Derivative Financial Instruments

12 Months Ended

Dec. 31, 2012

Derivative Financial Instruments

Derivative Financial Instruments

Note 3—Derivative Financial Instruments

        The Company enters into foreign currency forward contracts with financial institutions to reduce the risk that the Company's cash flows and earnings will be adversely affected by foreign currency exchange rate fluctuations. These forward contracts are not designated for trading or speculative purposes.

        The Company recognizes derivative instruments as either assets or liabilities on the accompanying consolidated balance sheets at fair value based on current market rates. The Company records changes in the fair value (e.g., gains or losses) of the derivatives in "Interest and other income (expense), net" in the accompanying consolidated statements of operations.

Non-designated Hedges

        The Company uses foreign currency forward contracts to hedge a portion of the balances denominated in Euro, Swedish Krona, British Pounds, South African Rand and Norwegian Kroner. These derivative instruments are not designated as hedging instruments. The Company recognizes gains and losses on these contracts, as well as related costs, in "Interest and other income (expense), net" on the accompanying consolidated statements of operations along with the gains and losses of the related hedged items. The Company records the fair value of derivative instruments as either "Prepaid expenses and other" or "Accrued liabilities" in the accompanying consolidated balance sheets based on current market rates.

        At December 31, 2012 and 2011, net derivative (liabilities) assets associated with the forward contracts of approximately $(27,000) and $25,000, respectively, were included in "Prepaid expenses and other" on the accompanying consolidated balance sheets. The effect of the derivative financial instruments on the consolidated statements of operations for fiscal 2012 and 2011 was to reduce foreign exchange gains by approximately $51,000 and reduce foreign exchange losses by approximately $(40,000), respectively, which reflects net realized and unrealized gains and losses related to our derivative financial instruments.

        As of December 31, 2012, the Company had outstanding forward contracts with a notional value of R3.5 million South African Rand (ZAR), or approximately $414,000.