Derivative Financial Instruments

6 Months Ended

Jun. 30, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

7. Derivative Financial Instruments

The Company’s Korean subsidiary from time to time has entered into zero cost collar contracts to hedge the risk of changes in the functional-currency-equivalent cash flows attributable to currency rate changes on U.S. dollar denominated revenues.

The Company did not have any derivative contracts in effect as of June 30, 2016.

The zero cost collar contracts qualify as cash flow hedges under Accounting Standards Codification 815, “Derivatives and Hedging,” since at both the inception of the contracts and on an ongoing basis, the hedging relationship was and is expected to be highly effective in achieving offsetting cash flows attributable to the hedged risk during the term of the contracts. The Company is utilizing the “hypothetical derivative” method to measure the effectiveness by comparing the changes in value of the actual derivative versus the change in fair value of the “hypothetical derivative.”

The fair values of the Company’s outstanding zero cost collar contracts recorded as liabilities as of June 30, 2016 and December 31, 2015 are as follows:

Derivatives designated as hedging instruments:		June 30, 2016		December 31, 2015
Liabilities Derivatives:
Zero cost collars	Other current liabilities	$	—	$	40

Offsetting of derivative liabilities as of December 31, 2015 is as follows:

As of December 31, 2015	Gross amounts of recognized liabilities		Gross amounts offset in the balance sheets		Net amounts of liabilities presented in the balance sheets		Gross amounts not offset in the balance sheets				Net amount
							Financial instruments		Cash collateral received/ pledged
Liabilities Derivatives:
Zero cost collars	$	40	$	—	$	40	$	—	$	—	$	40

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of accumulated other comprehensive income (“AOCI”) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative, representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness, are recognized in current earnings.

The following table summarizes the impact of derivative instruments on the consolidated statement of operations for the three months ended June 30, 2016 and 2015:

Derivatives in ASC 815 Cash Flow Hedging Relationships	Amount of Loss Recognized in AOCI on Derivatives (Effective Portion)						Location of Gain Reclassified from AOCI into Statement of Operations (Effective Portion)		Amount of Gain Reclassified from AOCI into Statement of Operations (Effective Portion)				Location of Loss Recognized in Statement of Operations on Derivative (Ineffective Portion)		Amount of Loss Recognized in Statement of Operations on Derivatives (Ineffective Portion)
	Three Months Ended June 30,								Three Months Ended June 30,						Three Months Ended June 30,
	2016			2015					2016		2015				2016			2015
Zero cost collars	$	(24	)	$	(1,417	)		Net sales	$	—	$	—		Other income, net	$	(8	)	$	(306	)
Total	$	(24	)	$	(1,417	)			$	—	$	—			$	(8	)	$	(306	)

The following table summarizes the impact of derivative instruments on the consolidated statement of operations for the six months ended June 30, 2016 and 2015:

Derivatives in ASC 815 Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in AOCI on Derivatives (Effective Portion)					Location of Gain Reclassified from AOCI into Statement of Operations (Effective Portion)		Amount of Gain Reclassified from AOCI into Statement of Operations (Effective Portion)				Location of Gain (Loss) Recognized in Statement of Operations on Derivative (Ineffective Portion)		Amount of Gain (Loss) Recognized in Statement of Operations on Derivatives (Ineffective Portion)
	Six Months Ended June 30,							Six Months Ended June 30,						Six Months Ended June 30,
	2016		2015					2016		2015				2016		2015
Zero cost collars	$	41	$	(1,417	)		Net sales	$	—	$	485		Other income, net	$	34	$	(306	)
Total	$	41	$	(1,417	)			$	—	$	485			$	34	$	(306	)

The Company had set aside $6,000 thousand cash deposits to the counterparty, Nomura Financial Investment (Korea) Co., Ltd. (“NFIK”) for the zero cost collar contracts outstanding as of December 31, 2015, and has received all of such cash deposits back from NFIK as of June 30, 2016 as the contracts have expired.