Derivative Instruments

9 Months Ended

Sep. 30, 2012

Derivative Instruments [Abstract]

Derivative Instruments

5. Derivative Instruments

The Company’s primary objective for holding derivative instruments is to reduce its exposure to foreign currency rate changes. The Company reduces its exposure by entering into forward foreign exchange contracts with respect to operating expenses that are forecast to be incurred in currencies other than U.S. dollars. Substantially all of the Company’s revenue and capital purchasing activities and a majority of its operating expenditures are transacted in U.S. dollars. However, certain operating expenditures are incurred in or exposed to other currencies, primarily the Israeli shekel and the Euro.

The Company has established forecasted transaction currency risk management programs to protect against fluctuations in fair value and the volatility of future cash flows caused by changes in exchange rates. The Company’s currency risk management program includes forward foreign exchange contracts designated as cash flow hedges. These forward foreign exchange contracts generally mature within 12 months. The Company does not enter into derivative financial instruments for trading purposes.

Derivative instruments measured at fair value and their classification on the condensed consolidated balance sheets are presented in the following tables (in thousands):

	Asset (Liability) as of September 30,					(Liability) as of December 31,
	2012					2011
						(unaudited)
	Notional Amount		Fair Value			Notional Amount		Fair Value
Forward foreign exchange contracts included in accrued and other current liabilities	$	15,378	$	(350	)	$	20,135	$	(631	)
Forward foreign exchange contracts included in prepaid expenses and other current assets	$	12,446	$	269			—		—

Gains (losses) on derivative instruments and their classification on the condensed consolidated statement of operations are presented in the following table (in thousands):

	For the three  months ended September 30,						For the nine  months ended September 30,
	2012			2011			2012			2011
Foreign Exchange Forward Contract Derivatives in cash flow hedging relationships:
Gains recognized in OCI (a)	$	223		$	—			223		$	—
Losses recognized in OCI (a)		(115	)		(204	)		(225	)		(138	)
Gains recognized from accumulated OCI into net loss (b)		—			139			—			674
Losses recognized from accumulated OCI into net loss (b)		(283	)		—			(464	)		—
Gains recognized in net loss (c)		—			—			—			49
Losses recognized in net loss (c)		—			(6	)		(5	)		—
Foreign Exchange Forward Contract Derivatives not designated as hedging relationships:
Gains recognized in net loss (d)		47			—			117			—
Losses recognized in net loss (d)	$	—		$	—		$	(17	)	$	—

(a) Net change in the fair value of the effective portion classified in other comprehensive income (loss) (“OCI”).

(b) Effective portion of cash flow hedges reclassified from accumulated other comprehensive income (loss) into net loss, of which $(17) and $(266) were recognized within cost of sales and operating expenses, respectively, for the three months ended September 30, 2012 and $(31) and $(433) were recognized within cost of sales and operating expenses for the nine months ended September 30, 2012. $11 and $128 were recognized within cost of sales and operating expenses, respectively for the three months ended September 30, 2011 and $53 and $621 were recognized within cost of sales and operating expenses, respectively, for the nine months ended September 30, 2011. All amounts are reflected with the respective condensed consolidated statement of operations.

(c) Ineffective portion and amount excluded from effectiveness testing classified in other income (expense), net.

(d) Classified in other income (expense), net.