Annual report pursuant to Section 13 and 15(d)

Derivative Contracts

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Derivative Contracts
12 Months Ended
Dec. 31, 2012
Derivative Contracts [Abstract]  
Derivative Contracts

Note 19 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.

During 2012 and 2011, we entered into a foreign exchange, fixed interest rate swap contract that provides for us to pay a fixed interest rate on the underlying loan balance denominated in Chilean Pesos. We entered into this agreement in Chile for purchases of inventory denominated in U.S. dollars. A hypothetical 1% interest rate change or 10% foreign exchange rate change will not have a material impact on our results from operations or financial position.

We record derivative financial instruments as Accrued expenses or Other current assets on our Consolidated Balance Sheet at their fair value and the corresponding gain or loss as Other income (expense), net. 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 December 31, 2012 and 2011, the forward contracts did not meet the documentation requirements to be designated as hedges. Accordingly, we recognize all changes in fair values in income.

 

The outstanding contracts at the end of the years ended December 31, 2012 and 2011 have been valued at fair value, and their maturity details are as follows:

 

                         

(In thousands)

Days until maturity

  Contract
value
    Fair value at
December 31, 2012
    Decrease of 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
   

 

 

   

 

 

   

 

 

 
       

(In thousands)

Days until maturity

  Contract
value
    Fair value at
December 31, 2011
    Decrease of loss  

0 to 30

  $ 1,232     $ 1,241     $ 9  

31 to 60

    116       126       10  

61 to 90

    402       415       13  

91 to 120

    35       37       2  

121 to 180

    106       109       3  

More than 180

    35       36       1  
   

 

 

   

 

 

   

 

 

 

Total

  $ 1,926     $ 1,964     $ 38