Derivative Instruments

9 Months Ended

Oct. 02, 2011

Derivative Instruments [Abstract]

Derivative Instruments

Note 8 — Derivative Instruments

The Company has foreign subsidiaries that operate and sell the Company’s products in various markets around the world. As a result, the Company is exposed to changes in foreign-currency exchange rates. The Company utilizes forward contracts to manage its exposure associated with net asset and liability positions denominated in non-functional currencies and to reduce the volatility of earnings and cash flows related to forecasted foreign-currency transactions. The Company does not hold derivative financial instruments for speculative or trading purposes.

Cash-Flow Hedges

The Company enters into forward contracts that are designated as foreign-currency cash-flow hedges of selected forecasted payments denominated in currencies other than U.S. dollars. These forward contracts generally mature within twelve months. The Company evaluates and calculates the effectiveness of each hedge at least quarterly. Changes in fair value attributable to changes in time value are excluded from the assessment of effectiveness and are recognized in interest income and other, net. The effective portion of the forward contracts’ gain or loss is recorded in other comprehensive income and is subsequently reclassified into earnings when the hedged expense is recognized within the same line item in the statements of operations as the impact of the hedged transaction. The ineffective portion of the gain or loss is reported in earnings immediately. As of October 2, 2011 and December 31, 2010, the total notional value of the Company’s outstanding forward contracts, designated as foreign-currency cash-flow hedges, was $42.2 million and $41.7 million, respectively. For the three and nine months ended October 2, 2011 and October 3, 2010, the after-tax effect of foreign-exchange forward contract derivatives on other comprehensive income was not material.

Other Foreign-Currency Hedges

The Company enters into foreign-exchange forward contracts that are used to hedge certain foreign-currency-denominated assets or liabilities and that do not qualify for hedge accounting. These forward contracts generally mature within three months. Changes in the fair value of these forward contracts are recorded immediately in earnings to offset the changes in fair value of the assets or liabilities being hedged. As of October 2, 2011 and December 31, 2010, the total notional value of the Company’s outstanding forward contracts, not designated as hedges under hedge accounting, was $47.3 million and $112.3 million, respectively. For the three and nine months ended October 2, 2011, losses of $2.5 million and $0.5 million, respectively, on other foreign-currency hedges were recognized in interest income and other, net. For the three and nine months ended October 3, 2010, gains of $6.5 million and $2.9 million, respectively, on other foreign-currency hedges were recognized in interest income and other, net. These gains and losses were substantially offset by the gain and loss on the underlying foreign-currency-denominated assets or liabilities.

Fair Value of Derivative Instruments

As of October 2, 2011 and December 31, 2010, the total fair value of derivative assets was $2.2 million and $0.8 million, respectively, and was recorded in prepaid expenses and other current assets in the condensed consolidated balance sheets. As of October 2, 2011 and December 31, 2010, the total fair value of derivative liabilities was $5.2 million and $0.3 million, respectively, and was recorded in other accrued liabilities in the condensed consolidated balance sheets.