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Derivative Instruments and Foreign Currency Exposure
 6 Months Ended
Jul. 31, 2013
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities Disclosure [Text Block]
11.
Derivative Instruments and Foreign Currency Exposure
  
The Company is exposed to foreign currency risk. Management previously had  a derivative instrument program to partially offset this risk by purchasing forward contracts to sell the Canadian Dollar, the Chilean Peso, the Euro, the Great Britain Pound and Brazil Real other than the cash flow hedge discussed below. However, as a result of the financing situation with its former lender, TD Bank, the Company’s corporate hedging program has been temporarily suspended. Subsequent to the quarter end, the Company has established a foreign exchange facility with Wells Fargo Bank, N.A. The Company has continued its currency hedging in China and Brazil. Such contracts are largely timed to expire with the last day of the fiscal quarter, with a new contract purchased on the first day of the following quarter, to match the operating cycle of the Company. We designated the forward contracts as derivatives but not as hedging instruments, with loss and gain recognized in current earnings. In the three ended July 31, 2013, the Company sustained a loss on foreign exchange in Brazil of $360,269 or $(0.06) per share included in net income. In the six months ended July 31, 2013, the Company recorded a loss on foreign exchange in Brazil of $387,411 or $(0.07) per share included in net income.
 
The Company accounts for its foreign exchange derivative instruments by recognizing all derivatives as either assets or liabilities at fair value, which may result in additional volatility in both current period earnings and other comprehensive income as a result of recording recognized and unrecognized gains and losses from changes in the fair value of derivative instruments.
 
Currently, we have two types of derivatives to manage the risk of foreign currency fluctuations. We enter into forward contracts with financial institutions to manage our currency exposure related to net assets and liabilities denominated in foreign currencies. Those forward contract derivatives, not designated as hedging instruments, are generally settled quarterly. Gain and loss on those forward contracts are included in current earnings. We also enter cash flow hedge contracts with financial institutions to manage our currency exposure on future cash payments denominated in foreign currencies. The effective portion of gain or loss on cash flow hedge is reported as a component of accumulated other comprehensive income. Our hedge positions are summarized below:
 
Fair Value of Derivative Instruments
 
Derivatives not designated as hedging instruments
Foreign Exchange Forward Contracts
 
 
 
Three Months Ended
 
Six Months Ended
 
 
 
July 31, 2013
 
July 31, 2012
 
July 31, 2013
 
July 31, 2012
 
Notional Value in USD
 
$
1,000,000
 
$
22,822,770
 
$
5,587,136
 
$
25,325,540
 
Gain and loss reported in current operating income (expense)
 
$
92,818
 
$
1,647
 
$
122,697
 
$
(55,614)
 
 
There is no outstanding balance from foreign exchange forward contracts as of July 31, 2013 or July 31, 2012.
 
Derivatives designated as hedging instruments
 
Asset Derivative from Foreign Currency Cash Flow Hedge
 
 
 
As of
July 31, 2013
 
As of
January 31, 2013
 
 
 
 
 
 
 
 
 
Notional value in USD
 
$
300,000
 
$
6,944,040
 
Gain reported in equity as other comprehensive income
 
 
4,722
 
 
38,513
 
 
Effect of Derivative on Income Statement from Foreign Currency Cash Flow Hedge
 
 
 
Six Months Ended
July 31, 2013
 
Six Months Ended
July 31, 2012
 
Gain reclassed from other comprehensive income into current earnings during three months ended July 31, 2013, reported in operating income
 
$
160,032
 
$
32,485
 
 
The cash flow hedge is designed to hedge the payments made in USD and Euro to our China subsidiaries. Other assets have been recorded as $92,011 and $19,544 in the balance sheet for Q2 FY14 vs. FY13, respectively.