Derivative Financial Instruments

12 Months Ended

Apr. 02, 2011

Derivative Financial Instruments [Abstract]

Derivative Financial Instruments

Note 5. Derivative Financial Instruments

The Company’s primary objective for holding derivative financial instruments is to manage foreign currency exchange rate risk and interest rate risk. As a result of the use of derivative financial instruments, the Company is exposed to the risk that counterparties to derivative contracts may fail to meet their contractual obligations. The Company manages counterparty credit risk in derivative contracts by reviewing counterparty creditworthiness on a regular basis, establishing collateral requirement and limiting exposure to any single counterparty. The right of set-off that exists with certain transactions enables the Company to net amounts due to and from the counterparty, reducing the maximum loss from credit risk in the event of counterparty default.

As of April 2, 2011 and April 3, 2010, the Company had the following outstanding forward currency exchange contracts which are derivative financial instruments:

	April 2,		April 3,
(In thousands and U.S. dollars)	2011		2010
Euro	$	38,787	$	21,190
Singapore dollar		52,782		58,420
Japanese Yen		12,382		12,268
British Pound		8,853		4,889
	$	112,804	$	96,767

As part of the Company’s strategy to reduce volatility of operating expenses due to foreign exchange rate fluctuations, the Company employs a hedging program with a five-quarter forward outlook for major foreign-currency-denominated operating expenses. The outstanding forward currency exchange contracts expire at various dates between April 2011 and May 2012. The net unrealized gain or loss, which approximates the fair market value of the above contracts, is expected to be realized and reclassified into net income within the next 13 months.

As of April 2, 2011, all the forward foreign currency exchange contracts were designated and qualified as cash flow hedges and the effective portion of the gain or loss on the forward contract was reported as a component of other comprehensive income and reclassified into net income in the same period during which the hedged transaction affects earnings. The ineffective portion of the gain or loss on the forward contract was immaterial and included in the net income for all periods presented.

The Company may enter into forward foreign currency exchange contracts to hedge firm commitments such as the acquisition of capital expenditures. Gains and losses on foreign currency forward contracts that are designated as hedges of anticipated transactions, for which a firm commitment has been attained and the hedged relationship has been effective, are deferred and included in income or expenses in the same period that the underlying transaction is settled. Gains and losses on any instruments not meeting the above criteria are recognized in income or expenses in the consolidated statements of income as they are incurred.

The 3.125% Debentures include provisions which qualify as an embedded derivative. See “Note 10. Convertible Debentures and Revolving Credit Facility” for detailed discussion about the embedded derivative. The embedded derivative was separated from the 3.125% Debentures and its fair value was established at the inception of the 3.125% Debentures. Any subsequent change in fair value of the embedded derivative would be recorded in the Company’s consolidated statement of income. The fair value of the embedded derivative at inception of the debentures was $2.5 million and it changed to $945 thousand and $848 thousand as of April 2, 2011 and April 3, 2010, respectively. The changes in the fair value of the embedded derivative of $97 thousand (expense) and $1.3 million (income) during fiscal 2011 and 2010, respectively, were recorded to interest and other income (expense), net on the Company’s consolidated statement of income.

The following table summarizes the fair value and presentation in the consolidated balance sheets for derivative instruments designated as hedging instruments as of April 2, 2011 and April 3, 2010, utilized for risk management purposes detailed above:

	Foreign Exchange Contracts
	Asset Derivatives			Liability Derivatives
	Balance Sheet			Balance Sheet
(In thousands)	Location	Fair Value		Location	Fair Value
April 2, 2011	Prepaid expenses and other current assets	$	5,205	Other accrued liabilities	$	71
April 3, 2010	Prepaid expenses and other current assets	$	700	Other accrued liabilities	$	2,177

The following table summarizes the effect of derivative instruments on the consolidated statements of income for fiscal 2011 and 2010:

	Amount of Gain				Amount of Gain
(In thousands)	(Loss) Recognized				Reclassified from
Derivatives in Cash	in OCI on			Statement of	Accumulated OCI			Amount of Gain
Flow Hedging	Derivative			Income	into Income		Statement of	Recorded
Relationships	(Effective portion)			Location	(Effective portion)		Income Location	(Ineffective portion)
Fiscal 2011
Foreign exchange contracts	$	6,776		Interest and other income (expense), net	$	3,705	Interest and other income (expense), net	$	7
Fiscal 2010
Foreign exchange contracts	$	(541	)	Interest and other income (expense), net	$	4,404	Interest and other income (expense), net	$	1