Derivative Instruments and Hedging Activities (Notes)

9 Months Ended

Sep. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company is exposed to certain risks arising from both its business operations and economic conditions. The primary risks that the Company manages through its derivative instruments are foreign currency exchange rate risk and commodity pricing risk. Accordingly, we have instituted hedging programs that are accounted for in accordance with Topic 815, “Derivatives and Hedging.”

• Our foreign currency hedging program is a cash flow hedge program designed to limit the Company's exposure to variability in expected future cash flows. The Company uses foreign currency forward agreements and currency options, all of which mature within seven months, to manage its exposure to fluctuations in the foreign currency exchange rates. These contracts are not currently designated as hedging instruments in accordance with Topic 815 and, therefore, changes in fair value are recorded through earnings.

• Our commodity price hedging program is designed to mitigate the risks associated with market fluctuations in the price of commodities. The Company uses commodity options, which are classified as economic hedges, to manage this risk. All economic hedges are recorded at fair value through earnings, as the Company does not qualify to use the hedge accounting designation as prescribed by Topic 815.

Although certain of our derivative financial instruments do not qualify or are not accounted for under hedge accounting, we do not hold or issue derivative financial instruments for trading or other speculative purposes. We monitor our derivative positions using techniques including market valuations and sensitivity analyses. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability. These changes in fair value are attributable to the earnings effect of the hedged forecasted transactions in a cash flow hedge.

We consider the classification of the underlying hedged item’s cash flows in determining the classification for the designated derivative instrument’s cash flows. We classify derivative instrument cash flows from hedges of changes in foreign currency as operating activities due to the nature of the hedged item. Cash flows from derivative instruments not designated under hedge accounting, such as our aluminum price options, are classified as investing activities.

Derivatives not designated as hedging instruments

To minimize commodity price exposure, the Company had commodity options with notional amounts of $3,240,000 at September 30, 2015. These derivative instruments mature at various times through January 2016.

To minimize foreign currency exposure, the Company had foreign currency options and forwards with notional amounts of $30,000,000 and $5,709,000, respectively at September 30, 2015. These derivative instruments mature at various times through April 2016.

These commodity options, foreign exchange forwards and forward exchange options are recorded in the consolidated balance sheet at fair value and the resulting gains or losses are recorded to other income in the consolidated statement of operations. The (gains) losses recognized for the three and nine months ended September 30, are as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended   September 30,
Derivatives not designated as hedging instruments	2015			2014			2015			2014
Commodity options	$	37		$	(153	)	$	392		$	119
Foreign exchange forwards	114			(237		)	208			(237		)
Foreign exchange options (1)	(2,643		)	(303		)	(5,460		)	(303		)
Total non-designated derivative realized loss (gain), net	$	(2,492	)	$	(693	)	$	(4,860	)	$	(421	)

(1) Includes a loss of $182,000 from the first quarter of 2015 for the discontinuation of cash flow hedges for which the forecasted transactions are not expected to occur within the originally forecasted time frame.

Summary of Derivatives

Derivatives consist of the following (in thousands):

		September 30, 2015		December 31, 2014
Derivatives not designated as hedging instruments	Classification	Fair Value		Fair Value
Commodity options	Other current assets	$	8	$	591
Commodity options	Other assets	—		162
Foreign exchange options	Other current assets	3,757		1,851
Foreign exchange options	Other assets	—		445
	Total assets	$	3,765	$	3,049
Foreign exchange forwards	Accrued expenses	$	35	$	—