Derivatives and Hedging Activities

12 Months Ended

Dec. 31, 2012

Derivatives and Hedging Activities [Abstract]

Derivatives and Hedging Activities

(11)         Derivatives and Hedging Activities

The Company operates internationally and is exposed to fluctuations in foreign exchange rates and interest rates in the normal course of business. The Company considers the use of derivative financial instruments to reduce exposure to market risks resulting from fluctuations in interest rates and foreign exchange rates.

All financial instruments involve market and credit risks. The Company is exposed to credit losses in the event of non-performance by the counterparties to the contracts. While there can be no assurance, the Company does not anticipate non-performance by these counterparties.

Foreign Currency Forward Contracts

The Company periodically enters into foreign currency forward contracts to hedge forecasted cash flows associated with foreign currency transaction exposures, as deemed appropriate. This hedging strategy mitigates some of the impact of short-term foreign exchange rate movements on the Company's local operating results primarily in Sweden and Italy. The Company's primary market risk relates to exposures to foreign currency exchange rate fluctuations on transactions entered into by these international operations that are denominated primarily in U.S. dollars, Swedish krona and Euros.

The Company's foreign currency forward contracts substantially offset gains and losses on the transactions being hedged. Foreign currency forward contracts outstanding during the year had varying maturities with none exceeding twelve months.

All foreign currency forward contracts outstanding during the year had been designated as cash flow hedges and, accordingly, changes in the fair value of these derivatives were not included in earnings but were included in accumulated other comprehensive (loss)/income ("AOCI"). Changes in the fair value of the derivative instruments reported in AOCI were recorded into earnings as a component of product revenue or expense, as applicable, when the forecasted transaction occurred. The ineffective portion of all hedges was recognized in current-period earnings and was immaterial to the Company's financial results.

The notional amounts of foreign exchange forward contracts were $11,005 at December 31, 2011. There were no foreign currency forward contracts outstanding at December 31, 2012.

Included in AOCI is the fair value of the Company's foreign currency forward contracts which was a gain of $380 as of December 31, 2011. The gain is located under the caption "Prepaid expenses and other current assets" on the balance sheet as of December 31, 2011.

Interest Rate Swap

The Company entered into an interest rate swap in March 2012 to reduce the impact of changes in interest rates on its floating rate debt. The swap is a contract to exchange floating rate for fixed interest payments periodically over the life of the agreement without the exchange of the underlying notional debt amount.

The swap contract outstanding at December 31, 2012 has been designated as a cash flow hedge and, accordingly, changes in the fair value of this derivative is not recorded in earnings but are recorded each period in AOCI and reclassified into earnings as interest expense in the same period during which the hedged transaction affects earnings. The ineffective portion of all hedges is recognized in earnings and has been immaterial to the Company's financial results.

As of December 31, 2012, the interest rate swap had a notional value of $60,000, at a fixed rate of 0.92%, maturing in September 2015. The fair value of this swap is based on quoted market prices and was in a loss position of $930 at December 31, 2012. This loss is reflected in the Company's balance sheet under the caption "Accrued expenses and other current liabilities." The Company did not have any interest rate swaps outstanding at December 31, 2011.

Assuming current market conditions continue, a loss of $419 is expected to be reclassed out of AOCI into earnings within the next 12 months.

Refer to Note 12 to the Company's consolidated financial statements for the summary table containing the fair value of the Company's financial instruments.