8. Derivatives and Other Financial Instruments

6 Months Ended

Jun. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Other Financial Instruments

The Company has exposure to certain risks relating to its ongoing business operations, including financial, market, political and economic risks. The following discussion provides information regarding our exposure to the risks of changing foreign currency exchange rates. The Company has not entered into these contracts for trading or speculative purposes in the past, nor do we currently anticipate entering into such contracts for trading or speculative purposes in the future. The foreign exchange contracts are used to mitigate uncertainty and volatility and to cover underlying exposures.

Foreign Currency Forward Contracts

We manage the risk of changes in foreign currency exchange rates, primarily at our Malaysian operation, through the use of foreign currency contracts. Foreign currency exchange contracts are used to protect the Company from the risk that the eventual cash flows resulting from transactions in foreign currencies, including sales and purchases transacted in a currency other than the functional currency, will be adversely affected by changes in exchange rates. We report the fair value of the derivatives on our consolidated balance sheets and changes in the fair value are recognized in earnings in the period of the change.

At June 30, 2017, we marked these contracts to market, recording $3,000 as a current liability on the consolidated balance sheets.

The following table summarizes the gross fair market value of all derivative instruments, which are not designated as hedging instruments and their location in our consolidated balance sheets at June 30, 2017 and December 31, 2016, in thousands:

Liability Derivatives
Derivative Instrument	Location		June 30, 2017		December 31, 2016
Foreign Currency Exchange Contracts	Accrued Expenses	$	3	$	2

For both the three and six month periods ended June 30, 2017, we recognized a loss on these contracts of $1,000 as compared to a gain on these contracts of $2,000 for both the three and six month periods ended June 30, 2016.

The following table summarizes, in thousands, the impact of the Company’s derivatives on the consolidated financial statements of operations for the three and six month periods ended June 30, 2017 and 2016:

			Amount of Gain (Loss) Recognized in Operations
Derivative	Location of Gain (Loss) on Derivative		Three Months Ended June 30,				Six Months Ended June 30,
Instrument	Instrument		2017		2016		2017		2016
Foreign Currency Exchange Contracts	Gain (loss) on foreign currency exchange rate	$	(1)	$	2	$	(1)	$	2

TOR MINERALS INTERNATIONAL INC 10-Q