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. 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. As of

June

30,

2017

and

December

31,

2016,

the total notional amount of the derivative contracts

not

designated as cash flow hedges was

$0.8

million (

CAD$1.0

million) and

$0.9

million (

CAD$1.3

million), respectively. As of

June

30,

2017

and

December

31,

2016,

the total notional amount of the derivative contracts designated as cash flow hedges was approximately

(

CAD$0.1

million) and

$3.4

million (

CAD$4.5

million), respectively. Derivative assets are included within Prepaid expenses and other and derivative 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.

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 Unrealized loss on cash flow hedges on the Condensed Consolidated Statements of Comprehensive 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 less than

twelve

months as of

June

30,

2017.

or the

three

and

six

months ended

June

30,

2017

and the

three

months ended

June

30,

2016,

gains recognized in Net sales from derivative contracts

not

designated as hedging instruments were approximately

For the

six

months ended

June

30,

2016,

losses recognized in Net sales from derivative contracts

not

designated as hedging instruments were $(

0.2

) million. As of

June

30,

2017,

unrealized pretax losses on outstanding derivatives in Accumulated other comprehensive loss was approximately

$0.

Typically, outstanding derivatives balances in Accumulated other comprehensive loss are expected to be reclassified to Net sales within the next

twelve

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

“Accumulated Other Comprehensive Loss” for additional quantitative information regarding derivative gains and losses.