FOREIGN CURRENCY DERIVATIVES
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Jun. 30, 2012
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FOREIGN CURRENCY DERIVATIVES | FOREIGN CURRENCY DERIVATIVES Non-Designated Hedges The Company enters into foreign exchange forward contracts to reduce the impact of foreign currency fluctuations on assets and liabilities denominated in currencies other than the functional currency of the reporting entity. These foreign exchange forward contracts are not subject to the hedge accounting provisions of the Derivatives and Hedging Topic of the FASB ASC, but are carried at fair value with changes in the fair value recorded within Interest and other income, net in the Condensed consolidated statements of operations in accordance with the Foreign Currency Matters Topic of the FASB ASC. Gains and losses on these contracts are intended to offset the impact of foreign exchange rate changes on the underlying foreign currency denominated assets and liabilities, and therefore, do not subject the Company to material balance sheet risk. The Company does not enter into foreign currency forward contracts for trading purposes. Refer to Note 5, Fair Value Measurements, for disclosure of the Company's fair value hierarchy for its derivative instruments. As of June 30, 2012, the Company had foreign currency forward contracts denominated in Euros ("EUR"), Great Britain Pounds ("GBP") and Australian Dollars ("AUD"). These forward contracts hedge against a portion of the Company’s foreign currency-denominated cash balances, receivables and payables. The following table summarizes the notional value of the Company’s outstanding foreign exchange currency contracts and approximate U.S. Dollar ("USD") equivalent at June 30, 2012:
Foreign currency transactions, net of the effect of forward contract hedging activity, resulted in immaterial net losses in the three months ended June 30, 2012 compared to immaterial gains in the three months ended June 30, 2011, which are included in Interest and other income, net in the Condensed consolidated statements of operations. Cash Flow Hedges The Company’s hedging activities include a hedging program to hedge the economic exposure from anticipated EUR and GBP denominated sales. The Company hedges a portion of these forecasted foreign denominated sales with currency options. These transactions are designated as cash flow hedges and are accounted for under the hedge accounting provisions of the Derivatives and Hedging Topic of the FASB ASC. The effective portion of the hedge gain or loss is initially reported as a component of Accumulated other comprehensive income ("AOCI") and subsequently reclassified into Net revenues when the hedged exposure affects earnings. Any ineffective portion of related gains or losses is recorded in the Condensed consolidated statements of operations immediately. On a monthly basis, the Company enters into option contracts with a one-year term. The Company does not purchase options for trading purposes. As of June 30, 2012, the Company had foreign currency put and call option contracts of approximately €60.1 million and £19.6 million. As of March 31, 2012, the Company had foreign currency put and call option contracts of approximately €63.7 million and £20.0 million. In the three months ended June 30, 2012, realized gains on cash flow hedges of $1.9 million were recognized in Net revenues, compared to realized losses of $2.0 million for the same period in the prior year. The Company expects to reclassify the entire gain of $2.6 million, net of tax, in AOCI as of June 30, 2012 to Net revenues during the next 12 months due to the recognition of the hedged forecasted sales. The Company hedges expenditures denominated in Mexican Peso (“MX$”), which are designated as cash flow hedges and are accounted for under the hedge accounting provisions of the Derivatives and Hedging Topic of the FASB ASC. The Company hedges a portion of the forecasted MX$ denominated expenditures with a cross-currency swap. The effective portion of the hedge gain or loss is initially reported as a component of AOCI and subsequently reclassified into Cost of revenues when the hedged exposure affects operations. Any ineffective portion of related gains or losses is recorded in the Condensed consolidated statements of operations immediately. As of June 30, 2012 and March 31, 2012, the Company had foreign currency swap contracts of approximately MX$237.5 million and MX$317.5 million, respectively. In the three months ended June 30, 2012 and 2011, there were no material realized gains or losses on MX$ cash flow hedges recognized in Cost of revenues in the Condensed consolidated statement of operations and there were no material losses in AOCI as of June 30, 2012 to be recognized during the next 12 months due to the recognition of the hedged forecasted expenditures. The following table summarizes the notional value of the Company’s outstanding MX$ cross-currency swaps and approximate USD Equivalent at June 30, 2012:
The amounts in the tables below include fair value adjustments related to the Company’s own credit risk and counterparty credit risk. Fair Value of Derivative Contracts The fair value of derivative contracts under the Derivatives and Hedging Topic of the FASB ASC was as follows:
Effect of Designated Derivative Contracts on Accumulated Other Comprehensive Income The following table represents only the balance of designated derivative contracts under the Derivatives and Hedging Topic of the FASB ASC as of June 30, 2012 and March 31, 2012, and the pre-tax impact of designated derivative contracts on AOCI for the three months ended June 30, 2012:
Effect of Designated Derivative Contracts on the Condensed Consolidated Statements of Operations The effect of designated derivative contracts under the Derivatives and Hedging Topic of the FASB ASC on results of operations recognized in Gross profit in the Condensed consolidated statements of operations was as follows:
Effect of Non-Designated Derivative Contracts on the Condensed Consolidated Statements of Operations The effect of non-designated derivative contracts under the Derivatives and Hedging Topic of the FASB ASC on results of operations recognized in Interest and other income, net in the Condensed consolidated statements of operations was as follows:
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