Quarterly report pursuant to Section 13 or 15(d)

Derivative Financial Instruments

 v2.3.0.11
Derivative Financial Instruments
6 Months Ended
Jun. 30, 2011
Derivative Financial Instruments  
Derivative Financial Instruments

NOTE 8.  DERIVATIVE FINANCIAL INSTRUMENTS

 

The Company's primary exchange rate risk management objective is to mitigate the uncertainty of anticipated cash flows attributable to changes in exchange rates. The Company primarily focuses on mitigating changes in cash flows resulting from sales denominated in currencies other than the U.S. dollar.   The Company manages this risk primarily by using currency forward and option contracts. If the anticipated transactions are deemed probable, the resulting relationships are formally designated as cash flow hedges.

 

The Company held the following contracts designated as hedged instruments as of June 30, 2011 and December 31, 2010:

 

 

 

June 30, 2011

 

 

Notional

 

Latest

 

 

Amount

 

Maturity

 

 

 

 

 

Foreign exchange contracts - Euros

 

 

5,082

 

December-11

Foreign exchange contracts - Canadian Dollars

 

 

4,545

 

February-12

Foreign exchange contracts - Swiss Francs

 

 

9,085

 

February-12

 

 

 

 

 

 

 

 

December 31, 2010

 

 

Notional

 

Latest

 

 

Amount

 

Maturity

 

 

 

 

 

 

Foreign exchange contracts - Norwegian Kroners

 

 

465

 

January-11

Foreign exchange contracts - British Pounds

 

 

415

 

May-11

Foreign exchange contracts - Canadian Dollars

 

 

3,965

 

June-11

Foreign exchange contracts - Euros

 

 

10,072

 

December-11

Foreign exchange contracts - Swiss Francs

 

 

15,835

 

February-12

 

The Company accounts for these contracts as cash flow hedges and tests effectiveness by determining whether changes in the cash flow of the derivative offset, within a range, changes in the cash flow of the hedged item.  For contracts that qualify as effective hedge instruments, the effective portion of gains and losses resulting from changes in fair value of the instruments are included in accumulated other comprehensive income and reclassified to sales in the period the underlying hedge item is recognized in earnings.  $(65) and $0 were reclassified to sales during the three months ended June 30, 2011 and 2010, respectively, and $(275) and $0 were reclassified to sales during the six months ended June 30, 2011 and 2010, respectively.

 

As of December 31, 2010, the Company reported an accumulated derivative instrument loss of $(237).  During the six months ended June 30, 2011, the Company reported an adjustment to accumulated other comprehensive income of $(435), as a result of the change in fair value of these contracts, resulting in an accumulated derivative instrument loss of $(672) reported as of June 30, 2011.

 

The following table presents the balance sheet classification and fair value of derivative instruments as of June 30, 2011 and December 31, 2010:

 

 

 

Classification

 

June 30, 2011

 

 

December 31, 2010

 

 

 

 

 

 

 

 

 

 

Derivative instruments in asset positions:

 

 

 

 

 

 

 

 

Forward exchange contracts

 

Prepaid and other current assets

 

$

625

 

 

$

1,346

 

 

 

 

 

 

 

 

 

 

 

 

Derivative instruments in liability positions:

 

 

 

 

 

 

 

 

 

 

Forward exchange contracts

 

Accounts payable and accrued liabilities

 

$

1,575

 

 

$

1,387