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Derivative Financial Instruments
 3 Months Ended
Mar. 31, 2014
Derivative Financial Instruments

Note 6 – Derivative Financial Instruments

We are exposed to market risk from changes in foreign currency exchange rates and short term interest rates. Market risks for changes in interest rates relate primarily to our debt obligations under our Bank of America credit facilities. Foreign currency exchange risks are attributable to sales to foreign customers and purchases from foreign suppliers not denominated in the location’s functional currency, foreign plant operations, intercompany indebtedness and include exposures to the European Euro, Mexican Peso, Canadian Dollar, Hungarian Forint, Ukraine Hryvnia and Korean Won. The Company regularly enters into derivative contracts with the objective of managing its financial and operational exposure arising from this risk by offsetting gains and losses on the underlying exposures with gains and losses on the financial instruments used to hedge them. We do not enter into derivative financial instruments for speculative or trading purposes. Our hedging relationships are formally documented at the inception of the hedge, and hedges must be highly effective in offsetting changes to future cash flows on hedged transactions both at the inception of a hedge and on an ongoing basis to be designated for hedge accounting treatment. We record the ineffective portion of hedging instruments, if any, to other income (expense) in the consolidated condensed statements of income. Though we continuously monitor the hedging program, derivative positions and hedging strategies, foreign currency forward exchange agreements have not always been designated as hedging instruments for accounting purposes.

The Company uses a market approach to value derivative instruments, analyzing observable benchmark rates at commonly quoted intervals for the instrument’s full term.

Note 6 – Derivative Financial Instruments – Continued

Information related to the recurring fair value measurement of derivative instruments in our consolidated condensed balance sheet as of March 31, 2014 is as follows:

 

 

  

 

  

 

  

Asset Derivatives

 

  

Liability Derivatives

 

  

Net Asset/
(Liabilities)

 

 

  

Hedge 
Designation

  

Fair Value
Hierarchy

  

Balance Sheet
Location

 

  

Fair
Value

 

  

Balance Sheet
Location

  

Fair
Value

 

  

 

 

CRS

  

Not a hedge

  

Level 2

  

 

 

 

  

 

 

 

  

Current liabilities

  

$

2,771

  

  

 

 

 

 

  

 

  

 

  

 

 

 

  

 

 

 

  

Non current 
liabilities

  

 

8,306

  

  

 

 

  

Total CRS

  

 

  

 

  

 

 

 

  

 

 

 

  

 

  

$

11,077

  

  

$

11,077

  

Foreign currency derivatives

  

Cash flow hedge

  

Level 2

  

 

Current assets

  

  

$

211

  

  

Non current 
liabilities

  

$

149

  

  

$

62

  

Foreign currency derivatives

  

Not a hedge

  

Level 2

  

 

Current assets

  

  

$

134

  

  

 

  

 

 

 

  

$

134

  

 

  

 

  

 

  

 

Non current 
assets

 

  

 

1,704

  

  

 

  

 

 

  

  

$

1,704

  

Total foreign currency derivatives

  

 

  

 

  

 

 

 

  

$

2,049

  

  

 

  

$

149

  

  

$

1,900

  

Interest rate swap derivatives

  

Cash flow hedge

  

Level 2

  

 

 

 

  

 

 

 

  

Current liabilities

  

$

43

  

  

$

43

  

Information relating to the effect of derivative instruments on our consolidated condensed income statements is as follows:

 

 

  

Location

  

Three Months
Ended
March 31,
2014

 

 

Three Months
Ended
March 31,
2013

 

Foreign currency derivatives

  

Revaluation of derivatives

  

$

262

 

 

 

(974

) 

 

 

Cost of Sales

 

 

53

 

 

 

—

 

 

 

Selling, general and administrative

 

 

48

 

 

 

—

 

 

 

Other Comprehensive Income

 

 

61

 

 

 

—

 

 

  

Foreign currency gain (loss)

  

 

(453

) 

 

 

(291

)

Total foreign currency derivatives

  

 

  

$

(29

) 

 

$

(1,265

) 

CRS

  

Revaluation of derivatives

  

$

(509

)

 

$

1,320

 

Interest Rate Swap

  

Interest Expense

  

$

—

 

 

$

(1

) 

 

  

Other Comprehensive Income

  

 

39

 

 

 

39

 

We did not incur any hedge ineffectiveness during the three months ended March 31, 2014 and 2013.