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Financial Instruments and Fair Value Measurements | 9 Months Ended
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Sep. 30, 2015
Financial Instruments and Fair Value Measurements [Abstract] |
Financial Instruments and Fair Value Measurements | (6) Financial Instruments and Fair Value Measurements Financial Instruments A financial instrument is cash or a contract that imposes an obligation to deliver, or conveys a right to receive cash or another financial instrument. The carrying values of cash and cash equivalents, accounts receivable and accounts payable are considered to be representative of fair value because of the short maturity of these instruments. Derivative Instruments and Hedging Activities On September 30, 2015, the Company had open foreign currency forward contracts which are used solely for hedging and not for speculative purposes. Management believes that its use of these instruments to reduce risk is in the Company's best interest. The counterparties to these financial instruments are financial institutions with investment grade credit ratings. Foreign Currency Exchange Rate Risk The Company conducts business internationally and therefore is exposed to foreign currency exchange rate risk. The Company uses derivative financial instruments as cash flow and fair value hedges to manage its exposure to fluctuations in foreign currency exchange rates by reducing the effect of such fluctuations on foreign currency denominated intercompany transactions, inventory purchases and other foreign currency exposures. The currencies hedged by the Company during 2015 and 2014 include the U.S. dollar, euro and Mexican peso. These forward contracts were executed to hedge forecasted transactions and were accounted for as cash flow hedges. As such, the effective portion of the unrealized gain or loss was deferred and reported in the Company’s condensed consolidated balance sheets as a component of accumulated other comprehensive loss. The cash flow hedges were highly effective. The effectiveness of the transactions has been and will be measured on an ongoing basis using regression analysis and forecasted future purchases of the U.S. dollar and Mexican peso. In certain instances, the foreign currency forward contracts do not qualify for hedge accounting or are not designated as hedges, and therefore are marked-to-market with gains and losses recognized in the Company's condensed consolidated statement of operations as a component of other (income) expense, net. The Company's foreign currency forward contracts offset a portion of the gains and losses on the underlying foreign currency denominated transactions as follows: Euro-denominated Foreign Currency Forward Contract As of September 30, 2015 and December 31, 2014, the Company held a foreign currency forward contract with underlying notional amounts of $1,694 and $3,523, respectively, to reduce the exposure related to the Company's euro-denominated intercompany loans. This contract expires in December 2015. The euro-denominated foreign currency forward contract was not designated as a hedging instrument. The Company recognized a loss of $9 and a gain of $1,064 for the three months ended September 30, 2015 and 2014, respectively, in the condensed consolidated statements of operations as a component of other (income) expense, net related to the euro-denominated contracts. The Company recognized a gain of $307 and $1,089, respectively, related to this contract for the nine months ended September 30, 2015 and 2014. U.S. dollar-denominated Foreign Currency Forward Contracts – Cash Flow Hedge s The Company entered into on behalf of one of its European Electronics subsidiaries whose functional currency is the Swedish krona, U.S. dollar-denominated currency contracts with a notional amount at September 30, 2015 of $2,940 which expire ratably on a monthly basis from October 2015 through December 2015, compared to a notional amount of $11,718 at December 31, 2014. The Company entered into on behalf of one of its European Electronics subsidiaries whose functional currency is the euro, U.S. dollar-denominated currency contracts with a notional amount at September 30, 2015 of $1,071 which expire ratably on a monthly basis from October 2015 through December 2015, compared to a notional amount of $4,266 at December 31, 201 4. On October 15, 2015 the Company entered into on behalf of one of its European Electronics subsidiaries whose functional currency is the Swedish krona, U.S. dollar-denominated currency contracts with a notional amount of $10,007 which expire ratably on a monthly basis from January 2016 through December 2016. On the same date the Company also entered into on behalf of one of its European Electronics subsidiaries whose functional currency is the euro, U.S. dollar-denominated currency contracts with a notional amount of $2,421 which expire ratably on a monthly basis from January 2016 through December 2016. Mexican peso-denominated Foreign Currency Forward Contracts – Cash Flow Hedge The Company holds Mexican peso-denominated foreign currency forward contracts with notional amounts at September 30, 2015 of $9,674 which expire ratably on a monthly basis from October 2015 through December 2016, compared to a notional amount of $10,282 at December 31, 2014. The Company evaluated the effectiveness of the Mexican peso-denominated foreign currency forward contracts held as of June 30, 2014. As a result of the sale of the Wiring business, the Company forecasted that it would purchase Mexican pesos to fulfill only two of the five contracts for the period August 2014 through December 2014. As the purchase of Mexican pesos related to three of the five contracts was not probable, these three contracts attributed to the Wiring business were de-designated at June 30, 2014, and the associated unrecognized $320 gain at that date was reclassified from accumulated other comprehensive loss and recorded in discontinued operations in the Company’s condensed consolidated statements of operations for the nine months ended September 30, 2014.
