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Derivative Instruments And Hedging Activities
 3 Months Ended
Mar. 31, 2012
Derivative Instruments And Hedging Activities [Abstract]  
Derivative Instruments And Hedging Activities
4. Derivative 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. These derivative contracts are consistent with the Company's strategy for financial risk management. The Company uses cash flow hedge accounting treatment for qualifying foreign currency forward contracts. The Company initially reports any gain or loss on the effective portion of a cash flow hedge as a component of other comprehensive income and subsequently reclassifies any gain or loss to net sales when the hedged revenues are recorded. 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 March 31, 2012 and December 31, 2011, the total notional amount of the derivative contracts not designated as hedges was $1.1 million (CAD$1.1 million) and $1.5 million (CAD$1.5 million), respectively. As of March 31, 2012 and December 31, 2011, the total notional amount of the derivative contracts designated as hedges was $9.6 million (CAD$9.5 million) and $8.5 million (CAD$8.6 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. 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 at March 31, 2012, except one contract with a notional value of $2.1 million (CAD$2.1 million) which has a remaining maturity of 13 months.

The balance sheet location and the fair values of derivative instruments are (in thousands):

 

December 31, December 31,
Foreign Currency Forward Contracts    March 31,
2012		      December 31,
2011		  

Assets

      

Derivatives designated as hedging instruments

      

Prepaid expenses and other

    $ —         $ 66   

Derivatives not designated as hedging instruments

      

Prepaid expenses and other

      4         87   
  

 

 

     

 

 

  

Total assets

    $ 4       $ 153   
  

 

 

     

 

 

  

Liabilities

      

Derivatives designated as hedging instruments

      

Accrued liabilities

    $ 59       $ 23   

Derivatives not designated as hedging instruments

      

Accrued liabilities

      154         85   
  

 

 

     

 

 

  

Total liabilities

    $ 213       $ 108   
  

 

 

     

 

 

  

 

The amounts of the gains and losses related to the Company's derivative contracts designated as hedging instruments for the three months ended March 31, 2012 and March 31, 2011 are (in thousands):

 

     March 31, 2012  
     Pretax Loss
Recognized in
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		     Loss on
Ineffective Portion of
Derivative and
Amount Excluded from
Effectiveness Testing
Recognized in Income		  

Derivatives in Cash Flow Hedging Relationships

      Amount        Location         Amount        Location         Amount   
  

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  

Foreign currency forward contracts

    $ (101 )      Net sales       $ (15 )      Net sales       $ (1 ) 
  

 

 

       

 

 

       

 

 

  

 

     March 31, 2011  
     Pretax Loss
Recognized in
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		     Loss on
Ineffective Portion of
Derivative and
Amount Excluded from
Effectiveness Testing
Recognized in Income		  

Derivatives in Cash Flow Hedging Relationships

      Amount        Location         Amount        Location         Amount   
  

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  

Foreign currency forward contracts

    $ (253 )      Net sales       $ (248 )      Net sales       $ (25 ) 
  

 

 

       

 

 

       

 

 

  

At March 31, 2012, there is $28,000 of unrealized pretax loss on outstanding derivatives accumulated in other comprehensive loss, a majority 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.

For the three months ended March 31, 2012, losses from our derivative contracts not designated as hedging instruments recognized in net sales were $0.1 million. For the three months ended March 31, 2011, losses from our derivative contracts not designated as hedging instruments recognized in net sales were $0.2 million.