Derivative Instruments and Hedging Activity

9 Months Ended

Sep. 30, 2011

Derivative Instruments and Hedging Activity [Abstract]

Derivative Instruments and Hedging Activity

8. Derivative Instruments and Hedging Activity

The Company may use forward exchange contracts and foreign currency denominated debt to manage its exposure to foreign exchange risk by reducing the effect of fluctuating foreign currencies on short-term foreign currency denominated intercompany transactions, non-functional currency raw material purchases, non-functional currency sales and other known foreign currency exposures. These forward exchange contracts have maturities of less than twelve months. The Company's primary hedging activities and their accounting treatment are summarized below:

Forward exchange contracts – The forward exchange contracts that have been designated as hedges are accounted for as cash flow hedges. The Company had $19.9 million and $10.1 million of forward exchange contracts, designated as hedges, outstanding as of September 30, 2011, and December 31, 2010, respectively. Due to the short term nature of these contracts, the results of these transactions are not material to the financial statements. In addition, the Company utilizes forward exchange contracts that are not designated as cash flow hedges and the results of these transactions are also not material to the financial statements.

Net investment hedges – The Company has certain debt denominated in Euros and Swiss Francs. These debt instruments have been designated as partial hedges of the Company's Euro and Swiss Franc net asset positions. Changes in the fair value of this debt attributable to changes in the spot foreign exchange rate are recorded in foreign currency translation in Other Comprehensive Income (“OCI”). As of September 30, 2011, and December 31, 2010, the total value of the Company's Euro and Swiss Franc debt was $107.4 million and $106.5 million, respectively.  For the three and nine months ended September 30, 2011, the impact of foreign exchange rates on these debt instruments decreased debt by $8.9 million and increased debt by $0.9 million, respectively, and these amounts have been recorded as foreign currency translation in OCI.