FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2012

NOTE 3-FINANCIAL INSTRUMENTS

Investments in Debt and Equity Securities

The fair values of all available-for-sale securities are based on quoted market prices and are included in cash and cash equivalents, available-for-sale securities-short-term and available-for-sale securities-long-term on the Company's Condensed Consolidated Balance Sheets based on each respective security's maturity. The following is a summary of available-for-sale securities as of March 31, 2012 (in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
U.S. government obligations and agency securities	$	19,414	$	180	$	-		$	19,594
U.S. corporate debt		24,443		404		(10	)		24,837
Foreign government obligations and agency securities		2,778		17		-			2,795
Foreign corporate debt and equity securities		15,011		78		(36	)		15,053
Total available-for-sale securities	$	61,646	$	679	$	(46	)	$	62,279

The following is a summary of available-for-sale securities as of December 31, 2011 (in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
U.S. government obligations and agency securities	$	19,421	$	177	$	-		$	19,598
U.S. corporate debt		24,942		259		(101	)		25,100
Foreign government obligations and agency securities		2,805		6		(1	)		2,810
Foreign corporate debt and equity securities		15,157		41		(268	)		14,930
Total available-for-sale securities	$	62,325	$	483	$	(370	)	$	62,438

Contractual maturities of available-for-sale securities as of March 31, 2012 and December 31, 2011 are as follows (in thousands):

	March 31,		December 31,
	2012		2011
Less than one year	$	12,130	$	7,937
One to two years		32,466		25,785
More than two years		17,683		28,716
Total available-for-sale securities	$	62,279	$	62,438

The Company recognized no significant net realized gains and losses during the three months ended March 31, 2012 and 2011. Realized gains and losses are included in interest income and other, net in the Company's Condensed Consolidated Statements of Operations. All of the Company's available-for-sale securities with gross unrealized losses as of March 31, 2012 and December 31, 2011 had been in a loss position for less than 12 months.

Non-Marketable Securities

As of March 31, 2012 and December 31, 2011, the carrying amounts of the Company's non-marketable securities, totaling $5.4 million and $5.0 million, respectively, equaled their estimated fair values. Their estimated fair values were based on liquidation and net realizable values. There was no other-than-temporary impairment ("OTTI") recognized during the three months ended March 31, 2012. During the three months ended March 31, 2011, the Company recognized an expense totaling $1.2 million in interest income and other, net related to its limited partnership investment fund. Net investment results are included in interest income and other, net in the Company's Condensed Consolidated Statements of Operations. Depending on market conditions, the Company may incur additional charges on this investment portfolio in the future.

Derivative Financial Instruments

The Company derives a portion of its revenues in foreign currencies, predominantly in Europe and Japan, as part of its ongoing business operations. In addition, a portion of its assets are held in the nonfunctional currencies of its subsidiaries. The Company enters into foreign currency forward contracts to manage a portion of the volatility related to transactions that are denominated in foreign currencies. The Company's foreign currency forward contracts are entered into for periods consistent with the related underlying exposures and do not constitute positions that are independent of those exposures. The Company's accounting policies for these instruments are based on whether the instruments are classified as designated or non-designated hedging instruments. The Company records all derivatives on the Company's Condensed Consolidated Balance Sheets at fair value. The effective portions of designated cash flow hedges are recorded in other comprehensive income ("OCI") until the hedged item is recognized in operations. As of March 31, 2012, the Company's existing foreign currency forward exchange contracts mature within 12 months. The deferred amount related to the Company's derivatives currently recorded in OCI and expected to be recognized into earnings over the next 12 months is a net gain of $0.3 million. Derivatives that are not designated as hedging instruments and the ineffective portions of cash flow hedges are adjusted to fair value through earnings.

Derivative instruments designated as cash flow hedges must be de-designated as hedges when it is probable the forecasted hedged transaction will not occur in the initially identified time period or within a subsequent two-month time period. Deferred gains and losses in OCI associated with such derivative instruments are reclassified immediately into operations through other income and expense. Any subsequent changes in fair value of such derivative instruments are reflected in other income and expense unless they are re-designated as hedges of other transactions. The Company did not recognize any net gains or losses related to the loss of hedge designation on discontinued cash flow hedges during the three months ended March 31, 2012.

As of March 31, 2012 and December 31, 2011, the total notional values of the Company's foreign currency forward contracts that mature within 12 months are as follows (in thousands):

	March 31,		December 31,
	2012		2011
Euro	$	14,296	$	11,851
Japanese yen		3,031		7,008
British pound		4,251		4,459
Total	$	21,578	$	23,318

The Company did not have any contracts that were not designated or qualifying as hedges as of March 31, 2012 and December 31, 2011.

As a result of the use of derivative instruments, the Company is exposed to the risk that the counterparties may be unable to meet the terms of the agreements. To mitigate the risk, only contracts with carefully selected highly-rated major financial institutions are entered into. In the event of non-performance by these counterparties, the asset position carrying values of the financial instruments represent the maximum amount of loss that can be incurred; however, no losses as a result of counterparty defaults are expected. The Company does not require and is not required to pledge collateral for these financial instruments. The Company does not enter into foreign currency forward contracts for trading or speculative purposes and is not party to any leveraged derivative instruments.

The following table shows the Company's foreign currency derivatives measured at fair value as reflected on the Company's Condensed Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011 (in thousands):

	March 31,		December 31,		Balance Sheet
	2012		2011		Location
Derivative assets:
Foreign exchange contracts	$	410	$	940	Other current assets
Derivative liabilities:
Foreign exchange contracts		133		217	Accrued expenses

The following table shows the pre-tax effect of the Company's derivative instruments on the Company's Condensed Consolidated Statements of Operations and OCI for the three months ended March 31, 2012 and 2011 (in thousands):

	Three Months Ended March 31,
	2012			2011
Derivatives in cash flow hedging relationships:
Net gain recognized in OCI, net of tax (1)	$	310		$	-
Net gain reclassified from accumulated OCI into income, net of tax (2)		518			-
Net gain recognized in other income and expense (3)		25			-
Derivatives not designated as hedging relationships:
Net loss recognized in other income and expense (4)		(148	)		(1,905	)

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(1)	Net change in the fair value of the effective portion classified in OCI

(2)	Effective portion classified as revenue

(3)	Ineffective portion and amount excluded from effectiveness testing classified as interest and other, net

(4)	Classified in interest and other, net