Derivative Financial Instruments

In the normal course of business, including the purchasing of materials and selling of products, the Company is exposed to certain risks related to fluctuations in foreign currency exchange rates. The Company uses foreign currency forward contracts to manage risks from these market fluctuations. The Company currently hedges its risk relative to fluctuations in the Canadian dollar and Japanese yen for forecasted cash outflows denominated in these currencies. The Company had foreign currency forward contracts denominated in these currencies outstanding with notional amounts totaling $17.4 million at March 31, 2016 and $10.3 million at December 31, 2015. As of March 31, 2016, all of the Company’s outstanding instruments mature within the next 9 months.

The Company’s derivative instruments discussed above are designated as cash flow hedges and the fair value of these derivative instruments was $0.6 million at March 31, 2016 and $0.1 million at December 31, 2015 which is included in prepaid and other current assets in the Company's Condensed Consolidated Balance Sheets.

The following table provides the effect of the Company’s designated cash flow hedges on the Company’s Condensed Consolidated Financial Statements for the three months ended March 31, 2016 and 2015:



Type of instrument:	Gain (Loss) Recognized in OCI on Derivative (Effective Portion)			Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
	(in millions)
Three Months Ended March 31, 2016
Foreign exchange contract	$	0.5		$	(0.1	)
Three Months Ended March 31, 2015
Foreign exchange contract	$	(0.3	)	$	(1.4	)

All gains (losses) that are reclassified from accumulated other comprehensive income (loss) into income (effective portion) are classified in (gain) loss on currency translation or cost of sales within the Company's Condensed Consolidated Statements of Operations. The gain (loss) recognized related to the ineffective portion of the derivative instruments was immaterial for all periods presented. During the three months ended March 31, 2016 and 2015, the Company recorded a net loss of $0.1 million and $1.4 million, respectively, related to the settlement of forward contracts which were designated as cash flow hedges.

The Company estimates fair value of its financial instruments utilizing an established three-level hierarchy. The hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date as follows:


•	Level 1–Valuation is based upon unadjusted quoted prices for identical assets or liabilities in active markets.


•	Level 2–Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial statements.


•	Level 3–Valuation is based upon other unobservable inputs that are significant to the fair value measurements.

The classification of fair value measurements within the established three-level hierarchy is based upon the lowest level of input that is significant to that measurement. The fair values of the Company’s derivatives instruments were measured using valuations based upon quoted prices for similar assets and liabilities in active markets (Level 2) and are valued by reference to similar financial instruments, adjusted for terms specific to the contracts. There were no transfers between the three levels of the fair value hierarchy during any period presented. The derivative assets and liabilities measured at fair value on a recurring basis as of March 31, 2016 and December 31, 2015 were as follows:



	Total		Level 1		Level 2		Level 3
	(in millions)
March 31, 2016
Foreign currency forward contracts (asset position)	$	0.6	$	—	$	0.6	$	—
December 31, 2015
Foreign currency forward contracts (asset position)	$	0.1	$	—	$	0.1	$	—

The Company also enters into derivative instruments (forwards) to economically hedge the impact of fluctuations in the Indian rupee. During the three months ended March 31, 2015, the Company recognized a gain of $0.3 million related to the changes in fair value of these derivative instruments not designated as hedges. These gains and losses are recognized immediately within the Company's Condensed Consolidated Statements of Operations and are classified within (gain) loss on currency translation. The fair value of these derivative instruments not designated as hedges at March 31, 2016 was de minimis.