Derivative Financial Instruments

3 Months Ended

Jul. 02, 2011

Derivative Financial Instruments

Derivative Financial Instruments

Note 6. 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 July 2, 2011 and April 2, 2011, the Company had the following outstanding forward currency exchange contracts which are derivative financial instruments:

	July 2,		April 2,
(In thousands and U.S. dollars)	2011		2011
Euro	$	40,990	$	38,787
Singapore dollar		70,383		52,782
Japanese Yen		11,265		12,382
British Pound		9,102		8,853
	$	131,740	$	112,804

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 forward outlook of up to two years for major foreign-currency-denominated operating expenses. The outstanding forward currency exchange contracts expire at various dates between July 2011 and May 2013. 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 two years.

As of July 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 was $572 thousand and $945 thousand as of July 2, 2011 and April 2, 2011, respectively and the changes in the fair value of the embedded derivative were recorded to interest and other expense, net on the Company's condensed consolidated statement of income.

The Company had the following derivative instruments as of July 2, 2011 and April 2, 2011, located on the condensed consolidated balance sheet, utilized for risk management purposes detailed above:

(In thousands)	Foreign Exchange Contracts
	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
July 2, 2011	Prepaid expenses and other current assets		$    4,721	Other accrued liabilities		$          92
April 2, 2011	Prepaid expenses and other current assets		$    5,205	Other accrued liabilities		$          71

The following table summarizes the effect of derivative instruments on the condensed consolidated statements of income for the first quarter of fiscal 2012 and 2011:

(In thousands) Derivatives in Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective portion)		Statement of Income Location	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective portion)	Statement of Income Location	Amount of Gain (Loss) Recorded (Ineffective portion)
Three Months Ended July 2, 2011
Foreign exchange contracts	$	(598)	Interest and other expense, net	$        2,764	Interest and other expense, net	$         (1)
Three Months Ended July 3, 2010
Foreign exchange contracts	$	868	Interest and other expense, net	$        (612)	Interest and other expense, net	$        2