Derivative Financial Instruments

12 Months Ended

Dec. 31, 2011

Derivative Financial Instruments

Derivative Financial Instruments

Note 3—Derivative Financial Instruments

        The Company enters into foreign currency forward contracts with financial institutions to reduce the risk that the Company's cash flows and earnings will be adversely affected by foreign currency exchange rate fluctuations. The program is not designated for trading or speculative purposes.

        The Company recognizes derivative instruments as either assets or liabilities on the accompanying consolidated balance sheets at fair value based on current market rates. The Company records changes in the fair value (e.g., gains or losses) of the derivatives in "interest income and other expense, net" on the accompanying consolidated statements of operations.

Non-designated Hedges

        The Company uses foreign currency forward contracts to hedge a portion of the balances denominated in Euro, Swedish Krona, British Pounds, South African Rand and Norwegian Kroner. These derivative instruments are not designated as hedging instruments. The Company recognizes gains and losses on these contracts, as well as related costs, in "Interest and other income (expense), net" along with the gains and losses of the related hedged items. The Company records the fair value of derivative instruments as either "Prepaid expenses and other" or "Accrued liabilities" on the accompanying condensed consolidated balance sheets based on current market rates.

        At December 31, 2011 and 2010, net derivative assets associated with the forward contracts of approximately $25,000 and zero, respectively, were included in "Prepaid expenses and other." The effect of the derivative financial instruments on the consolidated statements of operations for fiscal 2011 and 2010 was to reduce foreign exchange (gains) and losses by approximately $(40,000) and $13,000, respectively, which reflects both realized and unrealized gains (losses) related to our derivative financial instruments.

        As of December 31, 2011, the Company had outstanding forward contracts with a notional value of R3.5 million South African Rand (ZAR), or approximately $429,000.