Derivative Financial Instruments

9 Months Ended

Dec. 31, 2011

Derivative Financial Instruments [Abstract]

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 December 31, 2011 and April 2, 2011, the Company had the following outstanding forward currency exchange contracts (in notional amount), which are derivative financial instruments:

		September 30,		September 30,
	December 31,		April 2,
(In thousands and U.S. dollars)	2011		2011
Singapore dollar	$	60,028	$	52,782
Euro		40,194		38,787
Indian Rupee		17,757		0
British Pound		14,666		8,853
Japanese Yen		11,465		12,382
	$	144,110	$	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 a 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 January 2012 and November 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 December 31, 2011, 97% of 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 contracts 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 estimated amount of such gains or losses as of December 31, 2011 that is expected to be reclassified into earnings within the next 12 months was a net loss of $5.4 million. The ineffective portion of the gain or loss on the forward contract was included in the net income for all periods presented.

As of December 31, 2011, 3% of the forward foreign currency exchange contracts were designated and qualified as fair value hedges, and the related realized and unrealized gain or loss on the forward contracts was immaterial for all periods presented.

The Company may enter into forward foreign currency exchange contracts to hedge firm commitments such as acquisitions and 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 4. Fair Value Measurements” for more discussion about the embedded derivative. The fair value of the embedded derivative was $1.4 million and $945 thousand as of December 31, 2011 and April 2, 2011, respectively. The changes in the fair value of the embedded derivative were recorded to interest and other expense, net, on the Company’s condensed consolidated statements of income.

The Company had the following derivative instruments as of December 31, 2011 and April 2, 2011, located on the condensed consolidated balance sheet, utilized for risk management purposes detailed above:

	September 30,		September 30,	September 30,		September 30,
	Foreign Exchange Contracts
	Asset Derivatives			Liability Derivatives
(In thousands)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
December 31, 2011	Prepaid expenses and other current assets	$	183	Other accrued liabilities	$	7,241
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:

(In thousands) Derivatives Types	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective portion of cash flow hedging)	Amount of Gain Reclassified from Accumulated OCI into Income (Effective portion)*	Amount of Gain (Loss) Recorded (Ineffective portion)*
	Three Months Ended December 31, 2011
Foreign exchange contracts (cash flow hedging)	$  (3,347)	$703	$0
	Three Months Ended January 1, 2011
Foreign exchange contracts (cash flow hedging)	$  (1,585)	$2,085	$(3)
	Nine months Ended December 31, 2011
Foreign exchange contracts (cash flow hedging)	$(12,131)	$5,806	$(5)
	Nine months Ended January 1, 2011
Foreign exchange contracts (cash flow hedging)	$   5,903	$1,561	$5

* Recorded in Interest and Other Expense location within the condensed consolidated statements of income