Derivative Financial Instruments

3 Months Ended

Jun. 30, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

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 June 30, 2012 and March 31, 2012, the Company had the following outstanding forward currency exchange contracts (in notional amount), which are derivative financial instruments:

(In thousands and U.S. dollars)	June 30, 2012		March 31, 2012
Singapore dollar	$	60,229	$	60,925
Euro	37,866		41,467
Indian Rupee	18,718		18,943
British Pound	13,031		14,250
Japanese Yen	11,342		11,076
	$	141,186	$	146,661

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 July 2012 and May 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 June 30, 2012, 98% 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 June 30, 2012 that is expected to be reclassified into earnings within the next 12 months was a net loss of $5.0 million. The ineffective portion of the gains or losses on the forward contracts was included in the net income for all periods presented.

As of June 30, 2012, 2% 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 $1.5 million and $931 thousand as of June 30, 2012 and March 31, 2012, 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 June 30, 2012 and March 31, 2012, located on the condensed consolidated balance sheet, 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
June 30, 2012	Prepaid expenses and other current assets	$	168	Other accrued liabilities	$	5,779
March 31, 2012	Prepaid expenses and other current assets	$	203	Other accrued liabilities	$	3,273

The following table summarizes the effect of derivative instruments on the condensed consolidated statements of income for first quarter of fiscal 2013 and 2012:

(In thousands)	Amount of Loss Recognized in OCI on Derivative (Effective portion of cash flow hedging)			Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective portion)*			Amount of Loss Recorded (Ineffective Portion)
Derivatives Types
Three Months Ended June 30, 2012
Foreign exchange contracts	$	(2,463	)	$	(1,159	)	$	—
Three Months Ended July 2, 2011
Foreign exchange contracts	$	(598	)	$	2,764		$	(1	)

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