MTS Systems (MTSC)

	SUMMARY

	BULLS

	BEARS

	TOPICS

	DATA CENTRAL

	STOCK CHART

	SEC FILINGS

	BALANCE

	INCOME

	CASH FLOW

MTSC » Topics » 8. Derivative Instruments and Hedging Activities

This excerpt taken from the MTSC 10-Q filed Feb 2, 2009.

7. Derivative Instruments and Hedging Activities

The Company uses interest rate swaps, forward and option currency exchange contracts to manage risks associated with foreign exchange and interest rate fluctuations. Because the market value of these contracts is derived from current market rates, they are classified as derivative financial instruments. The Company does not use derivatives for speculative or trading purposes. Derivative contracts contain credit risk to the extent that the Company’s bank counterparties may be unable to meet the terms of the agreements. Such risk is minimized by limiting those counterparties to major financial institutions of high credit quality. For derivative instruments executed under master netting arrangements, the Company has the contractual right to offset fair value amounts recognized for the right to reclaim cash collateral with obligations to return cash collateral. The Company has made an accounting policy decision to not offset fair value amounts recognized on these derivative instruments.

Foreign Currency Cash Flow Hedging

Currency exchange contracts utilized to maintain the functional currency value of expected financial transactions denominated in foreign currencies are designated as cash flow hedges. Qualifying gains and losses related to changes in the market value of the contracts are recorded in Accumulated Other Comprehensive Income within Shareholders’ Investment on the Consolidated Balance Sheets until they are recognized in revenue at the time a gain or loss is recognized on the underlying expected transaction. The Company periodically assesses whether the contracts are effective in offsetting the changes in the functional currency value of the expected transactions. When a contract is no longer effective as a hedge, the Company discontinues hedge accounting prospectively. Subsequent changes in the market value of the contract are recognized in revenue on the Consolidated Statement of Income for the current period.

At December 27, 2008 and December 29, 2007, the Company had outstanding cash flow hedge currency exchange contracts with gross notional U.S. dollar equivalent amounts of $46.3 million and $56.4 million, respectively. Upon netting offsetting contracts to sell foreign currencies against contracts to purchase foreign currencies, irrespective of contract maturity dates, the net notional U.S. dollar equivalent amount of contracts outstanding were $22.7 million and $38.5 million at December 27, 2008 and December 29, 2007, respectively. At December 27, 2008 the net market value of the foreign currency exchange contracts was a liability of $1.9 million, consisting of $0.3 million in assets and $2.2 million in liabilities. At December 29, 2007, the net market value of foreign currency exchange contracts was a net liability of $0.4 million, consisting of $0.3 million in assets and $0.7 million in liabilities. The amount recognized in earnings as a result of the ineffectiveness of cash flow hedges was less than $0.1 million in each of the three-month periods ended December 27, 2008 and December 29, 2007. At December 27, 2008 and December 29, 2007, the amount projected to be reclassified from Accumulated Other Comprehensive Income into earnings in the next 12 months was a net loss of $1.0 million and $0.6 million, respectively. The maximum remaining maturity of any forward or optional contract at December 27, 2008 and December 29, 2007 was 1.0 years and 1.3 years, respectively.

Foreign Currency Balance Sheet Hedging

The Company also uses currency exchange contracts to hedge the functional currency value of monetary assets and liabilities denominated in non-functional foreign currencies. The gains and losses related to the changes in the market value of these contracts are included in Other income, net on the Consolidated Statement of Income in the current period.

At December 27, 2008 and December 29, 2007, the Company had outstanding balance sheet hedge currency exchange contracts with gross notional U.S. dollar equivalent amounts of $35.3 million and $45.3 million, respectively. Upon netting offsetting contracts by counterparty banks to sell foreign currencies against contracts to purchase foreign currencies, irrespective of contract maturity dates, the net notional U.S. dollar equivalent amount of contracts outstanding was $12.9 million at December 27, 2008 and $2.3 million at December 29, 2007. At December 27, 2008, the net market value of the balance sheet foreign currency exchange contracts was a net liability of $0.3 million, consisting of $0.1 million in assets and $0.4 million in liabilities. On December 29, 2007, the net market value of the balance sheet forward exchange contracts was a liability of $0.3 million, consisting of $0.3 million in liabilities with a less than $0.1 million in offsetting assets.

