Derivative Instruments and Hedging Activities

9 Months Ended

Sep. 30, 2012

Derivative Instruments and Hedging Activities [Abstract]

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

We operate internationally and, in the normal course of business, are exposed to fluctuations in foreign currency exchange rates. The exposures result from portions of our revenues, as well as the related receivables, and expenses that are denominated in currencies other than the U.S. dollar, primarily the Euro, Japanese Yen and Swiss Franc. We manage our foreign currency transaction risk within specified guidelines through the use of derivatives. All of our derivative instruments are utilized for risk management purposes, and we do not use derivatives for speculative trading purposes.

We enter into foreign exchange forward contracts, with durations of up to 36 months, to hedge exposures resulting from portions of our forecasted intercompany revenues that are denominated in currencies other than the U.S. dollar. The purpose of the hedges of intercompany revenue is to reduce the volatility of exchange rate fluctuations on our operating results and to increase the visibility of the foreign exchange impact on forecasted revenues. These hedges are designated as cash flow hedges upon contract inception. At September 30, 2012, we have open contracts with notional amounts totaling $768,382 that qualified for hedge accounting.

The impact on accumulated other comprehensive income (AOCI) and earnings from foreign exchange contracts that qualified as cash flow hedges, for the three and nine months endedSeptember 30, 2012 and 2011 are as follows:

	Three months ended						Nine months ended
	September 30,						September 30,
	2012			2011			2012			2011
Gain (loss) recognized in AOCI, net of tax	$	(10,873	)	$	17,569		$	7,025		$	4,252
Gain (loss) reclassified from AOCI to net product sales (effective portion)	$	4,810		$	(3,315	)	$	8,885		$	(5,391	)
Gain (loss) reclassified from AOCI to other income and expense (ineffective portion)	$	(501	)	$	222		$	(585	)	$	(864	)

Assuming no change in foreign exchange rates from market rates at September 30, 2012, $8,853 of a gain recognized in AOCI to be reclassified to revenue over the next 12 months.

We enter into foreign exchange forward contracts, with durations of approximately 30 days, designed to limit the balance sheet exposure of monetary assets and liabilities. We enter into these hedges to reduce the impact of fluctuating exchange rates on our operating results. These derivative instruments do not qualify for hedge accounting; however, gains and losses on these hedge transactions are designed to offset gains and losses on underlying balance sheet exposures. As of September 30, 2012, the notional amount of foreign exchange contracts that do not qualify for hedge accounting was $176,938.

We recognized a gain (loss) of $(3,470) and $(10,149), in other income and expense, for the three months ended September 30, 2012 and 2011, respectively, and $787 and $(22,539), for the nine months endedSeptember 30, 2012 and 2011, respectively, associated with the foreign exchange contracts not designated as hedging instruments under the guidance. These amounts were largely offset by gains or losses in monetary assets and liabilities.

The following tables summarize the fair value of outstanding derivatives at September 30, 2012 and December 31, 2011:

	September 30, 2012
	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Foreign exchange forward contracts	Other current assets	$	13,289	Other current liabilities	$	3,888
Foreign exchange forward contracts	Other non-current assets	5,959		Other non-current liabilities	4,173
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts	Other current assets	692		Other current liabilities	4,008
Total fair value of derivative instruments		$	19,940		$	12,069

	December 31, 2011
	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Foreign exchange forward contracts	Other current assets	$	14,118	Other current liabilities	$	5,889
Foreign exchange forward contracts	Other non-current assets	6,465		Other non-current liabilities	2,552
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts	Other current assets	4,745		Other current liabilities	2,033
Total fair value of derivative instruments		$	25,328		$	10,474