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INVACARE CORPORATION AND SUBSIDIAIRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
FS-43
Fair Values of Financial Instruments
Pursuant to ASC 820, the inputs used to derive the fair value of assets and liabilities are analyzed and assigned a level I, II
or III priority, with level I being the highest and level III being the lowest in the hierarchy. Level I inputs are quoted prices in
active markets for identical assets or liabilities. Level II inputs are quoted prices for similar assets or liabilities in active markets:
quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant
inputs are observable in active markets. Level III inputs are based on valuations derived from valuation techniques in which one
or more significant inputs are unobservable.
The following table provides a summary of the company’s assets and liabilities that are measured on a recurring basis (in
thousands).
Basis for Fair Value Measurements at Reporting Date
Quoted Prices
in Active
Markets
for Identical
Assets /
(Liabilities)
Significant
Other
Observable
Inputs
Significant
Other
Unobservable
Inputs
Total Level I Level II Level III
December 31, 2015:
Forward Exchange Contracts—net . . . . . . . $ 2,129 — $ 2,129 —
December 31, 2014:
Forward Exchange Contracts—net . . . . . . . $(2,006) — $ (2,006) —
Forward Contracts: The company operates internationally, and as a result, is exposed to foreign currency fluctuations.
Specifically, the exposure includes intercompany loans and third party sales or payments. In an attempt to reduce this exposure,
foreign currency forward contracts are utilized and accounted for as hedging instruments. The forward contracts are used to hedge
the following currencies: AUD, CAD, CHF, CNY, DKK, EUR, GBP, MXP, NOK, NZD, SEK and USD. The company does not
use derivative financial instruments for speculative purposes. Fair values for the company’s foreign exchange forward contracts
are based on quoted market prices for contracts with similar maturities.
The gains and losses that result from the majority of the forward contracts are deferred and recognized when the offsetting
gains and losses for the identified transactions are recognized. The company recognized a net gain of $1,112,000 in 2015, a net
gain of $338,000 in 2014 and a net loss of $271,000 in 2013 related to ASC 815 designated derivatives. Gains or losses recognized
as the result of the settlement of forward contracts are recognized in cost of products sold for hedges of inventory transactions,
sales for hedges of forecasted sales or selling, general and administrative expenses for other hedged transactions. The company’s
forward contracts are included in Other Current Assets or Accrued Expenses in the Consolidated Balance Sheets.
The carrying amounts and fair values of the company’s financial instruments at December 31, 2015 and 2014 are as follows
(in thousands):
2015 2014
Carrying
Value Fair Value
Carrying
Value Fair Value
Cash and cash equivalents . . . . . . . . . . . . . . . . . . $ 60,055 $ 60,055 $ 38,931 $ 38,931
Other investments . . . . . . . . . . . . . . . . . . . . . . . . 160 160 249 249
Installment receivables, net of reserves. . . . . . . . 1,793 1,793 1,911 1,911
Long-term debt (including current maturities of
long-term debt) . . . . . . . . . . . . . . . . . . . . . . . . . . (47,120)(47,369)(20,331)(20,248)
Forward contracts in other current assets . . . . . . 4,143 4,143 520 520
Forward contracts in accrued expenses . . . . . . . . (2,014)(2,014)(2,526)(2,526)