Derivative Instruments And Hedging Activities

12 Months Ended

Oct. 26, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments And Hedging Activities

Derivative Instruments and Hedging Activities

In the normal course of business, the Company is exposed to fluctuations in interest rates and the exchange rates associated with foreign currencies. The Company’s primary objective for holding derivative financial instruments is to manage foreign currency exchange rate risk. The Company currently does not enter into derivative instruments to manage credit risk. However, the Company manages its exposure to credit risk through its investment policies. The Company generally enters into derivative transactions with high-credit quality counterparties and, by policy, limits the amount of credit exposure to any one counterparty based on its analysis of that counterparty’s relative credit standing.

The amounts subject to credit risk related to derivative instruments are generally limited to the amounts, if any, by which the counterparty’s obligations to the Company exceed the Company’s obligations with that counterparty.

Foreign Currency Exchange Rate Risk

A majority of the Company’s revenue, expense and capital purchasing activities is transacted in U.S. dollars. However, the Company is exposed to foreign currency exchange rate risk inherent in conducting business globally in numerous currencies. The Company is primarily exposed to foreign currency fluctuations related to operating expenses denominated in currencies other than the U.S. dollar, of which the most significant to its operations for the fiscal year ended October 26, 2013, were the Chinese yuan, the euro, the Japanese yen, the Indian rupee, the British pound, the Singapore dollar and the Swiss franc. The Company has established a foreign currency risk management program to protect against the volatility of future cash flows caused by changes in foreign currency exchange rates. This program reduces, but does not always entirely eliminate, the impact of foreign currency exchange rate movements.

The Company’s foreign currency risk management program includes foreign currency derivatives with cash flow hedge accounting designation that utilizes foreign currency forward and option contracts to hedge exposures to the variability in the U.S. dollar equivalent of anticipated non-U.S.-dollar-denominated cash flows. These instruments generally have a maturity of less than fifteen months. For these derivatives, the Company reports the after-tax gain or loss from the effective portion of the hedge as a component of accumulated other comprehensive loss in stockholders’ equity and reclassifies it into earnings in the same period in which the hedged transaction affects earnings. The tax effect allocated to cash flow hedge-related components of other comprehensive income (loss) was not significant for the fiscal years ended October 26, 2013, October 27, 2012, and October 29, 2011.

Effective cash flow hedges are reported as a component of accumulated other comprehensive loss. Ineffective cash flow hedges are included in the Company’s net income as part of “Other income (loss), net.” The amount recorded on ineffective cash flow hedges was not significant for the fiscal years ended October 26, 2013, October 27, 2012, and October 29, 2011.

Net gains (losses) relating to the effective portion of foreign currency derivatives recorded in the consolidated statements of income are as follows (in thousands):

	Fiscal Year Ended
	October 26, 2013			October 27, 2012			October 29, 2011
Cost of revenues	$	98		$	(1,043	)	$	882
Research and development	(60		)	(1,094		)	496
Sales and marketing	356			(5,704		)	5,498
General and administrative	31			(510		)	416
Total	$	425		$	(8,351	)	$	7,292

Alternatively, the Company may choose not to hedge the foreign currency risk associated with its foreign currency exposures if the Company believes such exposure acts as a natural foreign currency hedge for other offsetting amounts denominated in the same currency or if the currency is difficult or too expensive to hedge. The net foreign currency exchange gains and losses recorded as part of “Other income (loss), net” were gains of $0.1 million and losses of $1.5 million and $0.6 million for the fiscal years ended October 26, 2013, October 27, 2012, and October 29, 2011, respectively.

Gross unrealized loss positions are recorded within “Other accrued liabilities” and “Other non-current liabilities,” and gross unrealized gain positions are recorded within “Prepaid expenses and other current assets.” As of October 26, 2013, the Company had gross unrealized loss positions of $1.4 million and gross unrealized gain positions of $1.8 million included in “Other accrued liabilities” and “Prepaid expenses and other current assets,” respectively.

Volume of Derivative Activity

Total gross notional amounts, presented by currency, are as follows (in thousands):

	Derivatives Designated as Hedging Instruments				Derivatives Not Designated as Hedging Instruments
In United States dollars	October 26, 2013		October 27, 2012		October 26, 2013		October 27, 2012
Euro	$	16,012	$	43,357	$	25,478	$	—
British pound	25,053		20,499		—		—
Japanese yen	16,172		3,776		—		12,068
Indian rupee	17,444		16,046		—		—
Singapore dollar	12,867		12,918		—		—
Swiss franc	11,066		8,575		—		—
Total	$	98,614	$	105,171	$	25,478	$	12,068

The Company utilizes a rolling hedge strategy for the majority of its foreign currency derivative instruments with cash flow hedge accounting designation that hedges exposures to the variability in the U.S. dollar equivalent of anticipated non-U.S.-dollar-denominated cash flows. All of the Company’s foreign currency forward contracts are single delivery, which are settled at maturity involving one cash payment.