Derivative Instruments

9 Months Ended

Sep. 30, 2016

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, 2016, and December 31, 2015, the Company had open forward foreign currency exchange contracts, all with durations of one to three months, to buy or sell foreign currencies with U.S. dollar equivalent amounts of $35,174,819 and $31,194,000, respectively.

The Company is exposed to volatility in short-term interest rates. The interest rate risk is partially mitigated by the periodic use of interest rate swaps on certain debt instruments.  The interest rate swaps are recognized on the balance sheet as either an asset or a liability measured at fair value.  The Company held interest rate swap contracts with notional values of $3,373,060 at September 30, 2016, and $3,724,000 at December 31, 2015. The contracts were designated as cash flow hedges. 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 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, 2016, and December 31, 2015, are disclosed in Note 3. Derivative instrument gains and losses for the three- and nine-month periods ended September 30, 2016 and 2015, were immaterial.  For amounts reclassified out of AOCI into earnings for the three- and nine-month periods ended September 30, 2016 and 2015, see Note 10.