Derivative Financial Instruments

9 Months Ended

Jul. 29, 2011

Derivative Financial Instruments

Derivative Financial Instruments

NOTE 8: DERIVATIVE FINANCIAL INSTRUMENTS

We use derivative financial instruments to manage well-defined interest rate and foreign currency exchange risks. We enter into derivative financial instruments with high-credit-quality counterparties and diversify our positions among such counterparties to reduce our exposure to credit losses. We do not have any credit-risk-related contingent features in our derivative contracts as of July 29, 2011.

In the second quarter of 2011, our aggregate $50,000 notional amount of interest rate swap contracts matured. These contracts were designated as cash flow hedges, to pay fixed rates of interest and receive a floating interest rate based on LIBOR. We had $50,000 notional amount of interest rate swap contracts in place as of July 30, 2010. There was no ineffectiveness for these swaps during the year-to-date period ended July 29, 2011 and the quarter or year-to-date periods ended July 30, 2010. Prior to maturity, the interest rate swap contracts were reflected at fair value in the Condensed Consolidated Balance Sheets. Unrealized gains and losses were recorded in accumulated other comprehensive income. Amounts to be received or paid under the contracts were recognized as interest expense over the life of the contracts.

At July 29, 2011, we had $3,249 and $6,432 notional amount of foreign currency contracts that mature during fiscal year 2011 and 2012, respectively. These foreign currency contracts have been designated as cash flow hedges with unrealized gains or losses recorded in accumulated other comprehensive income. Realized gains and losses will be recognized in other expense (income) when they occur. At July 30, 2010, we had approximately $2,845 notional amount of foreign currency contracts maturing during fiscal year 2010 and $5,425 maturing during fiscal year 2011. There was no ineffectiveness for these hedges during the quarter or year-to-date periods ended July 29, 2011 or July 30, 2010.

At July 29, 2011, we had $200,000 notional amount of treasury locks to hedge, or lock-in, interest rates on anticipated long-term debt to be issued. We designated the treasury locks as cash flow hedges with unrealized gains and losses recorded, net of tax, to accumulated other comprehensive income. The accumulated other comprehensive income amount in our Condensed Consolidated Balance Sheets represents the unrealized gains and losses, net of tax, from our current contracts and the unamortized gain, net of tax, from our settled contracts. The unamortized gain from our settled contracts is reclassified ratably to our condensed statements of income as a decrease to interest expense over the term of the related bond issuance. At July 30, 2010 we had no treasury lock contracts in place.

Our derivative assets and liabilities subject to fair value measurement disclosures are the following:

	Fair Value at July 29, 2011		Fair Value at July 30, 2010
	Level 2 1		Level 2 1
Assets
Prepaid expenses and other:
Foreign currency contracts	$	—	$	2
Total Assets	$	—	$	2
Liabilities
Accrued liabilities other:
Foreign currency contracts	$	275	$	—
Treasury lock contracts		8,489		—
Interest rate swap contracts		—		707
Total Liabilities	$	8,764	$	707

¹ See Note 1 in Notes to Consolidated Financial Statements in our Form 10-K for more information on fair value measurements.

Derivative gains (losses) recognized in AOCI ² and on the Condensed Consolidated Statements of Income for the three and nine-month periods ended July 29, 2011 and July 30, 2010, respectively, are as follows:

Three Months Ended July 29, 2011	Amount of Gain (Loss) recognized in AOCI2			Statement of Income Classification	Gain (Loss) in Income2
Derivatives designated as cash flow hedges
Foreign currency contracts	$	359		Other income / (expense), net	$	(244	)
Treasury lock contracts		(8,091	)	Interest expense		391
Total derivatives designated as cash flow hedges	$	(7,732	)	Total	$	147
Three Months Ended July 30, 2010	Amount of Gain (Loss) recognized in AOCI2			Statement of Income Classification	Gain (Loss) in Income2
Derivatives designated as cash flow hedges
Foreign currency contracts	$	(180	)	Other income / (expense), net	$	289
Treasury lock contracts		(391	)	Interest expense		391
Interest rate swap contracts		273		Interest expense		(329	)
Total derivatives designated as cash flow hedges	$	(298	)	Total	$	351

Nine Months Ended July 29, 2011	Amount of Gain (Loss) recognized in AOCI2			Statement of Income Classification	Gain (Loss) in Income2
Derivatives designated as cash flow hedges
Foreign currency contracts	$	91		Other income / (expense), net	$	(478	)
Treasury lock contracts		(9,662	)	Interest expense		1,173
Interest rate swap contracts		385		Interest expense		(388	)
Total derivatives designated as cash flow hedges	$	(9,186	)	Total	$	307

Nine Months Ended July 30, 2010	Amount of Gain (Loss) recognized in AOCI2			Statement of Income Classification	Gain (Loss) in Income2
Derivatives designated as cash flow hedges
Foreign currency contracts	$	172		Other income / (expense), net	$	128
Treasury lock contracts		(1,173	)	Interest expense		1,173
Interest rate swap contracts		769		Interest expense		(1,017	)
Total derivatives designated as cash flow hedges	$	(232	)	Total	$	284

² Accumulated other comprehensive income (loss) (AOCI) is included on the Condensed Consolidated Balance Sheets in the Stockholders' Equity section and is reported net of tax. The amounts disclosed in the above table are reported pretax and represent the respective period derivative activity.