Foreign Currency Exchange Risk Management

3 Months Ended

Mar. 31, 2012

Foreign Currency Exchange Risk Management

Foreign Currency Exchange Risk Management

(10)  Foreign Currency Exchange Risk Management

We use Euro-denominated debt as a non-derivative financial instrument to partially offset the Company’s business exposure to foreign currency exchange risk attributable to our net investments in Europe. Our focus is to manage the economic risks associated with our European subsidiaries, which are the foreign currency exchange risks that will ultimately be realized when we exchange one currency for another. To help protect the Company’s net investment in certain of its European subsidiary operations from adverse changes in foreign currency exchange rates, management denominates a portion of the Euro-denominated debt in the same functional currency used by the European subsidiaries. At March 31, 2012, the Company carried $12.4 million in Euro-denominated debt and designated the debt as a non-derivative hedge of its net investment in certain European subsidiaries. The Company designated the hedging relationship such that changes in the net investments being hedged are expected to be naturally offset by corresponding changes in the value of the Euro-denominated debt. We consider our investments in European subsidiaries to be denominated in a relatively stable currency and of a long-term nature.

The effective portion of the net foreign investment hedge is reported in accumulated other comprehensive income (loss) (“AOCI”) as part of the cumulative translation adjustment. Any ineffective portion of the net foreign investment hedge is recognized in earnings as other income (expense) during the period of change. Effectiveness of the hedging relationship is measured and designated at the beginning of each month by comparing the outstanding balance of the Euro-denominated debt to the carrying value of the designated net equity investments.

At March 31, 2012 and December 31, 2011, the carrying value and line item caption of the Company’s non-derivative instrument was reported on the consolidated balance sheets as follows (in thousands):

Non-Derivative
Instrument in
Net Investment	Balance Sheet	Carrying Value at:
Hedging Relationship	Location	March 31, 2012		December 31, 2011
Euro-denominated debt	Notes payable to banks	$	12,440	$	13,240

The effect of the non-derivative instrument qualifying and designated as a hedging instrument in net foreign investment hedges on the consolidated financial statements for the three-month periods ended March 31, 2012 and 2011 was as follows (in thousands):

								Amount of Gain (Loss)
								Recognized in Income
	Amount of Gain (Loss)							(Ineffective Portion and
	Recognized in AOCI							Amount Excluded from
Non-Derivative	(Effective Portion)						Location of Gain (Loss)	Effectiveness Testing)
Instrument in	Three Months Ended						Reclassified from	Three Months Ended
Net Investment	March 31,						AOCI into Income	March 31,
Hedging Relationship	2012			2011			(Effective Portion)	2012		2011
Euro-denominated debt	$	(398	)	$	(1,292	)	Other income (expense)	$	—	$	—