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Derivative Financial Instruments And Hedging Activities
 12 Months Ended
Dec. 31, 2011
Derivative Financial Instruments And Hedging Activities [Abstract]  
Derivative Financial Instruments And Hedging Activities
9. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES:

The Company conducts business in various foreign countries and, from time to time, settles transactions in foreign currencies. The Company has established a program that utilizes foreign currency forward contracts to offset the risk associated with the effects of certain foreign currency exposures, typically arising from sales contracts denominated in Canadian currency. Instruments that do not qualify for cash flow hedge accounting treatment are re-measured at fair value on each balance sheet date and resulting gains and losses are recognized in net income. As of December 31, 2011 and 2010, the total notional amount of the derivative contracts not designated as hedges was $1.5 million (CAD$1.5 million) and $1.3 million (CAD$1.3 million), respectively. As of December 31, 2011 and 2010, the total notional amount of the derivative contracts designated as hedges was $8.5 million (CAD$8.6 million) and $15.1 million (CAD$15.0 million), respectively.

For each derivative contract entered into in which the Company seeks to obtain cash flow hedge accounting treatment, the Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking the hedge transaction, the nature of the risk being hedged, how the hedging instrument's effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively, and a description of the method of measuring ineffectiveness. This process includes linking all derivatives to specific firm commitments or forecasted transactions and designating the derivatives as cash flow hedges. The Company also formally assesses, both at the hedge's inception and on an ongoing basis, whether the derivative contracts that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items. The effective portion of these hedged items is reflected in other comprehensive income on the Consolidated Statement of Stockholders' Equity and Comprehensive Income (Loss). If it is determined that a derivative contract is not highly effective, or that it has ceased to be a highly effective hedge, the Company will be required to discontinue hedge accounting with respect to that derivative contract prospectively.

 

All of the Company's Canadian forward contracts have maturities not longer than 12 months as of December 31, 2011, except one contract with a notional value of $0.8 million (CAD$0.8 million) which has a remaining maturity of 13 months.

The balance sheet location and the fair values of derivative instruments are:

 

     December 31,  

Foreign Currency Forward Contracts

    2011      2010  
     (in thousands)  

Assets

      

Derivatives designated as hedging instruments
Prepaid expenses and other

    $ 66       $ —     

Derivatives not designated as hedging instruments
Prepaid expenses and other

    $ 87         —     
  

 

 

     

 

 

  

Total assets

    $ 153       $ —     
  

 

 

     

 

 

  

Liabilities

      

Derivatives designated as hedging instruments
Accrued liabilities

    $ 23       $ 317   

Derivatives not designated as hedging instruments
Accrued liabilities

      85         305   
  

 

 

     

 

 

  

Total liabilities

    $ 108       $ 622   
  

 

 

     

 

 

  

The amounts of the gains and losses related to the Company's derivative contracts designated as hedging instruments for the year ended December 31, 2011 and 2010 are (in thousands):

 

    Pretax Loss
Recognized in  Other
Comprehensive
Income on Effective
Portion of Derivative		     Pretax Loss
Recognized in Income on
Effective Portion of
Derivative as a Result
of Reclassification from
Accumulated Other
Comprehensive Income		     Ineffective Portion  of
Loss on Derivative and
Amount Excluded from
Effectiveness Testing		  

Derivatives in Cash Flow Hedging Relationships

   Amount     Location     Amount     Location     Amount  

2011

          

Foreign currency forward contracts

   $ (172 )      Net sales      $ (501 )      Net sales      $ (69 ) 
 

 

 

      

 

 

      

 

 

  

2010

          

Foreign currency forward contracts

   $ (157 )      Net sales      $ (31 )      Net sales      $ (46 ) 
 

 

 

      

 

 

      

 

 

  

The following table reconciles the beginning and ending balances of the Company's accumulated other comprehensive income (loss) related to gains or losses on derivative contracts, as well as amounts reclassified to earnings for the years ended December 31, 2011 and 2010 (in thousands):

 

     2011     2010  

Beginning balance

    $ (197 )    $ (105 ) 

Net unrealized loss from cash flow hedging instruments arising during the period, net of tax

      (107 )      (121 ) 

Reclassifications into earnings, net of tax

      318        29   
  

 

 

    

 

 

  

Ending balance

    $ 14      $ (197 ) 
  

 

 

    

 

 

  

For the years ended December 31, 2011, 2010 and 2009, gains (losses) of $36,000, ($0.6) million and ($3.3) million, respectively, from derivative contracts not designated as hedging instruments were recognized in net sales. At December 31, 2011, there is $58,000 of unrealized pretax income on outstanding derivatives accumulated in other comprehensive income, substantially all of which is expected to be reclassified to net sales within the next 12 months as a result of underlying hedged transactions also being recorded in net sales.