Table of Contents

Interest Rate Swaps

The Company also uses floating to fixed interest rate swaps to mitigate its exposure to changes in interest rates related to a portion of its floating rate indebtedness. The Company has designated these interest rate swaps as cash flow hedges. As a result, changes in the fair value of the interest rate swap are recorded in Accumulated Other Comprehensive Income within Shareholders’ Investment on the Consolidated Balance Sheets.

At December 27, 2008, the Company had outstanding interest rate swaps with total notional amounts of $40.0 million, which equals the amount of outstanding credit facility borrowings as of that date. Every month, the Company pays fixed interest on these interest rate swaps in exchange for interest received at monthly U.S. LIBOR. At December 27, 2008, the weighted-average fixed interest rate payable by the Company under the terms of the interest rate swap arrangements was 3.31%. Because there is a 45 basis-point differential between the variable-rate interest paid by the Company on its outstanding credit facility borrowings and the variable-rate interest received on the interest rate swaps, the overall effective interest rate applicable to outstanding credit facility borrowings at December 27, 2008, under the terms of the credit facility borrowings and interest rate swap agreements, was 3.76%. The total market value of the interest rate swaps at December 27, 2008 was a liability of $2.1 million.

This excerpt taken from the MTSC 10-Q filed Aug 4, 2008.

6. Derivative Instruments and Hedging Activities

The Company periodically enters into committed and optional contracts with banks to exchange currencies at a set future date and rate to maintain the functional or reporting currency value of specifically identified foreign currency exposures. Because the market value of these currency exchange contracts is derived from current exchange rates, they are classified as derivative financial instruments. The Company does not use currency exchange contracts for speculative or trading purposes.

Currency exchange contracts utilized to maintain the U.S. dollar value of expected financial transactions denominated in foreign currencies are designated as foreign currency cash flow hedges. Qualifying gains and losses related to changes in the market value of the contracts are recorded in Accumulated Other Comprehensive Income within Shareholders’ Investment on the Consolidated Balance Sheets until they are recognized in earnings at the time income or loss is recognized on the underlying expected transaction. The Company periodically assesses whether the contracts are effective in offsetting the changes in the U.S. dollar value of the expected transactions. When a contract is no longer effective as a hedge, the Company discontinues hedge accounting prospectively. Subsequent changes in the market value of the contract are recognized in Revenue on the Consolidated Statement of Income for the current period.

The Company also uses currency contracts to hedge the functional currency value of monetary assets and liabilities denominated in non-functional currencies. The gains and losses related to the changes in the market value of these contracts are included in Other (Expense) income, net on the Consolidated Statement of Income in the current period.

At June 28, 2008 and June 30, 2007, the Company had outstanding forward and optional currency exchange contracts with gross notional U.S. dollar equivalent amounts of $85.5 million and $108.0 million, respectively. Upon netting offsetting contracts to sell foreign currencies against contracts to purchase foreign currencies, the net notional U.S. dollar equivalent amount of contracts outstanding was $41.4 million and $34.3 million at June 28, 2008 and June 30, 2007, respectively. At June 28, 2008 and June 30, 2007, the market value of the forward and optional currency exchange contracts was a net liability of $0.1 million and net asset of $0.7 million, respectively. The amount recognized in earnings as a result of the ineffectiveness of cash flow hedges was not material for the three- and nine-month periods ended June 28, 2008 and June 30, 2007. At June 28, 2008 and June 30, 2007, the amount projected to be reclassified from Accumulated Other Comprehensive Income into earnings in the next twelve months was a loss of $0.2 million and a gain of $0.2 million, respectively. The maximum remaining maturity of any forward or optional contract at June 28, 2008 and June 30, 2007 was 0.8 years.

