Foreign Currency Derivatives

12 Months Ended

Dec. 31, 2011

Foreign Currency Derivatives [Abstract]

Foreign Currency Derivatives

9. Foreign Currency Derivatives:

The Company maintains a foreign currency risk management program that is designed to reduce the volatility of the Company's economic value from the effects of unanticipated currency fluctuations. International operations generate both revenues and costs denominated in foreign currencies. The Company's policy is to hedge significant foreign currency revenues and costs to improve margin visibility and reduce earnings volatility associated with unexpected changes in currency.

Non-Designated Hedges

The Company hedges its net foreign currency monetary assets and liabilities monthly, primarily resulting from foreign currency denominated receivables and payables with foreign exchange forward contracts to reduce the risk that the Company's earnings and cash flows will be adversely affected by changes in foreign currency exchange rates. These derivative instruments are carried at fair value with changes in the fair value recorded as interest and other income (expense), net. These derivative instruments do not subject the Company to material balance sheet risk due to exchange rate movements because gains and losses on these derivatives are intended to offset remeasurement gains and losses on the hedged assets and liabilities. The Company executes non-designated foreign exchange forward contracts primarily denominated in Euros, British Pounds, Israeli Shekels, Brazilian Reais, and Mexican Pesos.

The following table summarizes the Company's notional position by currency, and approximate U.S. dollar equivalent, at December 31, 2011 of the outstanding non-designated hedges (foreign currency and dollar amounts in thousands):

	Original Maturities of 360 Days or Less						Original Maturities of Greater than 360 Days
	Foreign Currency		USD Equivalent		Positions		Foreign Currency		USD Equivalent		Positions
Euro		33,124	$	43,194		Buy		5,999	$	7,832		Buy
Euro		41,758	$	55,323		Sell		30,255	$	39,502		Sell
British Pound		5,670	$	8,868		Buy		5,758	$	8,821		Buy
British Pound		9,930	$	15,536		Sell		6,244	$	9,565		Sell
Israeli Shekel		16,236	$	4,309		Buy		20,377	$	5,634		Buy
Israeli Shekel		27,520	$	7,215		Sell		—	$	—		—
Mexican Peso		5,178	$	371		Buy		—	$	—		—
Mexican Peso		10,472	$	757		Sell		—	$	—		—
Brazilian Real		388	$	180		Buy		—	$	—		—
Brazilian Real		777	$	419		Sell		—	$	—		—

The following table shows the effect of the Company's non-designated hedges in the consolidated statement of operations for the twelve months ended December 31, 2011 (in thousands):

Derivatives Not Designated as Hedging Instruments	Location of Gain or (Loss) Recognized in Income on Derivative	Amount of Gain or (Loss) Recognized in Income on  Derivative
Foreign exchange contracts	Interest and other income (expense), net	$ (357)

Cash Flow Hedges

The Company's foreign exchange risk management program objective is to reduce volatility in the Company's economic value from unanticipated foreign currency fluctuations. The Company designates forward contracts as cash flow hedges of foreign currency revenues and expenses, primarily the Euro, British Pound and Israeli Shekel. All foreign exchange contracts are carried at fair value on the balance sheet and the maximum duration of foreign exchange forward contracts do not exceed thirteen months. Speculation is prohibited by policy.

To receive hedge accounting treatment, all cash flow hedging relationships are formally designated at hedge inception, and tested both prospectively and retrospectively to ensure the forward contracts are highly effective in offsetting changes to future cash flows on the hedged transactions. The Company records effective spot to spot changes in these cash flow hedges in accumulated other comprehensive income (loss) until they are reclassified to revenue, cost of goods sold or operating expenses together with the hedged transaction. The time value on forward contracts is excluded from effectiveness testing and recorded to interest and other income (expense), net over the life of the contract together with any ineffective portion of the hedge.

