DERIVATIVE FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2016

DERIVATIVE FINANCIAL INSTRUMENTS [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

4.DERIVATIVE FINANCIAL INSTRUMENTS

As of March 31, 2016, the Company held mark-to-market forward derivative contracts to hedge foreign denominated intercompany positions with notional amounts of 500 million Japanese yen ($4.4 million) and 5.8 billion Korean won ($5.0 million), with related gains and losses being recorded as part of Other Income (Expense); in addition, the Company held mark-to-market forward contracts designated as foreign currency cash flow hedges with notional amounts totaling 3.9 billion Japanese yen and 12.0 million euros ($34.6 million and $13.7 million, respectively) as of March 31, 2016 and 1.8 billion Japanese yen and 7.0 million euros ($15.0 million and $7.5 million, respectively) as of March 31, 2015 to hedge forecasted foreign-currency-denominated intercompany transactions. The fair value of these hedges were $1.0 million and $(2.0) million as of March 31, 2015 and 2016, respectively.

The contracts held at March 31, 2016 have maturities through March 2017, and accordingly, all unrealized gains and losses on foreign currency cash flow hedges included in accumulated other comprehensive loss will be recognized in current earnings over the next 12 months. The pre-tax net losses/gains on foreign currency cash flow hedges reclassified from accumulated other comprehensive loss to revenue were $0.2 million of pre-tax net gains and $1.3 million of pre-tax net losses for the three-month periods ended March 31, 2016 and 2015, respectively. The corresponding tax effects of these transactions were recorded in provision for income tax expense. As of March 31, 2016 and December 31, 2015, there were $1.3 million of unrealized losses and $0.3 million of unrealized gains, respectively, included in accumulated other comprehensive loss related to foreign currency cash flow hedges. The remaining $66.0 million and $71.6 million as of March 31, 2016 and December 31, 2015, respectively, in accumulated other comprehensive income are related to cumulative translation adjustments.

During the quarter ended March 31, 2015, the Company identified and recorded an adjustment to correct an out-of-period error related to certain tax effects of a prior period net investment hedge, resulting in a $7.8 million reduction to deferred tax assets and accumulated other comprehensive income, which had no impact on net income. The Company has concluded the effect to be immaterial to both the current quarter and prior period financial statements.