On March 12, 2008 the Company entered into a five-year cross currency swap agreement to hedge the functional U.S. dollar value of an inter-company loan to a Japanese affiliate denominated in Japanese yen. The total notional U.S. dollar equivalent amount of the cross currency swap is $4.9 million. Under this agreement, every six months, the Company pays interest at a Japan LIBOR plus an applicable margin in exchange for interest received at a U.S. LIBOR plus an applicable margin. The market value of the cross-currency swap at June 28, 2008, excluding accrued interest, was an asset of $0.2 million. The gain or loss related to the change in market value of the cross currency swap is included in Other (Expense) Income, net on the Consolidated Statement of Income in the current period.

Table of Contents

This excerpt taken from the MTSC 10-Q filed May 5, 2008.

5. Derivative Instruments and Hedging Activities

The Company also uses currency contracts to hedge the functional currency value of monetary assets and liabilities denominated in non-functional currencies. The gains and losses related to the changes in the market value of these contracts are included in Other Income (Expense), net on the Consolidated Statement of Income in the current period.

At March 29, 2008 and March 31, 2007, the Company had outstanding forward and optional currency exchange contracts with gross notional U.S. dollar equivalent amounts of $113.8 million and $115.4 million, respectively. Upon netting offsetting contracts to sell foreign currencies against contracts to purchase foreign currencies, the net notional U.S. dollar equivalent amount of contracts outstanding was $47.7 million and $42.6 million at March 29, 2008 and March 31, 2007, respectively. At March 29, 2008 and March 31, 2007, the market value of the forward and optional currency exchange contracts was a net liability of $2.0 million and $0.1 million, respectively. The amount recognized in earnings as a result of the ineffectiveness of cash flow hedges was not material for the three- and six-month periods ended March 29, 2008 and March 31, 2007. At March 29, 2008 and March 31, 2007, the amount projected to be reclassified from Accumulated Other Comprehensive Income into earnings in the next twelve months was a loss of $1.4 million and $0.1 million, respectively. The maximum remaining maturity of any forward or optional contract at March 29, 2008 and March 31, 2007 was 1.1 years.

Table of Contents

On March 12, 2008 the Company entered into a five-year cross currency swap agreement to hedge the functional U.S. dollar value of an inter-company loan to a Japanese affiliate denominated in Japanese yen. The total notional U.S. dollar equivalent amount of the cross currency swap is $4.9 million. Under this agreement, every six months, the Company pays interest at a Japan LIBOR plus an applicable margin in exchange for interest received at a U.S. LIBOR plus an applicable margin. The market value of the cross-currency swap at March 29, 2008, excluding accrued interest, was a liability of $0.1 million. The gain or loss related to the change in market value of the cross currency swap is included in Other Income (Expense), net on the Consolidated Statement of Income in the current period.

This excerpt taken from the MTSC 10-Q filed Feb 4, 2008.

5. Derivative Instruments and Hedging Activities

Currency exchange contracts utilized to maintain the U.S. dollar value of expected financial transactions denominated in foreign currencies are designated as foreign currency cash flow hedges. Qualifying gains and losses related to changes in the market value of the contracts are recorded in Accumulated Other Comprehensive Income within Shareholders’ Investment on the Consolidated Balance Sheets until they are recognized in earnings at the time income or loss is recognized on the underlying expected transaction. The Company periodically assesses whether the contracts are effective in offsetting the changes in the U.S. dollar value of the expected transactions. When a contract is no longer effective as a hedge, the Company discontinues hedge accounting prospectively. Subsequent changes in the market value of the contract are recognized in Other Income (Expense), net on the Consolidated Statement of Income in the current period.

The Company also uses currency contracts to hedge the functional currency value of monetary assets and liabilities denominated in non-functional currencies. The gains and losses related to the changes in the market value of these contracts are included in Other Income (Expense), net on the Consolidated Statement of Income in the current period.

