7 .	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. The Company utilizes cash flow hedge accounting treatment for qualifying foreign currency forward contracts. Instruments that do

not

qualify for cash flow hedge accounting treatment are remeasured at fair value on each balance sheet date and resulting gains and losses are recognized in earnings.

For each foreign currency forward 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 foreign currency forward contracts to specific firm commitments or forecasted transactions and designating the foreign currency forward contracts as cash flow hedges. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the foreign currency forward 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 Unrealized gain (loss) on cash flow hedges on the Condensed Consolidated Statements of Comprehensive Income (Loss). If it is determined that a foreign currency forward contract is

not

highly effective, or that it has ceased to be a highly effective hedge, the Company is required to discontinue hedge accounting with respect to that foreign currency forward contract prospectively.

As of

September

30,

2018

and

December

31,

2017,

the total notional amount of the foreign currency forward contracts designated as cash flow hedges was

$2.0

million (

CAD$2.6

million) and

$2.1

million (

CAD$2.7

million), respectively. Foreign currency forward contract assets are included within Prepaid expenses and other and foreign currency forward contract liabilities are included within Accrued liabilities in the Condensed Consolidated Balance Sheets. All of the Company’s foreign currency forward contracts are subject to an enforceable master netting arrangement. The Company presents the assets and liabilities associated with its foreign currency forward contracts at their gross fair values in the Condensed Consolidated Balance Sheets.

All of the Company’s Canadian forward contracts have maturities less than

twelve

months as of

September

30,

2018.

As of

September

30,

2018,

all foreign currency forward contracts were designated as cash flow hedges. As of

December

31,

2017,

the total notional amount of the foreign currency forward contracts

not

designated as cash flow hedges was

$0.2

million (

CAD$0.2

million). For the

three

months ended

September

30,

2018

and the

three

and

nine

months ended

September 30, 2017,

losses recognized in Net sales from continuing operations from foreign currency forward contracts

not

designated as hedging instruments were approximately

$0.

For the

nine

months ended

September 30, 2018,

gains recognized in Net sales from continuing operations from foreign currency forward contracts

not

designated as hedging instruments were

$0.1

million. As of

September

30,

2018,

unrealized pretax gains on outstanding foreign currency forward contracts in Accumulated other comprehensive loss was approximately

$0.

Typically, outstanding foreign currency forward contract balances in Accumulated other comprehensive loss are expected to be reclassified to Net sales from continuing operations within the next

twelve

months as a result of underlying hedged transactions also being recorded in Net sales from continuing operations. See Note

12,

“Accumulated Other Comprehensive Loss” for additional quantitative information regarding foreign currency forward contract gains and losses.