Invacare 2009 Annual Report Download - page 102

Download and view the complete annual report

Please find page 102 of the 2009 Invacare annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 128

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128

INVACARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Derivatives—Continued
To protect against increases/decreases in forecasted foreign currency cash flows resulting from inventory
purchases/sales over the next year, the company utilizes foreign currency forward contracts to hedge portions of
its forecasted purchases/sales denominated in foreign currencies. The gains and losses are included in cost of
products sold and selling, general and administrative expenses on the consolidated statement of operations. If it is
later determined that a hedged forecasted transaction is unlikely to occur, any gains or losses on the forward
contracts would be reclassified from other comprehensive income into earnings. The company does not expect
this to occur during the next twelve months.
The company has historically not recognized any ineffectiveness related to forward contract cash flow
hedges because the company generally limits it hedges to between 60% and 90% of total forecasted transactions
for a given entity’s exposure to currency rate changes and the transactions hedged are recurring in nature.
Furthermore, the majority of the hedged transactions are related to intercompany sales and purchases for which
settlement occurs on a specific day each month. Forward contracts with a total notional amount in USD of
$180,664,000 matured during the twelve months ended December 31, 2009.
As of December 31, 2009, foreign exchange forward contracts qualifying and designated for hedge
accounting treatment were as follows (in thousands USD):
Notional
Amount
Unrealized
Net Gain
(Loss)
USD/AUD .............................................................. $ 3,294 $ (41)
USD/CAD .............................................................. 49,345 202
USD/EUR .............................................................. 22,119 (526)
USD/GBP .............................................................. 3,640 (72)
USD/NZD .............................................................. 8,286 130
USD/SEK .............................................................. 8,965 (100)
USD/MXN.............................................................. 2,520 217
EUR/CHF .............................................................. 2,755 (9)
EUR/GBP .............................................................. 22,258 27
EUR/SEK .............................................................. 3,800 15
EUR/NZD .............................................................. 8,029 359
GBP/CHF .............................................................. 501 14
GBP/SEK............................................................... 2,169 37
GBP/DKK .............................................................. 765 17
DKK/SEK .............................................................. 7,439 52
DKK/NOK.............................................................. 2,236 19
NOK/EUR .............................................................. 342 6
NOK/CHF .............................................................. 592 (9)
NOK/SEK .............................................................. 1,190 (21)
$150,245 $ 317
Fair Value Hedging Strategy
In 2009 and 2008, the company did not utilize any derivatives designated as fair value hedges. However, the
company has in the past utilized fair value hedges in the form of forward contracts to manage the foreign
exchange risk associated with certain firm commitments and has entered into interest rate swaps to effectively
convert fixed-rate debt to floating-rate debt in an attempt to avoid paying higher than market interest rates. For
FS-34