At December 29, 2007 and December 30, 2006, the Company had outstanding currency exchange contracts with gross notional U.S. dollar equivalent amounts of $101.8 million and $138.4 million, respectively. Netting offsetting contracts to sell foreign currencies against contracts to purchase foreign currencies, irrespective of contract maturity dates, the net notional amount of contracts outstanding in U.S. dollar equivalent amounts were $40.8 million and $33.0 million at December 29, 2007 and December 30, 2006, respectively. At December 29, 2007 and December 30, 2006, the market value of the foreign currency exchange contracts was a net liability of $0.7 million and a net asset of $0.4 million, respectively. The amount recognized in earnings as a result of the ineffectiveness of cash flow hedges was not material for the periods ended December 29, 2007 and December 30, 2006. At December 29, 2007 and December 30, 2006, the amount projected to be reclassified from Accumulated Other Comprehensive Income into earnings in the next 12 months was a loss of $0.6 million and a gain of $0.2 million, respectively. The maximum remaining maturity of any currency contract at December 29, 2007 and December 30, 2006 was 1.3 years and 0.8 years, respectively.

This excerpt taken from the MTSC 10-Q filed Aug 6, 2007.

8. Derivative Instruments and Hedging Activities

The Company periodically enters into contracts with banks to exchange currencies at a set future date and rate to maintain the reporting currency value of specifically identified foreign currency exposures. Because the market value of these currency contracts is derived from current exchange rates, they are classified as derivative financial instruments. The Company does not use currency contracts for speculative or trading purposes.

Currency exchange contracts utilized to maintain the U.S. dollar value of expected financial transactions denominated in foreign currencies are designated as foreign currency cash flow hedges. Gains and losses related to changes in the market value of the contracts are recorded in Accumulated Other Comprehensive Income within Shareholders’ Investment on the Consolidated Balance Sheet until they are recognized in earnings at the time currency gain or loss is recognized on the underlying expected transaction. The Company periodically assesses whether the contracts are effective in offsetting the changes in the U.S. dollar value of the expected transactions. When a contract is no longer effective as a hedge, the Company discontinues hedge accounting prospectively, and changes in the market value of the contract are recognized in Other Income (Expense), net on the Consolidated Statement of Income in the current period.

The Company also uses currency contracts to hedge the functional currency value of monetary assets and liabilities denominated in foreign currencies. The gains and losses related to the changes in the market value of these contracts are included in Other Income (Expense), net on the Consolidated Statement of Income in the current period.

At June 30, 2007 and July 1, 2006, the Company had outstanding currency exchange contracts with gross notional U.S. dollar equivalent amounts of $108.0 million and $105.4 million, respectively. Netting offsetting contracts, net notional contracts outstanding in U.S. dollar equivalent amounts were $34.3 million and $26.0 million, respectively. At June 30, 2007 and July 1, 2006, the market value of the foreign currency exchange contracts was $0.7 million and $0.2 million, respectively. The amount recognized in earnings as a result of the ineffectiveness of cash flow hedges was not material for the periods ended June 30, 2007 and July 1, 2006. At June 30, 2007 and July 1, 2006, the amount projected to be reclassified from Accumulated Other Comprehensive Income into earnings in the next 12 months was $0.2 million and $0.1 million, respectively. The maximum remaining maturity of any currency exchange contract was 0.8 years at June 30, 2007 and 0.9 years at July 1, 2006.

This excerpt taken from the MTSC 10-Q filed May 8, 2007.

8. Derivative Instruments and Hedging Activities

Currency exchange contracts utilized to maintain the U.S. dollar value of expected financial transactions denominated in foreign currencies are designated as foreign currency cash flow hedges. Gains and losses related to changes in the market value of the contracts are recorded in Accumulated Other Comprehensive Income within Shareholders’ Investment on the Consolidated Balance Sheet until they are recognized in earnings at the time income or loss is recognized on the underlying expected transaction. The Company periodically assesses whether the contracts are effective in offsetting the changes in the U.S. dollar value of the expected transactions. When a contract is no longer effective as a hedge, the Company discontinues hedge accounting prospectively.

