NOTE E- DERIVATIVES

The Company is a party to interest rate swap agreements with an aggregate notional value of $12.3 million and $14.0 million, at March 31, 2017 and December 31, 2016, respectively, to manage interest rate exposure in connection with its variable interest rate borrowings. The hedge periods of these agreements commenced in March 2013 and expire in June 2018 and the notional amounts amortize over these periods. The interest rate swap agreements were designated as cash flow hedges under ASC Topic No. 815. The effective portion of the fair value gain or loss on these agreements is recorded as a component of accumulated other comprehensive income (loss).

The Company has also entered into certain foreign exchange contracts, primarily to offset the earnings impact related to fluctuations in foreign currency exchange rates associated with sales and inventory purchases denominated in foreign currencies. The aggregate gross notional values of foreign exchange contracts at March 31, 2017 and December 31, 2016 were $58.4 million and $38.3 million, respectively. These foreign exchange contracts have not been designated as hedges as required in order to apply hedge accounting. The changes in the fair values of these contracts are recorded in earnings immediately.

The fair values of the Company’s derivative financial instruments included in the condensed consolidated balance sheets are presented as follows (in thousands):


Derivatives designated as hedging instruments	Balance Sheet Location	March 31, 2017		December 31, 2016
Interest rate swaps	Prepaid Expenses	$	16	$	—
	Accrued Expenses		—		4
	Deferred rent & other long-term liabilities		—		3

Derivatives not designated as

hedging instruments

Balance Sheet

Location

March 31, 2017

December 31,
2016

Foreign exchange contracts

Prepaid expenses and other current assets

636

924

The fair values of the derivatives have been obtained from the counterparties to the agreements and were based on Level 2 observable inputs using proprietary models and estimates about relevant future market conditions.

The amounts of the gains and losses related to the Company’s derivative financial instruments designated as hedging instruments are recognized in other comprehensive income (loss) as follows (in thousands):


	Three Months Ended March 31,
Derivatives designated as hedging instruments	2017		2016
Interest rate swaps	$	13	$	(43	)

No amounts recorded in accumulated other comprehensive income (loss) are expected to be reclassified to interest expense in the next twelve months.

The amounts of the gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments are recognized in earnings as follows (in thousands):


		Three Months Ended March 31,
Derivatives not designated as hedging instruments	Location of Gain or (Loss)	2017			2016
Foreign exchange contracts	Selling, general and administrative expense	$	(189	)	$	552