Quarterly report pursuant to Section 13 or 15(d)

Derivative Contracts

v2.4.0.8
Derivative Contracts
6 Months Ended
Jun. 30, 2013
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE CONTRACTS
DERIVATIVE CONTRACTS
We enter into foreign currency forward exchange contracts to cover the risk of exposure to exchange rate differences arising from inventory purchases on letters of credit. Under these forward contracts, for any rate above or below the fixed rate, we receive or pay the difference between the spot rate and the fixed rate for the given amount at the settlement date.
The following table summarizes the fair values and the presentation of our derivative financial instruments in the Condensed Consolidated Balance Sheets:
(In thousands)
Balance Sheet Component
 
June 30,
2013
 
December 31,
2012
Derivative financial instruments:
 
 
 
 
 
Pharmsynthez Note Receivable and
     Purchase Option
Prepaid expenses and other current assets
 
$
6,795

 
$

Neovasc common stock options/warrants
Investments, net
 
$
2,319

 
$
1,872

Embedded conversion option
3.00% convertible senior notes, net of discount
     and estimated fair value of embedded
     derivatives
 
$
74,079

 
$

Forward contracts (1)
Current portion of lines of credit and notes
      payable
 
$
2,242

 
$
1,294

(1)
The effect on loss in the forward contracts is recorded in Accrued expenses. The effect on income in the forward contracts is recorded in Prepaid expenses and other current assets.
To qualify the derivative instrument as a hedge, we are required to meet strict hedge effectiveness and contemporaneous documentation requirements at the initiation of the hedge and assess the hedge effectiveness on an ongoing basis over the life of the hedge. At June 30, 2013 and December 31, 2012, our derivative financial instruments do not meet the documentation requirements to be designated as hedges. Accordingly, we recognize the changes in fair value in Fair value changes of derivative instruments, net in our Condensed Consolidated Statements of Operations. The following table summarizes the (losses) and gains recorded during the three and six months ended June 30, 2013 and 2012:
 
Three months ended June 30,
 
Six months ended June 30,
(In thousands)
2013
 
2012
 
2013
 
2012
Derivative gain (loss):
 
 
 
 
 
 
 
Pharmsynthez Note Receivable and Purchase Option
$
2,599

 
$

 
$
2,599

 
$

Neovasc common stock options/warrants and BZNE Note
     conversion feature
(15
)
 
137

 
1,245

 
1,167

Notes
9,913

 

 
(14,875
)
 

Forward contracts
154

 
(114
)
 
133

 
(27
)
Total
$
12,651

 
$
23

 
$
(10,898
)
 
$
1,140


The outstanding forward contracts at June 30, 2013 and December 31, 2012, have been recorded at fair value, and their maturity details are as follows:
(In thousands)
Days until maturity
 
Contract value
 
Fair value at
 June 30, 2013
 
Effect on income (loss)
0 to 30
 
$
659

 
$
703

 
$
44

31 to 60
 
410

 
436

 
26

61 to 90
 
618

 
654

 
36

91 to 120
 
422

 
449

 
27

121 to 180
 

 

 

More than 180
 

 

 

Total
 
$
2,109

 
$
2,242

 
$
133

(In thousands)
Days until maturity
 
Contract value
 
Fair value at
 December 31, 2012
 
Effect on income (loss)
0 to 30
 
$

 
$

 
$

31 to 60
 
581

 
577

 
(4
)
61 to 90
 
341

 
339

 
(2
)
91 to 120
 
212

 
210

 
(2
)
121 to 180
 
170

 
168

 
(2
)
More than 180
 

 

 

Total
 
$
1,304

 
$
1,294

 
$
(10
)