Note 4 - Derivative Instruments and Hedging Activities

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

4. Derivative Instruments and Hedging Activities

Commodities

The

Company is exposed to significant price fluctuations in commodities it uses as raw materials, and periodically utilizes commodity derivatives to mitigate the impact of these potential price fluctuations on its financial results and its economic well-being. These derivatives typically have maturities of less than

eighteen

months. At both

December

31,

2016

and

2015,

the Company had

one

commodity contract outstanding, covering the purchases of copper.

Because these contracts do not qualify for hedge accounting,

the related gains and losses are recorded in cost of goods sold in the Company’s consolidated statements of comprehensive income. Net gains (losses) recognized were

$739,

$(1,909)

and

$(629)

for the years ended

December

31,

2016,

2015,

and

2014,

respectively.

Foreign Currencies

The Company is exposed to foreign currency exchange risk as a result of transactions

denominated in currencies other than the U.S. Dollar. The Company periodically utilizes foreign currency forward purchase and sales contracts to manage the volatility associated with certain foreign currency purchases and sales in the normal course of business. Contracts typically have maturities of

twelve

months or less. As of

December

31,

2016

and

2015,

the Company had

thirty

-

eight

and

six

foreign currency contracts outstanding, respectively.

Because these contracts do not qualify for hedge accounting,

the related gains and losses are recorded in cost of goods sold in the Company’s consolidated statements of comprehensive income. Net losses recognized for the years ended

December

31,

2016,

2015

and

2014

were

$385,

$624

and

$149,

respectively.

Interest Rate Swaps

I

n

October

2013,

the Company entered into

two

interest rate swap agreements, and in

May

2014,

the Company entered into an additional interest rate swap agreement. The Company formally documented all relationships between interest rate hedging instruments and the related hedged items, as well as its risk-management objectives and strategies for undertaking various hedge transactions. These interest rate swap agreements qualify as cash flow hedges, and accordingly, the effective portions of the gains or losses are reported as a component of accumulated other comprehensive loss (AOCL). The cash flows of the swaps are recognized as adjustments to interest expense each period. The ineffective portions of the derivatives’ changes in fair value, if any, are immediately recognized in earnings.

Fair Value

The following table presents the fair value of the Company

’s derivatives:

	December 31 , 201 6			December 31, 201 5
Commodity contracts	$	623		$	(400	)
Foreign currency contracts		(150	)		(171	)
Interest rate swaps		(1,739	)		(2,618	)

The fair value of the commodity

contract is included in other assets, the fair value of the foreign currency contracts are included in other accrued liabilities, and the fair value of the interest rate swaps are included in other long-term liabilities in the consolidated balance sheet as of

December

31,

2016.

The fair value of the commodity and foreign currency contracts are included in other accrued liabilities, and the fair value of the interest rate swaps are included in other long-term liabilities in the consolidated balance sheet as of

December

31,

2015.

Excluding the impact of credit risk, the fair value of the derivative contracts as of

December

31,

2016

and

2015

is a liability of

$1,295

and

$3,248,

respectively, which represents the amount the Company would need to pay to exit the agreements on those dates.

The amount of

gains (losses) recognized in AOCL in the consolidated balance sheets on the effective portion of interest rate swaps designated as hedging instruments for the years ended

December

31,

2016,

2015

and

2014

were

$535,

$(965)

and

$(1,420),

respectively. The amount of gains (losses) recognized in cost of goods sold in the consolidated statements of comprehensive income for commodity and foreign currency contracts not designated as hedging instruments for the years ended

December

31,

2016,

2015

and

2014

were

$354,

$(2,533)

and

$(778),

respectively.