Foreign Currency Derivative Instruments

9 Months Ended

Sep. 30, 2011

Foreign Currency Derivative Instruments [Abstract]

Foreign Currency Derivative Instruments

Note 5 – Foreign Currency Derivative Instruments

Maxwell uses forward contracts to hedge certain monetary assets and liabilities, primarily receivables and payables, denominated in a foreign currency. The change in fair value of these instruments represents a natural hedge as gains and losses offset the changes in the underlying fair value of the monetary assets and liabilities due to movements in currency exchange rates. These contracts generally expire in one month. These contracts are considered economic hedges and are not designated as hedges under the Derivatives and Hedging Topic of the FASB ASC, therefore, the change in the fair value of the instrument is recognized currently in the consolidated statement of operations.

Net gains (losses) on foreign currency forward contracts included in cost of revenue and selling, general and administrative expense are as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Cost of revenue	$	(45	)	$	(59	)	$	(282	)	$	296
Selling, general and administrative		(1,273	)		705			742			435
Total	$	(1,318	)	$	646		$	460		$	731

As of September 30, 2011, the total notional amount of foreign currency forward contracts not designated as hedges was $27.2 million. The fair value of these derivatives was $2.8 million (liability) at September 30, 2011. For additional information, refer to Note 4 – Fair Value Measurements.

The net gains and losses on foreign currency forward contracts were partially offset by net gains and losses on the underlying monetary assets and liabilities. Foreign currency gains and losses on those underlying monetary assets and liabilities included in cost of revenue and selling, general and administrative expense are as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Cost of revenue	$	(74	)	$	754		$	149		$	450
Selling, general and administrative		1,271			(838	)		(918	)		(669	)
Total	$	1,197		$	(84	)	$	(769	)	$	(219	)