Note 9 – Derivative Financial Instruments

We are exposed to market risk from changes in foreign currency exchange rates, short term interest rates and price fluctuations of certain material commodities such as copper. Foreign currency exchange risks are attributable to sales to foreign customers not denominated in the seller's functional currency, foreign plant operations, intercompany indebtedness and purchases from foreign suppliers and include exposures to the European Euro, Japanese Yen, Canadian Dollar, and Mexican Peso. The Company regularly enters into derivative contracts with the objective of managing its financial and operational exposure arising from this risk by offsetting gains and losses on the underlying exposures with gains and losses on the financial instruments used to hedge them. We do not enter into derivative financial instruments for speculative or trading purposes. Our hedging relationships are formally documented at the inception of the hedge, and hedges must be highly effective in offsetting changes to future cash flows on hedged transactions both at the inception of a hedge and on an ongoing basis. We record the ineffective portion of hedging instruments, if any, to other income (expense) in the consolidated condensed statements of operations.

While W.E.T. continuously monitors the hedging program, derivative positions and hedging strategies and maintains documentation as to the hedging objectives, practices and procedures, W.E.T. has not typically designated its derivatives as hedging instruments for accounting purposes.

In March 2008, W.E.T. entered into a 10 year currency related interest rate swap ("CRS") having a notional value of €10,000, or $13,594 as of September 30, 2011, in order to offset the interest rate risk associated with a debt financing which was repaid prior our acquisition of W.E.T. Under this agreement W.E.T. receives interest equal to the then six month Euro Interbank Offered Rate ("EUIBOR"), 1.80% at September 30, 2011, plus 1.40% and pays interest equal to the six month EUIBOR when the exchange rate between the European Euro ("EUR") and the Swiss Franc ("CHF"), which was 1.22 at September 30, 2011, equals or exceeds 1.46 EUR to the CHF or pays interest equal to the six month EURIBOR plus a premium when this exchange rate is less than 1.46. The premium is calculated as [(1.46 – current EUR/CHF rate)/current EUR/CHF rate] x 100. W.E.T. has entered into offsetting derivative contracts that cancel out the payment due under the CRS through 2012.

During the three month period ended September 30, 2011, the Company entered into a series of interest rate swap contracts and a interest rate cap agreement designated as cash flow hedges in order to hedge the exposure to variable market interest rates on the Company's senior debt as follows:


Contract Type	Contract Term	Notional Value		Hedged Instruments	Fixed Rate			Variable Rate	Rate Cap
Swap	June 30, 2014	$	8,000	US Term Note		1.27	%	3 month LIBOR		—
Swap	June 30, 2014	$	8,000	US Term Note		1.27	%	3 month LIBOR		—
Cap	March 31, 2016	€	14,250	W.E.T. Term Note		—		3 month EURIBOR		2.75

Information related to the fair values of derivative instruments in our consolidated balance sheet as of September 30, 2011 are as follows:


		Asset Derivatives			Liability Derivatives				Net Asset/ (Liabilities)
		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
CRS	Not designated as a hedge				Current liabilities	$	(2,604	)
					Non current liabilities		(18,298	)

Total CRS						$	(20,902	)	$	(20,902	)
Foreign currency derivatives	Not designated as a hedge	Current assets	$	3,097	Current liabilities	$	(1,866	)	$	1,231
Interest rate swap derivatives	Designated as a hedge	Current assets	$	80	Current liabilities	$	(283	)	$	(202	)
Commodity derivatives	Not designated as a hedge				Current liabilities	$	(283	)	$	(283	)

At December 31, 2010, we had no outstanding forward contracts.

Information related to the effect of derivative instruments on our consolidated income statements is as follows:


	Location	Three Months Ended September 30, 2011			Nine Months Ended September 30, 2011
Foreign currency derivatives	Cost of sales	$	—		$	(15	)
	Revaluation of derivatives		(5,621	)	$	(4,326	)
	Foreign currency gain (loss)		(2,439	)		2,087

Total foreign currency derivatives		$	(8,060	)	$	2,254
CRS	Revaluation of derivatives	$	1,745		$	(3,565	)
Commodity derivatives	Revaluation of derivatives	$	(429	)	$	(293	)
Series C Convertible Preferred Stock embedded derivatives (see Note 7)	Revaluation of derivatives	$	—		$	2,610
Interest Rate Swap	Interest Expense	$	42		$	42
	Other Comprehensive Income		283			283

	Location	Three Months Ended September 30, 2010			Nine Months Ended September 30, 2010
Foreign currency derivatives	Cost of sales	$	9		$	26