Foreign Currency Exchange Rate Risk

12 Months Ended

Dec. 31, 2011

Foreign Currency [Abstract]

Foreign Currency Exchange Rate Risk

Foreign Currency Exchange Rate Risk

The Company’s foreign businesses enter into contracts with customers and vendors that are denominated in currencies other than their functional currencies. To protect the functional currency equivalent cash flows associated with certain of these contracts, the Company enters into foreign currency forward contracts. The Company’s activities involving foreign currency forward contracts are designed to hedge the changes in the functional currency equivalent cash flows due to movements in foreign exchange rates compared to the functional currency. The foreign currencies hedged are primarily the euro and the Swedish kroner. The Company manages exposure to counterparty non-performance credit risk by entering into foreign currency forward contracts only with major financial institutions that are expected to fully perform under the terms of such contracts. Gains and losses on foreign currency forward contracts are recognized in income at the end of each reporting period based on the difference between the contract rate and the spot rate. The net amount of the losses related to derivative instruments recorded in other expense for the year ended December 31, 2011 and 2010 were $2.3 million and $0.7 million, respectively. These losses are offset in the Consolidated Statement of Income by the reciprocal gains from the underlying assets or liabilities which originally gave rise to the exposure.

Note 3. Foreign Currency Exchange Rate Risk—(Continued)

Notional amounts are used to measure the volume of foreign currency forward contracts and do not represent exposure to foreign currency gains or losses. The table below presents the notional amounts of the Company’s outstanding foreign currency forward contracts by currency at December 31, 2011 and 2010 (in thousands):

	Year Ended December 31,
	2011		2010
Euro	$	19,640	$	41,022
Swedish kroner	18,091		23,212
British pound sterling	3,050		1,551
Australian dollar	609		1,017
Danish kroner	174		—
Japanese yen	3,581		—
	$	45,145	$	66,802

At December 31, 2011, the Company’s foreign currency forward contracts, in general, had maturities of 45 days or less.