The Company also uses currency contracts to hedge the functional currency value of monetary assets and liabilities denominated in foreign currencies. The gains and losses related to the changes in the market value of these contracts are included in Other (Expense) Income, net on the Consolidated Statement of Income in the current period.

At March 31, 2007 and April 1, 2006, the Company had outstanding currency exchange contracts with gross notional U.S. dollar equivalent amounts of $115.4 million and $93.5 million, respectively. Netting offsetting contracts, net notional contracts outstanding in U.S. dollar equivalent amounts were $42.6 million and $16.8 million, respectively. At March 31, 2007 and April 1, 2006, the market value of the foreign currency exchange contracts was ($0.1) million and $1.0 million, respectively. The amount recognized in earnings as a result of the ineffectiveness of cash flow hedges was not material for the three- and six-month periods ended March 31, 2007 and April 1, 2006. At March 31, 2007 and April 1, 2006, the amount projected to be reclassified from Accumulated Other Comprehensive (Loss) Income into earnings in the next 12 months was ($0.1) million and $0.5 million, respectively. At March 31, 2007 and April 1, 2006, the maximum remaining maturity of any currency exchange contract was 1.1 years and 2.0 years, respectively.

This excerpt taken from the MTSC 10-Q filed Feb 5, 2007.

8. Derivative Instruments and Hedging Activities

Currency exchange contracts utilized to maintain the U.S. dollar value of expected financial transactions denominated in foreign currencies are designated as foreign currency cash flow hedges. Gains and losses related to changes in the market value of the contracts are recorded in Accumulated Other Comprehensive Income within Shareholders’ Investment on the Consolidated Balance Sheet until they are recognized in earnings at the time income or loss is recognized on the underlying expected transaction. The Company periodically assesses whether the contracts are effective in offsetting the changes in the U.S. dollar value of the expected transactions. When a contract is no longer effective as a hedge, the Company discontinues hedge accounting prospectively, and changes in the market value of the contract are recognized in Other Income, net on the Consolidated Statement of Income in the current period.

The Company also uses currency contracts to hedge the functional currency value of monetary assets and liabilities denominated in foreign currencies. The gains and losses related to the changes in the market value of these contracts are included in Other Income, net on the Consolidated Statement of Income in the current period.

At December 30, 2006 and December 31, 2005, the Company had outstanding currency exchange contracts with gross notional U.S. dollar equivalent amounts of $138.4 million and $122.8 million, respectively. Netting offsetting contracts, net notional contracts outstanding in U.S. dollar equivalent amounts were $33.0 million and $23.0 million, respectively. At December 30, 2006 and December 31, 2005, the market value of the foreign currency exchange contracts was $0.1 million and $1.4 million, respectively. The amount recognized in earnings as a result of the ineffectiveness of cash flow hedges was not material for the periods ended December 30, 2006 and December 31, 2005. At December 30, 2006 and December 31, 2005, the amount projected to be reclassified from Accumulated Other Comprehensive Income into earnings in the next 12 months was $0.2 million and $1.4 million, respectively. The maximum remaining maturity of any currency exchange contract was 0.8 years at December 30, 2006 and 2.0 years at December 31, 2005.

This excerpt taken from the MTSC 10-Q filed Aug 7, 2006.

8. Derivative Instruments and Hedging Activities

The Company periodically enters into forward and optional currency exchange contracts with banks to exchange currencies at set future dates and rates to maintain the functional currency value of specifically identified foreign currency exposures. Because the market value of these currency exchange contracts is derived from current exchange rates, they are classified as derivative financial instruments. The Company does not use currency exchange contracts for speculative or trading purposes.

