Invacare 2014 Annual Report Download - page 110

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INVACARE CORPORATION AND SUBSIDIAIRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
FS-40
The effect of derivative instruments on the Statement of Operations and Other Comprehensive Income (OCI) was as follows,
net of tax (in thousands):
Derivatives in ASC 815 cash flow hedge
relationships
Amount of Gain
(Loss) Recognized in
OCI on Derivatives
(Effective Portion)
Amount of Gain (Loss)
Reclassified from
Accumulated OCI into
Income (Effective
Portion)
Amount of Loss
Recognized in
Income on
Derivatives
(Ineffective Portion
and Amount
Excluded from
Effectiveness Testing)
Year ended December 31, 2014
Foreign currency forward exchange contracts . $ 562 $ 416 $ (11)
Interest rate swap contracts. . . . . . . . . . . . . . . . —(12) —
$ 562 $ 404 $ (11)
Year ended December 31, 2013
Foreign currency forward exchange contracts . $(492) $ (261) $ (76)
Interest rate swap contracts. . . . . . . . . . . . . . . . (33)(337) —
$(525) $ (598) $ (76)
Derivatives not designated as hedging
instruments under ASC 815
Amount of Gain
(Loss)
Recognized in
Income on
Derivatives
Year ended December 31, 2014
Foreign currency forward contracts . . . . . . . . . $(1,458)
Year ended December 31, 2013
Foreign currency forward contracts . . . . . . . . . $ 370
The gains or losses recognized as the result of the settlement of cash flow hedge foreign currency forward contracts are
recognized in net sales for hedges of inventory sales or cost of product sold for hedges of inventory purchases. In 2014, net sales
were decreased by $657,000 and cost of product sold was decreased by $995,000 for a net realized gain of $338,000. In 2013, net
sales were increased by $432,000 and cost of product sold was increased by $703,000 for a net realized loss of $271,000 compared
to a net gain of $3,763,000 in 2012.
The Company recognized incremental expense of $12,000, $337,000 and $600,000 in 2014, 2013 and 2012, respectively,
related to interest rate swap agreements which are reflected in interest expense on the consolidated statement of comprehensive
income (loss).
A loss of $1,458,000 in 2014 and gains of $370,000 and $1,159,000, respectively, were recognized in selling, general and
administrative (SG&A) expenses on ineffective foreign currency forward contracts as well as foreign currency forward contracts
not designated as hedging instruments that are entered into to offset gains/losses on intercompany trade receivables or payables.
The gains/losses on the non-designated hedging instruments were substantially offset by gains/losses also recorded in SG&A
expenses on intercompany trade receivables or payables.
The Company has entered into foreign currency forward exchange contracts and, at times, interest rate swap contracts (the
“agreements”) with various bank counterparties, each of which are subject to provisions which are similar to a master netting
agreement. The agreements provide for a net settlement payment in a single currency upon a default by the Company. Furthermore,
the agreements provide the counterparty with a right of set off in the event of a default that would enable the counterparty to offset
any net payment due by the counterparty to the Company under the applicable agreement by any amount due by the Company to
the counterparty under any other agreement. For example, the terms of the agreement would permit a counterparty to a derivative
contract that is also a lender under the New Credit Agreement to reduce any derivative settlement amounts owed to the Company
under the derivative contract by any amounts owed to the counterparty by the Company under the New Credit Agreement. In
addition, the agreements contain cross-default provisions that could trigger a default by the Company under the agreement in the