Commodity Price Risk - Cash Flow Hedge To mitigate the risk of future price volatility and, consequently, fluctuations in gross margins, the Company sometimes enters into fixed price commodity contracts with financial institution s to fix the cost of a portion of the Company’s copper purchases. C opper is a raw material used in a number of the Company’s products. The Company did not have any fixed price commodity contracts at September 30, 2015 compared to an aggregate notional amount of 317 pounds at December 31, 2014. The unrealized gain or loss for the effective portion of the hedges were deferred and reported in the Company’s condensed consolidated balance sheets as a component of accumulated other comprehensive loss while the ineffective portion, if any, was reported in the condensed consolidated statements of operations. The effectiveness of the transactions is measured on an ongoing basis using regression analysis and forecasted future copper purchases. The Company evaluated the effectiveness of the copper fixed price commodity contracts as of June 30, 2014. As a result of the sale of the Wiring business, the Company forecasted that it would not purchase the quantities of copper to fulfill the two contracts for the period August 2014 through March 2015. As the purchase of copper quantities related to these contracts was not probable, the contracts primarily associated with the Wiring segment not expected to be fulfilled were de-designated at June 30, 2014, and the associated unrecognized $77 gain at that date was reclassified from accumulated other comprehensive loss and recorded in discontinued operations in the Company’s condensed consolidated statements of operations for the nine months ended September 30, 2014. Interest Rate Risk - Fair Value Hedge The Company had a fixed-to-floating interest rate swap agreement (the “Swap”) with a notional amount of $45,000 to hedge its exposure to fair value fluctuations on a portion of its senior notes. The Swap was designated as a fair value hedge of the fixed interest rate obligation under the Company's $175,000 9.5% senior notes due October 15, 2017. Under the Swap, the Company paid a variable interest rate equal to the six-month London Interbank Offered Rate (“LIBOR”) plus 7.2% and it received a fixed interest rate of 9.5%. The difference between amounts received and paid under the Swap was recognized as a component of interest expense, net on the condensed consolidated statements of operations. In connection with the Company’s notice of redemption issued on September 15, 2014 to redeem all remaining outstanding senior notes, the interest rate fair value hedge was de-designated on that date. On October 23, 2014, the Company terminated the interest rate swap resulting in a gain of $371 recognized in the fourth quarter of 2014. The Swap reduced interest expense by $194 and $625 for the three and nine months ended September 30, 2014, respectively. The notional amounts and fair values of derivative instruments in the condensed consolidated balance sheets were as follows:
|  |  |  | Prepaid expenses |  |  |
|  | Notional |  | and other current assets / |  | Accrued expenses and
| amounts (A) |  | other long-term assets |  | other current liabilities
| September 30, | December 31, |  | September 30, | December 31, |  | September 30, | December 31,
| 2015 | 2014 |  | 2015 | 2014 |  | 2015 | 2014
Derivatives designated as hedging instruments |  |  |  |  |  |  |
Cash Flow Hedges: |  |  |  |  |  |  |  |
Forward currency contracts | $ 13,685 | $ 26,266 |  | $ 400 | $ 479 |  | $ 428 | $ 478
Derivatives not designated as hedging instruments |  |  |  |  |  |
Forward currency contracts | $ 1,694 | $ 3,523 |  | - | - |  | $ 8 | $ 13
Fixed price commodity contracts | - | 317 |  | - | - |  | - | $ 69
(A) | Notional amounts represent the gross contract / notional amount of the derivatives outstanding. The fixed price commodity contract notional amounts are in pounds.
