Derivatives

9 Months Ended

Jul. 30, 2011

Derivatives [Abstract]

Derivatives

Note 9 — Derivatives

     Foreign Exchange Exposure Management — The Company enters into forward foreign currency exchange contracts to offset certain operational and balance sheet exposures from the impact of changes in foreign currency exchange rates. Such exposures result from the portion of the Company’s operations, assets and liabilities that are denominated in currencies other than the U.S. dollar, primarily the Euro; other exposures include the Philippine Peso and the British Pound. These foreign currency exchange contracts are entered into to support transactions made in the normal course of business, and accordingly, are not speculative in nature. The contracts are for periods consistent with the terms of the underlying transactions, generally one year or less. Hedges related to anticipated transactions are designated and documented at the inception of the respective hedges as cash flow hedges and are evaluated for effectiveness monthly. Derivative instruments are employed to eliminate or minimize certain foreign currency exposures that can be confidently identified and quantified. As the terms of the contract and the underlying transaction are matched at inception, forward contract effectiveness is calculated by comparing the change in fair value of the contract to the change in the forward value of the anticipated transaction, with the effective portion of the gain or loss on the derivative instrument reported as a component of accumulated other comprehensive (loss) income (OCI) in shareholders’ equity and reclassified into earnings in the same period during which the hedged transaction affects earnings. Any residual change in fair value of the instruments, or ineffectiveness, is recognized immediately in other (income) expense. Additionally, the Company enters into forward foreign currency contracts that economically hedge the gains and losses generated by the re-measurement of certain recorded assets and liabilities in a non-functional currency. Changes in the fair value of these undesignated hedges are recognized in other (income) expense immediately as an offset to the changes in the fair value of the asset or liability being hedged. As of July 30, 2011 and October 30, 2010, the total notional amount of these undesignated hedges was $46.9 million and $42.1 million, respectively. The fair value of these hedging instruments in the Company’s condensed consolidated balance sheets as of July 30, 2011 and October 30, 2010, was immaterial.

     Interest Rate Exposure Management — On June 30, 2009, the Company entered into interest rate swap transactions related to its outstanding 5.0% senior unsecured notes where the Company swapped the notional amount of its $375 million of fixed rate debt at 5.0% into floating interest rate debt through July 1, 2014. Under the terms of the swaps, the Company will (i) receive on the $375 million notional amount a 5.0% annual interest payment that is paid in two installments on the 1st of every January and July, commencing January 1, 2010 through and ending on the maturity date; and (ii) pay on the $375 million notional amount an annual three month LIBOR plus 2.05% (2.30% as of July 30, 2011) interest payment, payable in four installments on the 1st of every January, April, July and October, commencing on October 1, 2009 and ending on the maturity date. The LIBOR-based rate is set quarterly three months prior to the date of the interest payment. The Company designated these swaps as fair value hedges. The fair value of the swaps at inception was zero and subsequent changes in the fair value of the interest rate swaps were reflected in the carrying value of the interest rate swaps on the balance sheet. The carrying value of the debt on the balance sheet was adjusted by an equal and offsetting amount. The gain or loss on the hedged item (that is, the fixed-rate borrowings) attributable to the hedged benchmark interest rate risk and the offsetting gain or loss on the related interest rate swaps for the nine-month periods ended July 30, 2011 and July 31, 2010 are as follows:

Income Statement	July 30, 2011							July 31, 2010
Classification	Loss on Swaps			Gain on Note		Net Income Effect		Gain on Swaps		Loss on Note			Net Income Effect
Other income	$	(4,182	)	$	4,182	$	—	$	15,893	$	(15,893	)	$	—

     The amounts earned and owed under the swap agreements are accrued each period and are reported in interest expense. There was no ineffectiveness recognized in any of the periods presented.

     The market risk associated with the Company’s derivative instruments results from currency exchange rate or interest rate movements that are expected to offset the market risk of the underlying transactions, assets and liabilities being hedged. The counterparties to the agreements relating to the Company’s derivative instruments consist of a number of major international financial institutions with high credit ratings. The Company does not believe that there is significant risk of nonperformance by these counterparties because the Company continually monitors the credit ratings of such counterparties. Furthermore, none of the Company’s derivative transactions are subject to collateral or other security arrangements and none contain provisions that are dependent on the Company’s credit ratings from any credit rating agency. While the contract or notional amounts of derivative financial instruments provide one measure of the volume of these transactions, they do not represent the amount of the Company’s exposure to credit risk. The amounts potentially subject to credit risk (arising from the possible inability of counterparties to meet the terms of their contracts) are generally limited to the amounts, if any, by which the counterparties’ obligations under the contracts exceed the obligations of the Company to the counterparties. As a result of the above considerations, the Company does not consider the risk of counterparty default to be significant.

     The Company records the fair value of its derivative financial instruments in the consolidated financial statements in other current assets, other assets or accrued liabilities, depending on their net position, regardless of the purpose or intent for holding the derivative contract. Changes in the fair value of the derivative financial instruments are either recognized periodically in earnings or in shareholders’ equity as a component of OCI. Changes in the fair value of cash flow hedges are recorded in OCI and reclassified into earnings when the underlying contract matures. Changes in the fair values of derivatives not qualifying for hedge accounting are reported in earnings as they occur.

     The total notional amount of derivative instruments designated as hedging instruments as of July 30, 2011 and October 30, 2010 was as follows: $375 million of interest rate swap agreements accounted for as fair value hedges, and $149.5 million and $140.0 million, respectively, of cash flow hedges denominated in Euros, British Pounds and Philippine Pesos. The fair value of these hedging instruments in the Company’s condensed consolidated balance sheets as of July 30, 2011 and October 30, 2010 was as follows:

		Fair Value at		Fair Value at
	Balance Sheet Location	July 30, 2011		October 30, 2010
Interest rate swap agreements	Other assets	$	22,619	$	26,801
Forward foreign currency exchange contracts	Prepaid expenses and other current assets	$	4,952	$	7,542

     The effect of derivative instruments designated as cash flow hedges on the condensed consolidated statements of income for the three- and nine-month periods ended July 30, 2011 and July 31, 2010 are as follows:

	Three Months Ended
	July 30, 2011			July 31, 2010
Loss recognized in OCI on derivatives (net of tax of $351 in 2011 and $356 in 2010)	$	(2,311	)	$	(1,816	)
(Gain) loss reclassified from OCI into income (net of tax of $432 in 2011 and $668 in 2010)	$	(2,844	)	$	3,404

	Nine Months Ended
	July 30, 2011			July 31, 2010
Gain (loss) recognized in OCI on derivatives (net of tax of $693 in 2011 and $1,513 in 2010)	$	4,344		$	(9,058	)
(Gain) loss reclassified from OCI into income (net of tax of $1,027 in 2011 and $460 in 2010)	$	(6,856	)	$	$1,880

     The amounts reclassified into earnings before tax are recognized in cost of sales and operating expenses for the three- and nine-month periods ended July 30, 2011 and July 31, 2010 are as follows:

	Three Months Ended
	July 30, 2011		July 31, 2010
Cost of sales	$	1,535	$	1,497
Research and development	$	833	$	1,343
Selling, marketing, general and administrative	$	908	$	1,232

	Nine Months Ended
	July 30, 2011		July 31, 2010
Cost of sales	$	3,784	$	218
Research and development	$	2,029	$	1,116
Selling, marketing, general and administrative	$	2,070	$	1,006

     All derivative gains and losses included in OCI will be reclassified into earnings within the next 12 months. There was no ineffectiveness in the three- and nine-month periods ended July 30, 2011 or July 31, 2010.