Currency exchange contracts utilized to maintain the reporting currency value of expected financial transactions are matched to the identified exposures and designated as foreign currency cash flow hedges. Subsequent changes in the market value of the contracts are recorded in Accumulated Other Comprehensive Income within Shareholders’ Investment on the Consolidated Balance Sheet until they are recognized in earnings at the time income or loss is recognized on the underlying forecasted transactions. The Company periodically assesses whether the contracts are effective in offsetting the reporting currency value of the forecasted transactions. When a contract is no longer effective as a hedge, the Company discontinues hedge accounting prospectively and reclassifies the unrealized gain or loss from Accumulated Other Comprehensive Income to Other Income, net on the Consolidated Statement of Income in the current period. Subsequent changes in the market value of the contract are recognized in current period earnings.

The Company also uses currency exchange contracts to hedge the reporting currency value of monetary assets and liabilities denominated in foreign currencies. The related gains and losses are included in Other Income, net on the Consolidated Statement of Income.

At July 1, 2006 and July 2, 2005, the Company had outstanding currency exchange contracts with gross notional U.S. dollar equivalent amounts of $105.4 million and $152.6 million, respectively. Netting offsetting contracts, net notional contracts outstanding in U.S. dollar equivalent amounts were $26.0 million and $30.4 million, respectively. At July 1, 2006 and July 2, 2005, the market value of the foreign currency forward exchange contracts was 0.2 million and $1.4 million, respectively. The amount recognized in earnings as a result of the ineffectiveness of cash flow hedges was not material for the periods ended July 1, 2006 and July 2, 2005. At July 1, 2006 and July 2, 2005, the amount projected to be reclassified from Accumulated Other Comprehensive Income into earnings in the next 12 months was $97,000 and $1.1 million, respectively. The maximum remaining maturity of any derivative was 0.9 years at July 1, 2006 and 1.7 years at July 2, 2005.

This excerpt taken from the MTSC 10-Q filed May 9, 2006.

8. Derivative Instruments and Hedging Activities

The Company periodically enters into forward and optional currency exchange contracts with banks to exchange currencies at a set future date and rate to maintain the functional currency value of specifically identified foreign currency exposures. Because the market value of these currency exchange contracts is derived from current exchange rates, they are classified as derivative financial instruments. The Company does not use currency exchange contracts for speculative or trading purposes.

Currency exchange contracts utilized to maintain the reporting currency value of expected financial transactions are matched to the identified exposures and designated as foreign currency cash flow hedges. Subsequent changes in the market value of the contracts are recorded in Accumulated Other Comprehensive Income within Shareholders’ Investment on the Consolidated Balance Sheet until they are recognized in earnings at the time income or loss is recognized on the underlying forecasted transaction. The Company periodically assesses whether the contracts are effective in offsetting the reporting currency value of the forecasted transactions. When a contract is no longer effective as a hedge, the Company discontinues hedge accounting prospectively and reclassifies the unrealized gain or loss from Accumulated Other Comprehensive Income to Other Income, net on the Consolidated Statement of Income in the current period. Subsequent changes in the market value of the contract are recognized in current period earnings.

At April 1, 2006 and April 2, 2005, the Company had outstanding currency exchange contracts with gross notional U.S. dollar equivalent amounts of $93.5 million and $105.1 million, respectively. Netting offsetting contracts, net notional contracts outstanding in U.S. dollar equivalent amounts were $16.8 million and $40.3 million, respectively. At April 1, 2006 and April 2, 2005, the market value of the foreign currency forward exchange contracts was $1.0 million and ($52) thousand, respectively. The amount recognized in earnings as a result of the ineffectiveness of cash flow hedges was not material for the periods ended April 1, 2006 and April 2, 2005. At April 1, 2006 and April 2, 2005, the amount projected to be reclassified from Accumulated Other Comprehensive Income into earnings in the next 12 months was $0.5 million and not material, respectively. The maximum original maturity of any derivative was 2 years at both April 1, 2006 and April 2, 2005.

This excerpt taken from the MTSC 10-Q filed Feb 7, 2006.

