Derivative Financial Instruments

9 Months Ended

Jul. 27, 2012

Derivative Financial Instruments [Abstract]

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 27, 2012.

At July 27, 2012, we had $3,249 and $2,786 notional amount of foreign currency contracts that mature during fiscal year 2012 and 2013, respectively. These foreign currency contracts have been designated as cash flow hedges with unrealized gains or losses recorded in accumulated other comprehensive income (loss). Realized gains and losses were recognized in other expense (income) when they occurred. At July 29, 2011, we had $3,249 and $6,432 notional amount of foreign currency contracts that matured in fiscal year 2011 and 2012, respectively. There was no material ineffectiveness related to these hedges during the quarter or year-to-date periods ended July 27, 2012 or July 29, 2011.

At July 27, 2012, we had no treasury lock contracts in place. During the first quarter of 2012, we settled $200,000 notional amount of treasury lock contracts as a result of issuing $400,000 of Senior Notes, yielding a pretax loss of $27,875. This loss was recognized net of tax, in accumulated other comprehensive income in the first quarter of fiscal year 2012. The accumulated other comprehensive income amount in our Condensed Consolidated Balance Sheets as of July 27, 2012 represents the unamortized gains and losses, net of tax, from our settled contracts. Unamortized gains and losses are reclassified ratably to interest expense in our Condensed Consolidated Statements of Operations over the term of the related debt. 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 issuances. 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 Sheet as of July 29, 2011 represents the unrealized gains and losses, net of tax, from our current contracts and unamortized net gains, net of tax, from our settled contracts. There was no material ineffectiveness related to these hedges for the 2012 and 2011 fiscal periods.

At July 27, 2012 and July 29, 2011, we had no interest rate derivative contracts. We had $50,000 notional amount of interest rate derivative contracts that matured in the second quarter of 2011. These contracts were designated as cash flow hedges, to pay fixed rates of interest and receive a floating interest rate based on LIBOR. Prior to maturity, the interest rate derivative contracts were reflected at fair value in the Condensed Consolidated Balance Sheets. Unrealized gains and losses were recorded in accumulated other comprehensive income (loss). Amounts to be received or paid under the contracts are recognized as interest expense over the life of the contracts.

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

	Fair Value at July 27, 2012		Fair Value at October 28, 2011		Fair Value at July 29, 2011
	Level 21		Level 21		Level 21
Assets
Prepaid expenses and other:
Foreign currency contracts	$	42	$	3	$	—
Total Assets	$	42	$	3	$	—
Liabilities
Accrued liabilities other:
Foreign currency contracts	$	—	$	—	$	275
Treasury lock contracts		—		20,005		8,489
Total Liabilities	$	—	$	20,005	$	8,764

¹ The fair value is calculated as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Our derivative financial instruments are categorized as Level 2 assets or liabilities as they have observable inputs based on quoted prices for similar assets and liabilities in active markets, or quoted prices for identical assets and liabilities in inactive markets. The fair market value was estimated using market data for the components of the derivatives financial instruments. See Note 1 in Notes to Consolidated Financial Statements in our Form 10-K for more information on fair value measurements. There were no transfers of derivative financial instruments between Level 1 and Level 2 of the fair value hierarchy as of July 27, 2012, October 28, 2011 or July 29, 2011.

Derivative gains (losses) recognized in AOCI² and on the Condensed Consolidated Statements of Operations for the three and nine-month periods ended July 27, 2012 and July 29, 2011, respectively, are as follows:

Three Months Ended July 27, 2012	Amount of Gain (Loss) recognized in AOCI2			Statement of Operations Classification	Gain (Loss) in Income2
Derivatives designated as cash flow hedges
Foreign currency contracts	$	224		Other income / (expense), net	$	62
Treasury lock contracts		319		Interest expense		(319	)
Total derivatives designated as cash flow hedges	$	543			$	(257	)
Three Months Ended July 29, 2011	Amount of Gain (Loss) recognized in AOCI2			Statement of Operations 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	)		$	147

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

Nine Months Ended July 27, 2012	Amount of Gain (Loss) recognized in AOCI2			Statement of Operations Classification	Gain (Loss) in Income2
Derivatives designated as cash flow hedges
Foreign currency contracts	$	38		Other income / (expense), net	$	414
Treasury lock contracts		(7,406	)	Interest expense		(464	)
Total derivatives designated as cash flow hedges	$	(7,368	)		$	(50	)
Nine Months Ended July 29, 2011	Amount of Gain (Loss) recognized in AOCI2			Statement of Operations 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 derivative contracts		385		Interest expense		(388	)
Total derivatives designated as cash flow hedges	$	(9,186	)		$	307

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