The following tables show the effect of the Company's derivative instruments designated as cash flow hedges in the consolidated statements of operations for the twelve months ended December 31, 2011 and 2010 (in thousands):

	Year Ended December 31, 2011
	Gain or (Loss) Recognized in OCI—Effective Portion		Location of Gain or (Loss) Reclassified from OCI into Income—Effective Portion	Gain or (Loss) Reclassified from OCI into Income— Effective Portion			Location of Gain or  (Loss) Recognized—Ineffective Portion and Amount Excluded from Effectiveness Testing	Gain or (Loss) Recognized— Ineffective Portion and Amount Excluded from Effectiveness Testing(a)
Foreign exchange contracts	$	1,444	Product revenues	$	(7,113	)	Interest and other income (expense), net	$	(378	)
Foreign exchange contracts			Cost of revenues		388
Foreign exchange contracts			Sales and marketing		2,979
Foreign exchange contracts			Research and development		493
Foreign exchange contracts			General and administrative		393
Total	$	1,444		$	(2,860	)		$	(378	)

	Year Ended December 31, 2010
	Gain or (Loss) Recognized in OCI—Effective Portion		Location of Gain or (Loss) Reclassified from OCI into Income—Effective Portion	Gain or (Loss) Reclassified from OCI into Income— Effective Portion			Location of Gain or  (Loss) Recognized—Ineffective Portion and Amount Excluded from Effectiveness Testing	Gain or (Loss) Recognized— Ineffective Portion and Amount Excluded from Effectiveness Testing(a)
Foreign exchange contracts	$	4,046	Product revenues	$	6,223		Interest and other income (expense), net	$	70
Foreign exchange contracts			Cost of revenues		(269	)
Foreign exchange contracts			Sales and marketing		(1,729	)
Foreign exchange contracts			Research and development		359
Foreign exchange contracts			General and administrative		(62	)
Total	$	4,046		$	4,522			$	70

(a) For the year ended December 31, 2011, no gain/loss was recorded for the ineffective portion and a $0.4 million loss was recorded for the excluded time value portion of the hedge. For the year ended December 31, 2010, no gain/loss was recorded for the ineffective portion and a $0.1 million gain was recorded for the excluded time value portion of the hedge.

As of December 31, 2011, the Company estimated all values reported in accumulated other comprehensive income (loss) will be reclassified to income within the next twelve months.

The following table summarizes the derivative-related activity in accumulated other comprehensive income (loss) (in thousands and not tax-effected):

	Year Ended December 31,
	2011			2010
Beginning balance	$	(574	)	$	(98	)
Net gains/losses reclassified into earnings for revenue hedges		7,113			(6,223	)
Net gains/losses reclassified into earnings for expense hedges		(4,253	)		1,701
Net change in fair value of cash flow hedges		1,444			4,046
Ending balance	$	3,730		$	(574	)

In the event the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, the related hedge gains and losses on the cash flow hedge would be immediately reclassified to interest and other income (expense), net on the consolidated statements of operations. For the years ended December 31, 2011 and 2010, there were no such gains or losses.

The following table summarizes the Company's notional position by currency, and approximate U.S. dollar equivalent, at December 31, 2011 of the outstanding cash flow hedges, all of which are carried at fair value on the balance sheet (foreign currency and dollar amounts in thousands):

	Original Maturities of 360 Days or Less						Original Maturities of Greater than 360 Days
	Foreign Currency		USD Equivalent		Positions		Foreign Currency		USD Equivalent		Positions
Euro		6,647	$	8,786		Buy		17,492	$	24,322		Buy
Euro		5,940	$	7,971		Sell		64,207	$	89,284		Sell
British Pound		4,509	$	7,040		Buy		16,791	$	26,485		Buy
British Pound		4,437	$	6,931		Sell		17,938	$	28,280		Sell
Israeli Shekel		11,568	$	3,065		Buy		58,110	$	16,246		Buy

The estimates of fair value are based on applicable and commonly quoted prices and prevailing financial market information as of December 31, 2011. See Note 6 of Notes to Consolidated Financial Statements for additional information on the fair value measurements for all financial assets and liabilities, including derivative assets and derivative liabilities that are measured at fair value in the Consolidated Financial Statements on a recurring basis. The following table shows the Company's derivative instruments measured at gross fair value as reflected in the consolidated balance sheets as of December 31, 2011 and 2010 (in thousands):

	December 31, 2011				December 31, 2010
	Fair Value of Derivatives Designated as Hedge Instruments		Fair Value of Derivatives Not Designated as  Hedge Instruments		Fair Value of Derivatives Designated as Hedge Instruments		Fair Value of Derivatives Not Designated as  Hedge Instruments
Derivative assets(a):
Foreign exchange contracts	$	7,345	$	1,871	$	3,025	$	2,632
Derivative liabilities(b):
Foreign exchange contracts	$	3,796	$	813	$	3,503	$	1,495

(a) All derivative assets are recorded as prepaid expenses and other current assets in the consolidated balance sheets.

(b) All derivative liabilities are recorded as other accrued liabilities in the consolidated balance sheets.