8. Derivative Instruments and Hedging Activities

Currency exchange contracts utilized to maintain the reporting currency value of expected financial transactions are matched to the identified exposures and designated as foreign currency cash flow hedges. Subsequent changes in the market value of the contracts are recorded in Accumulated Other Comprehensive Income within Shareholders’ Investment on the Consolidated Balance Sheet until they are recognized in earnings at the time income or loss is recognized on the underlying forecasted transaction. The Company periodically assesses whether the contracts are effective in offsetting the reporting currency value of the forecasted transactions. When a contract is no longer effective as a hedge, the Company discontinues hedge accounting prospectively and reclassifies the unrealized gain or loss from Accumulated Other Comprehensive Income to Other Income, net on the Consolidated Statement of Income in the current period. Subsequent changes in the market value of the contract are recognized in current period earnings. The Company also uses currency exchange contracts to hedge the reporting currency value of monetary assets and liabilities denominated in foreign currencies. The related gains and losses are included in Other Income, net on the Consolidated Statement of Income.

At December 31, 2005 and January 1, 2005, the Company had outstanding currency exchange contracts with gross notional U.S. dollar equivalent amounts of $122.8 million and $44.4 million, respectively. Netting offsetting contracts, net notional contracts outstanding in U.S. dollar equivalent amounts were $23.0 million and $17.7 million, respectively. At December 31, 2005 and January 1, 2005, the market value of the foreign currency forward exchange contracts was $1.4 million and ($1.3) million, respectively. The amount recognized in earnings as a result of the ineffectiveness of cash flow hedges was not material and ($0.3) million for the periods ended December 31, 2005 and January 1, 2005, respectively. At December 31, 2005 and January 1, 2005, the amount projected to be reclassified from Accumulated Other Comprehensive Income into earnings in the next 12 months was $1.4 million and ($1.0) million, respectively. The maximum original maturity of any derivative was 2.0 years and 1.75 years at December 31, 2005 and January 1, 2005, respectively.

This excerpt taken from the MTSC 10-Q filed Aug 9, 2005.

6. Derivative Instruments and Hedging Activities

The Company periodically enters into forward option contracts with banks to exchange currencies at a set future date and rate to maintain the functional currency value of specifically identified foreign currency exposures. Because the market value of these foreign currency forward exchange contracts is derived from current and expected exchange rates, these are classified as derivative financial instruments. The Company does not use foreign exchange contracts for speculative or trading purposes.

Contracts utilized to maintain the functional currency value of future financial transactions are matched to the identified exposures and designated as foreign currency cash flow hedges. Subsequent changes in the market value of the contracts are recorded in Accumulated Other Comprehensive Income (Loss) within Shareholders’ Investment on the Consolidated Balance Sheet until they are recognized in earnings at the time the underlying forecasted transactions have occurred. The Company periodically assesses whether the contracts are effective in hedging the functional currency value of the expected foreign currency transactions. When a contract is no longer effective as a hedge, the Company discontinues hedge accounting prospectively and reclassifies the unrealized gain or loss from Accumulated Other Comprehensive Income (Loss) to Other (Expense) Income, net on the Consolidated Statement of Income in the current period. Subsequent changes in the market value of the contract are recognized in current period earnings. The Company also uses foreign currency forward exchange contracts to hedge the functional currency value of monetary assets and liabilities denominated in foreign currencies. The related gains and losses are included in Other (Expense) Income, net on the Consolidated Statement of Income.

At July 2, 2005 and June 26, 2004, the Company had outstanding foreign currency forward exchange contracts with gross U.S. dollar notional equivalent amounts of $152.6 million and $25.2 million, respectively. At July 2, 2005 and June 26, 2004, the market value of the foreign currency forward contracts was $1.4 million and not material, respectively. The amount recognized in earnings as a result of the ineffectiveness of cash flow hedges was not material for the three-month periods ended July 2, 2005 and June 26, 2004. At July 2, 2005 and June 26, 2004, the amount projected to be reclassified from Accumulated Other Comprehensive Income into earnings in the next 12 months was approximately $1.1 million and not material, respectively. The maximum original maturity of any derivative was 2.0 and 1.0 years at July 2, 2005 and June 26, 2004, respectively.

