Derivative Financial Instruments

12 Months Ended

Mar. 31, 2012

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 commodity price 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 March 31, 2012 and April 2, 2011, the Company had the following outstanding forward currency exchange contracts (in notional amount), which are derivative financial instruments:

(In thousands and U.S. dollars)	March 31, 2012		April 2, 2011
Singapore Dollar	$	60,925	$	52,782
Euro		41,467		38,787
Indian Rupee		18,943		—
British Pound		14,250		8,853
Japanese Yen		11,076		12,382
	$	146,661	$	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 April 2012 and February 2014. 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 March 31, 2012, 99% 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 March 31, 2012 that is expected to be reclassified into earnings within the next 12 months was a net loss of $2.6 million. The ineffective portion of the gain or loss on the forward contract was immaterial for all periods presented and was included in the net income for all periods presented.

As of March 31, 2012, 1% 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 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.

As the Company operates facilities that consume natural gas and has established forecasted transactions, in fiscal 2012 the Company entered into natural gas swap contracts with a notional amount of $1.1 million in order to manage the risk of natural gas price fluctuation. These contracts mature throughout fiscal 2013 to 2017 and were designated and qualified as cash flow hedges. The effective portion of the gain or loss on these contracts was reported as a component of other comprehensive income and reclassified into net income in the same period during which the swap transaction affects earnings. The ineffective portion of the gain or loss on the swap contract was immaterial and included in net income.

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 values of the embedded derivative as of March 31, 2012 and April 2, 2011 were $931 thousand and $945 thousand, respectively. The changes in the fair value of the embedded derivative were recorded to interest and other 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 March 31, 2012 and April 2, 2011, utilized for risk management purposes detailed above:

	Foreign Exchange Contracts
	Asset Derivatives			Liability Derivatives
(In thousands)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
March 31, 2012	Prepaid expenses and other current assets	$	203	Other accrued liabilities	$	3,273
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 consolidated statements of income for fiscal 2012 and 2011:

(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)*
Fiscal 2012
Foreign exchange contracts (cash flow hedging)	$	(8,320	)	$	4,659	$	(5	)
Natural gas swap contracts (cash flow hedging)		(5	)		—		—
Fiscal 2011
Foreign exchange contracts (cash flow hedging)	$	6,776		$	3,705	$	7

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