was immaterial in the six months ended June 30, 2015 and 2014. The Company is subject to the credit risk of the counterparties to derivative instruments. Counterparties include a number of major banks and financial institutions. The Company manages individual counterparty exposure by monitoring the credit rating of the counterparty and the size of financial commitments and exposures between the Company and the counterparty. None of the concentrations of risk with any individual counterparty was considered significant at June 30, 2015. The Company does not expect any counterparties to fail to meet their obligations. Cash Flow Hedges Certain foreign currency forward contracts were qualified and designated as cash flow hedges. The dollar equivalent gross notional amount of these short-term contracts was $35,740 at June 30, 2015 and $27,265 at December 31, 2014. The effective portions of the fair value gains or losses on these cash flow hedges are recognized in AOCI and subsequently reclassified to Cost of goods sold or Sales for hedges of purchases and sales, respectively, as the underlying hedged transactions affect earnings. Net Investment Hedges The Company has foreign currency forward contracts that qualify and are designated as net investment hedges. The dollar equivalent gross notional amount of these short-term contracts was $7,468 at June 30, 2015 and $60,734 at December 31, 2014. The effective portions of the fair value gains or losses on these net investment hedges are recognized in AOCI and subsequently reclassified to Selling, general and administrative expenses, as the underlying hedged investment is liquidated. Derivatives Not Designated as Hedging Instruments The Company has certain foreign exchange forward contracts that are not designated as hedges. These derivatives are held as economic hedges of certain balance sheet exposures. The dollar equivalent gross notional amount of these contracts was $265,323 at June 30, 2015 and $280,949 at December 31, 2014. The fair value gains or losses from these contracts are recognized in Selling, general and administrative expenses, offsetting the losses or gains on the exposures being hedged. The Company had short-term silver and copper forward contracts with notional amounts of $3,032 and $960, respectively, at June 30, 2015 and notional amounts of $4,467 and $1,066, respectively, at December 31, 2014. Realized and unrealized gains and losses on these contracts are recognized in Costs of goods sold. Fair values of derivative instruments in the Company’s Consolidated Balance Sheets follow:
|  | June 30, 2015 |  | December 31, 2014
Derivatives by hedge designation |  | Other Current Assets |  | Other Current Liabilities |  | Other Current Assets |  | Other Current Liabilities
Designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts |  | $ | 195 |  |  | $ | 424 |  |  | $ | 461 |  |  | $ | 935 |
Net investment contracts |  | 64 |  |  | — |  |  | 1,091 |  |  | 469 |
Not designated as hedging instruments: |  |  |  |  |  |  |  |
Foreign exchange contracts |  | 612 |  |  | 1,420 |  |  | 482 |  |  | 3,638 |
Commodity contracts |  | 63 |  |  | 24 |  |  | 47 |  |  | 69 |
Total derivatives |  | $ | 934 |  |  | $ | 1,868 |  |  | $ | 2,081 |  |  | $ | 5,111 |
The effects of undesignated derivative instruments on the Company’s Consolidated Statements of Income for the three and six month periods ended June 30, 2015 and 2014 consisted of the following:
|  |  |  | Three Months Ended June 30, |  | Six Months Ended June 30,
Derivatives by hedge designation |  | Classification of gain (loss) |  | 2015 |  | 2014 |  | 2015 |  | 2014
Not designated as hedges: |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts |  | Selling, general & administrative expenses |  | $ | 2,512 |  |  | $ | 1,259 |  |  | $ | (7,092 | ) |  | $ | 1,298 |
Commodity contracts |  | Cost of goods sold |  | 194 |  |  | (505 | ) |  | 50 |  |  | (501 | )
The effects of designated hedges on AOCI and the Company’s Consolidated Statements of Income consisted of the following:
Total gain (loss) recognized in AOCI, net of tax |  | June 30, 2015 |  | December 31, 2014
Foreign exchange contracts |  | $ | (221 | ) |  | $ | (9 | )
Net investment contracts |  | 733 |  |  | — |
The Company expects a loss of $221 related to existing contracts to be reclassified from AOCI, net of tax, to earnings over the next 12 months as the hedged transactions are realized.
|  |  |  | Three Months Ended June 30, |  | Six Months Ended June 30,
Derivative type |  | Gain (loss) reclassified from AOCI to: |  | 2015 |  | 2014 |  | 2015 |  | 2014
Foreign exchange contracts |  | Sales |  | $ | 8 |  |  | $ | (82 | ) |  | $ | (521 | ) |  | $ | 50 |
|  | Cost of goods sold |  | 306 |  |  | 79 |  |  | 613 |  |  | 236 |

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