This excerpt taken from the MTSC 10-Q filed May 10, 2005.

6. Derivative Instruments and Hedging Activities

The Company periodically enters into contracts with banks to exchange currencies at a set future date and rate to maintain the functional currency value of estimated cash flows from specifically identified foreign currency exposures. Because the market value of these contracts is derived from current and expected exchange rates, these are classified as derivative financial instruments. The contracts are matched to the identified exposures and designated as foreign currency cash flow hedges. Subsequent changes in the market value of the contracts are recorded in Accumulated Other Comprehensive Income (Loss) within Shareholders Investment on the Consolidated Balance Sheet until they are recognized in earnings at the time the forecasted transactions occur. The Company periodically assesses whether the contracts are effective in hedging the change in dollar value of the expected foreign currency exposures. When a contract is no longer effective as a hedge, the Company discontinues hedge accounting prospectively and reclassifies the unrealized gains or losses accumulated in Accumulated Other Comprehensive Income (Loss) to Other Income, net on the Consolidated Statement of Income in the current period. Subsequent changes in the market value of the contract are recognized in current period earnings. The Company also uses foreign currency forward exchange contracts to hedge the functional currency value of current assets and liabilities denominated in foreign currencies. The related gains and losses are included in Other Income, net on the Consolidated Statement of Income. The Company does not use foreign exchange contracts for speculative or trading purposes.

At April 2, 2005 and March 27, 2004, the Company had outstanding foreign currency forward exchange contracts with gross U.S. dollar notional equivalent amounts of $105.1 million and $27.1 million, respectively. At April 2, 2005 and March 27, 2004, the market value of the foreign currency forward contracts was not material. The amount recognized in earnings as a result of the ineffectiveness of cash flow hedges was not material for the periods ended April 2, 2005 and March 27, 2004. At April 2, 2005 and March 27, 2004, the amount projected to be reclassified from Accumulated Other Comprehensive Income into earnings in the next 12 months was not material and approximately ($0.1) million, respectively. The maximum original maturity of any derivative was 1.96 and 1.30 years at April 2, 2005 and March 27, 2004, respectively.

This excerpt taken from the MTSC 10-Q filed Feb 8, 2005.

5. Derivative Instruments and Hedging Activities

At January 1, 2005 and December 27, 2003, the Company had outstanding foreign currency forward exchange contracts with gross U.S. dollar notional equivalent amounts of $44.3 million and $18.8 million, respectively. At January 1, 2005 and December 27, 2003, the market value of the foreign currency forward contracts was ($1.3) million and ($1.1) million, respectively. The amount recognized in earnings as a result of the ineffectiveness of cash flow hedges was ($0.3) million for the three months ended January 1, 2005 and was not material for the three months ended December 27, 2003. Approximately ($1.0) million and ($0.6) million was projected to be reclassified from Accumulated Other Comprehensive Income into earnings in the next 12 months at January 1, 2005 and December 27, 2003, respectively. The

maximum original maturity of any derivative was 1.75 and 1.40 years at January 1, 2005 and December 27, 2003, respectively.

"8. Derivative Instruments and Hedging Activities" elsewhere:

Bruker BioSciences (BRKR)
CEPHEID (CPHD)
Itron (ITRI)
Rudolph Technologies (RTEC)
Cubic (CUB)

Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.

Mobile | Advertise | Licensing & Partnerships | Blogger Tools | Jobs

MTS Systems (MTSC)

MTSC » Topics » 8. Derivative Instruments and Hedging Activities

6. Derivative Instruments and Hedging Activities

6. Derivative Instruments and Hedging Activities

5. Derivative Instruments and Hedging Activities

EXCERPTS ON THIS PAGE:

RELATED TOPICS for MTSC:

"8. Derivative Instruments and Hedging Activities" elsewhere: