Derivative Instruments

9 Months Ended

Sep. 30, 2015

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Instruments

4. DERIVATIVE INSTRUMENTS

The Company is exposed to certain risks relating to its ongoing business operations. The primary risk managed by the use of derivative instruments is foreign currency exchange risk.  The Company holds forward foreign currency exchange contracts that are not designated as any type of accounting hedge as defined by U.S. GAAP.  The Company uses these contracts to manage its exposure to exchange rate fluctuations on certain Company subsidiary cash, accounts receivable, accounts payable and other obligation balances that are denominated in currencies other than the entities’ functional currencies. The forward foreign exchange contracts are recognized on the balance sheet as either an asset or a liability measured at fair value. Gains and losses arising from recording the foreign exchange contracts at fair value are reported in earnings as offsets to the losses and gains reported in earnings arising from the re-measurement of the asset and liability balances into the applicable functional currencies. At September 30, 2015, and December 31, 2014, the Company had open forward foreign currency exchange contracts, all with settlement dates of less than two months, to buy or sell foreign currencies with U.S. dollar equivalent amounts of $45,430,000 and $51,623,000, respectively.

The Company is exposed to volatility in short-term interest rates and mitigates certain portions of that risk by using interest rate swaps.  The interest rate swaps are recognized on the balance sheet as either an asset or a liability measured at fair value.  The Company held an interest rate swap contract with a notional value of $3,992,000 at September 30, 2015, which is designated as a cash flow hedge.  At December 31, 2014, the Company held no significant interest rate swap contracts.  Period-to-period changes in the fair value of interest rate swap contracts are recognized as gains or losses in other comprehensive income, to the extent effective.  As each interest rate swap hedge contract is settled, the corresponding gain or loss is reclassified out of accumulated other comprehensive income (AOCI) into earnings in that settlement period. The latest date through which the Company expects to hedge its exposure to the volatility of short-term interest rates is December 1, 2021.

The fair values of the derivative instruments held by the Company on September 30, 2015, and December 31, 2014, and derivative instrument gains and losses for the three and nine month periods ending September 30, 2015 and 2014, were immaterial.  For amounts reclassified out of AOCI into earnings for the three and nine month periods ended September 30, 2015 and 2014, see Note 10.