Derivative Financial Instruments and Hedging Activities

9 Months Ended

Sep. 30, 2012

Derivative Financial Instruments and Hedging Activities [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

15.  DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

The Company does not purchase or hold any derivative financial instruments for trading purposes.

At contract inception, the Company designates its derivative instruments as hedges.  The Company recognizes all derivative instruments on the balance sheet at fair value.  Fluctuations in the fair values of derivative instruments designated as cash flow hedges are recorded in accumulated other comprehensive (loss) income and reclassified into earnings within other income as the underlying hedged items affect earnings. To the extent that a change in the derivative does not perfectly offset the change in value of the risk being hedged, the ineffective portion is recognized in earnings immediately.

The Company is subject to exposures to changes in foreign currency exchange rates. The Company manages its exposure to changes in foreign currency exchange rates on firm sale and purchase commitments by entering into foreign currency forward contracts. The Company’s risk management objective is to reduce its exposure to the effects of changes in exchange rates on these transactions over the duration of the transactions. 

During the third quarter of 2012, the Company executed derivative contracts with notional amounts totaling approximately $3,186,000 to sell Canadian funds based on the anticipated receipt of Canadian funds from the sale of certain rail products in the third quarter of 2012.  The receipt of Canadian funds did not occur when the Company expected and the Company needed to enter into another commitment to buy Canadian funds with notional amounts totaling approximately $3,388,000.  During the third quarter of 2012, the Company settled these contracts for a recognized loss of approximately $204,000.  This amount is included within “Other expense/(income)” in the Condensed Consolidated Statements of Operations.

During the third quarter of 2012, the Company entered into a new commitment with notional amounts totaling approximately $3,280,000 to sell Canadian funds based on the anticipated receipt of Canadian funds from the sale of certain rail products in the fourth quarter of 2012.  The fair value of this instrument was a liability of approximately $47,000 as of September 30, 2012 and was recorded in “Other accrued liabilities” in the Condensed Consolidated Balance Sheet.

The Company did not engage in any foreign currency hedging transactions during the nine-month period ended September 30, 2011.