Amounts recorded for the cash flow hedges in other comprehensive loss and in net income for the three months ended September 30 are as follows:
|  | Loss recorded in other comprehensive loss |  | L oss reclassified from other comprehensive loss into net income |
|  | 2015 |  | 2014 |  | 2015 |  | 2014 |
Derivatives designated as cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |  |
Forward currency contracts |  | $ | (578) |  | $ | (457) |  | $ | (342) |  | $ | (290) |
Fixed price commodity contracts |  |  | - |  |  | (20) |  |  | - |  |  | (43) |
Total derivatives designated as cash flow hedges |  | $ | (578) |  | $ | (477) |  | $ | (342) |  | $ | (333) |
Amounts recorded for the cash flow hedges in other comprehensive loss and in net income (loss) for the nine months ended September 30 are as follows:
|  | Gain (loss) recorded in other comprehensive loss |  | Loss reclassified from other comprehensive loss into net income (loss) |
|  | 2015 |  | 2014 |  | 2015 |  | 2014 |
Derivatives designated as cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |  |
Forward currency contracts |  | $ | (681) |  | $ | 77 |  | $ | (652) |  | $ | (48) |
Fixed price commodity contracts |  |  | - |  |  | (338) |  |  | - |  |  | (164) |
Total derivatives designated as cash flow hedges |  | $ | (681) |  | $ | (261) |  | $ | (652) |  | $ | (212) |
Gains and losses reclassified from other comprehensive loss into net income (loss) were recognized in cost of goods sold in the Company's condensed consolidated statements of operations. The net deferred loss of $28 on the cash flow hedge derivatives will be reclassified from other comprehensive loss to the condensed consolidated statements of operations through December 2016. The Company has measured the ineffectiveness of the forward currency and commodity contracts and any amounts recognized in the condensed consolidated financial statements were immaterial for the three and nine months ended September 30, 2015 and 2014. Fair Value Measurements The following table presents our assets and liabilities that are measured at fair value on a recurring basis and are categorized using the three levels of the fair value hierarchy based on the reliability of the inputs used.
|  | September 30, |  | December 31, |
|  | 2015 |  | 2014 |
|  | Fair values estimated using |  |  |  |
|  |  |  |  | Level 1 |  | Level 2 |  | Level 3 |  |  |  |
|  | Fair value |  | inputs (A) |  | inputs (B) |  | inputs (C) |  | Fair value |
Financial assets carried at fair value: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swap contract |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | - |
Forward currency contracts |  | $ | 400 |  | $ | - |  | $ | 400 |  | $ | - |  | $ | 479 |
Total financial assets carried at fair value |  | $ | 400 |  | $ | - |  | $ | 400 |  | $ | - |  | $ | 479 |
Financial liabilities carried at fair value: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Forward currency contracts |  | $ | 436 |  | $ | - |  | $ | 436 |  | $ | - |  | $ | 491 |
Fixed price commodity contracts |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 69 |
Total financial liabilities carried at fair value |  | $ | 436 |  | $ | - |  | $ | 436 |  | $ | - |  | $ | 560 |
(A) | Fair values estimated using Level 1 inputs, which consist of quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. The Company did not have any recurring fair value estimates using Level 1 inputs at September 30, 2015 or December 31, 2014.
(B) | Fair values estimated using Level 2 inputs, other than quoted prices, that are observable for the asset or liability, either directly or indirectly and include among other things, quoted prices for similar assets or liabilities in markets that are active or inactive as well as inputs other than quoted prices that are observable. For forward currency and fixed price commodity contracts, inputs include foreign currency exchange rates and commodity indexes.
(C) | Fair values estimated using Level 3 inputs consist of significant unobservable inputs. The Company did not have any recurring fair value estimates using Level 3 inputs at September 30, 2015 or December 31, 2014.
The Company recorded a non-recurring fair value adjustment of $23,498 related to PST goodwill during the nine months ended September 30, 2014. The Company utilized Level 3 inputs to estimate the fair value adjustment for nonfinancial assets. For additional information, see the discussion of Goodwill in Note 4. No non-recurring fair value adjustments were required for nonfinancial assets for the nine months ended September 30, 2015.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=36462937&loc=d3e19207-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13537-108611 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13504-108611 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13433-108611 + Details
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