Note H - Derivative Instruments - Foreign Currency Hedge Contracts

3 Months Ended

Mar. 31, 2013

Notes to Financial Statements

Note H-Derivative Instruments - Foreign Currency Hedge Contracts

Note H – Derivative Instruments – Foreign Currency Hedge Contracts

The Company is exposed to the impact of fluctuations in foreign currency exchange rates on the expenses incurred in its Canadian and United Kingdom operations. PT’s risk management program is designed to reduce the exposure and volatility arising from this risk. At March 31, 2013, the Company had contracts in place to hedge approximately 65% of its estimated Canadian foreign currency risk for the remainder of 2013. At March 31, 2012, the Company had contracts in place to hedge approximately 60% of its estimated Canadian foreign currency risk for the second quarter 2012. The Company had no such contracts in place at December 31, 2012.

PT’s derivative instruments are designated and qualify as cash flow hedges. Such contracts are stated at estimated fair value and any gains or losses resulting from changes in the fair value of these contracts are recorded in other comprehensive income or loss. The Company will receive, or be required to disburse, cash payments upon the expiration of each contract depending on fluctuations in the underlying exchange rates. Such payments will be recorded as reductions to, or increases in, expense as they are determined.

The fair value of the Company’s derivative instruments consisted of the following:

		Fair value at
	Balance sheet location	March 31, 2013			December 31, 2012
Derivatives designated as hedging instruments	Current Liabilities	$	(15,000	)	$	—

The Company’s derivative instruments had the following effect on the statements of operations:

		Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) to the  statement of operations
Derivatives fair value	Location of gain (loss) recognized in	Three Months Ended March 31,
hedging relationships	operations	2013			2012
Foreign exchange contracts	Research and development expenses	$	(4,000	)	$	(12,000	)

The Company’s derivative instruments had the following effect on accumulated other comprehensive income:

	Three Months Ended
	March 31,
	2013			2012
Accumulated other comprehensive income, January 1	$	—		$	(46,000	)
Amount of loss (gain) recognized in statement of operations,   net of tax		4,000			12,000
Net change in fair value of derivative instruments		(19,000	)		25,000
Accumulated other comprehensive income, March 31	$	(15,000	)	$	(9,000	)