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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | 9 Months Ended
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Sep. 30, 2012
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES |
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES |
NOTE 5 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES The Company maintains a foreign exchange risk management policy designed to establish a framework to protect the value of the Company’s non-functional denominated transactions from adverse changes in exchange rates. Sales of the Company’s products can be denominated in a currency different from the currency in which the related costs to produce the product are denominated. Changes in exchange rates on such inter-country sales or intercompany loans can impact the Company’s results of operations. The Company’s policy is not to engage in speculative foreign currency hedging activities, but to minimize its net foreign currency transaction exposure defined as firm commitments and transactions recorded and denominated in currencies other than the functional currency. The Company may use foreign currency forward exchange contracts, options and cross currency swaps to economically hedge these risks. The Company maintains an interest rate risk management strategy to minimize significant, unanticipated earnings fluctuations that may arise from volatility in interest rates. For derivative instruments designated as hedges, the Company formally documents the nature and relationships between the hedging instruments and the hedged items, as well as the risk management objectives, strategies for undertaking the various hedge transactions, and the method of assessing hedge effectiveness. Additionally, in order to designate any derivative instrument as a hedge of an anticipated transaction, the significant characteristics and expected terms of any anticipated transaction must be specifically identified, and it must be probable that the anticipated transaction will occur. FAIR VALUE HEDGES The Company maintained an interest rate swap to convert a portion of its fixed-rate debt into variable-rate debt until May 31, 2011. Under the interest rate swap contract, the Company exchanged, at specified intervals, the difference between fixed-rate and floating-rate amounts, which was calculated based on an agreed upon notional amount. On May 31, 2011, this interest rate swap contract matured and was not renewed. No gain or loss was recorded in the income statement in 2011 as any hedge ineffectiveness for the period was immaterial. CASH FLOW HEDGES The Company had one foreign currency cash flow hedge until March 15, 2012. A French subsidiary of AptarGroup, AptarGroup Holding SAS, had hedged the risk of variability in Euro equivalent associated with the cash flows of an intercompany loan granted in Brazilian Real. The forward contracts utilized were designated as a hedge of the changes in the cash flows relating to the changes in foreign currency rates relating to the loan and related forecasted interest. On March 15, 2012, the loan and foreign currency forward contracts were repaid. During the nine months ended September 30, 2012, the Company did not recognize any net gain (loss) as any hedge ineffectiveness for the period was immaterial, and the Company did not recognize any net gain (loss) related to the portion of the hedging instrument excluded from the assessment of hedge effectiveness. HEDGE OF NET INVESTMENTS IN FOREIGN OPERATIONS A significant number of the Company’s operations are located outside of the United States. Because of this, movements in exchange rates may have a significant impact on the translation of the financial condition and results of operations of the Company’s foreign entities. A strengthening U.S. dollar relative to foreign currencies has a dilutive translation effect on the Company’s financial condition and results of operations. Conversely, a weakening U.S. dollar has an additive effect. The Company in some cases maintains debt in these subsidiaries to offset the net asset exposure. The Company does not otherwise actively manage this risk using derivative financial instruments. In the event the Company plans on a full or partial liquidation of any of its foreign subsidiaries where the Company’s net investment is likely to be monetized, the Company will consider hedging the currency exposure associated with such a transaction. OTHER As of September 30, 2012, the Company has recorded the fair value of foreign currency forward exchange contracts of $0.4 million in prepaid and other, $0.8 million in miscellaneous other assets, $2.6 million in accounts payable and accrued liabilities, and $0.3 million in deferred and other non-current liabilities in the balance sheet. All forward exchange contracts outstanding as of September 30, 2012 had an aggregate contract amount of $98 million. Fair Value of Derivative Instruments in the Condensed Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011
Derivative Contracts Designated as Hedging Instruments |  | Balance Sheet Location |  | September 30, 2012 |  | December 31, 2011 |
Derivative Liabilities |  |  |  |  |  |  |
Foreign Exchange Contracts |  | Accounts payable and accrued liabilities |  | $ | — |  | $ | 302 |
|  |  |  | $ | — |  | $ | 302 |
Derivative Contracts Not Designated as Hedging Instruments |  |  |  |  |  |  |
Derivative Assets |  |  |  |  |  |  |
Foreign Exchange Contracts |  | Prepaid and other |  | $ | 407 |  | $ | 520 |
Foreign Exchange Contracts |  | Miscellaneous Other Assets |  | 754 |  | — |
|  |  |  | $ | 1,161 |  | $ | 520 |
Derivative Liabilities |  |  |  |  |  |  |
Foreign Exchange Contracts |  | Accounts payable and accrued liabilities |  | $ | 2,593 |  | $ | 8,383 |
Foreign Exchange Contracts |  | Deferred and other non-current liabilities |  | 260 |  | 2,005 |
|  |  |  | $ | 2,853 |  | $ | 10,388 |
The Effect of Derivative Instruments on the Condensed Consolidated Statements of Income for the Quarters Ended September 30, 2012 and September 30, 2011
Derivatives in Cash Flow Hedging Relationships |  |  |  | Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion) |
|  |  |  | 2012 |  | 2011 |
Foreign Exchange Contracts |  |  |  | $ | — |  | $ | (5 | )
|  |  |  | $ | — |  | $ | (5 | )
Derivatives Not Designated as Hedging Instruments |  | Location of Gain or (Loss) Recognized in Income on Derivative |  | Amount of Gain or (Loss) Recognized in Income on Derivative |
|  |  |  | 2012 |  | 2011 |
Foreign Exchange Contracts |  | Other (Expense) Miscellaneous, net |  | $ | (81 | ) | $ | 168 |
|  |  |  | $ | (81 | ) | $ | 168 |
The Effect of Derivative Instruments on the Condensed Consolidated Statements of Income for the Nine Months Ended September 30, 2012 and September 30, 2011
Derivatives in Cash Flow Hedging Relationships |  |  |  | Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion) |
|  |  |  | 2012 |  | 2011 |
Foreign Exchange Contracts |  |  |  | $ | — |  | $ | 6 |
|  |  |  | $ | — |  | $ | 6 |
Derivatives Not Designated as Hedging Instruments |  | Location of Gain or (Loss) Recognized in Income on Derivative |  | Amount of Gain or (Loss) Recognized in Income on Derivative |
|  |  |  | 2012 |  | 2011 |
Foreign Exchange Contracts |  | Other (Expense) Miscellaneous, net |  | $ | (1,316 | ) | $ | (3,360 | )
|  |  |  | $ | (1,316 | ) | $ | (3,360 | )

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- Definition The entire disclosure for the entity's entire derivative instruments and hedging activities. 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