FOREIGN CURRENCY DERIVATIVES

The Company uses derivative instruments primarily to manage exposures to foreign currency risks. The Company’s primary objective in holding derivatives is to reduce the volatility of earnings and cash flows associated with changes in foreign currency. The program is not designed for trading or speculative purposes. The Company’s derivatives expose the Company to credit risk to the extent that the counterparties may be unable to meet the terms of the agreements. The Company seeks to mitigate such risk by limiting its counterparties to major financial institutions and by spreading the risk across several major financial institutions. In addition, the potential risk of loss with any one counterparty resulting from this type of credit risk is monitored on an ongoing basis.

In accordance with Derivatives and Hedging Topic of the FASB ASC, the Company recognizes derivative instruments as either assets or liabilities on the balance sheet at fair value. Changes in fair value (i.e., gains or losses) of the derivatives are recorded as Net revenues or Interest and other income (expense), net or as Accumulated other comprehensive income.

Non-Designated Hedges

The Company enters into foreign exchange forward contracts to reduce the impact of foreign currency fluctuations on assets and liabilities denominated in currencies other than the functional currency of the reporting entity. These foreign exchange forward contracts are not subject to the hedge accounting provisions of the Derivatives and Hedging Topic of the FASB ASC, but are carried at fair value with changes in the fair value recorded within Interest and other income (expense), net in the Consolidated statements of operations in accordance with the Foreign Currency Matters Topic of the FASB ASC. Gains and losses on these contracts are intended to offset the impact of foreign exchange rate changes on the underlying foreign currency denominated assets and liabilities, and therefore, do not subject the Company to material balance sheet risk. The Company does not enter into foreign currency forward contracts for trading purposes.

As of March 31, 2011, the Company had foreign currency forward contracts denominated in Euros ("EUR"), Great Britain Pounds ("GPB") and Australian Dollars ("AUD"). These forward contracts hedge against a portion of the Company's foreign currency-denominated cash balances, receivables and payables. The following table summarizes the Company’s outstanding foreign exchange currency contracts and approximate U.S. Dollar equivalent (“USD”), at March 31, 2011:



	Local Currency	USD Equivalent		Position	Maturity
	(in thousands)	(in thousands)
EUR	18,000	$	25,540	Sell EUR	1 month
GBP	4,000	$	6,443	Sell GBP	1 month
AUD	3,400	$	3,515	Sell AUD	1 month

As of March 31, 2010, the Company had foreign currency forward contracts of €18.0 million and £2.0 million denominated in EUR and GBP, respectively.

Foreign currency transactions, net of the effect of hedging activity on forward contracts, resulted in immaterial gains in fiscal 2011 and 2010, but recognized net losses of $6.3 million in fiscal 2009, which are included in Interest and other income (expense), net in the Consolidated statements of operations.

Cash Flow Hedges

The Company’s hedging activities include a hedging program to hedge the economic exposure from anticipated Euro and Great Britain Pound denominated sales. The Company hedges a portion of these forecasted foreign denominated sales with currency options. These transactions are designated as cash flow hedges and are accounted for under the hedge accounting provisions of the Derivatives and Hedging Topic of the FASB ASC. The effective portion of the hedge gain or loss is initially reported as a component of Accumulated other comprehensive income and subsequently reclassified into Net revenues when the hedged exposure affects earnings. Any ineffective portion of related gains or losses is recorded in the Consolidated statements of operations immediately. On a monthly basis, the Company enters into option contracts with a one-year term. It does not purchase options for trading purposes. As of March 31, 2011, the Company had foreign currency put and call option contracts of approximately €52.7 million and £14.5 million. As of March 31, 2010, it had foreign currency put and call option contracts of approximately €40.2 million and £10.8 million.

In fiscal 2011, 2010 and 2009, realized gains of $2.5 million, $1.8 million and $4.5 million, respectively, on cash flow hedges were recognized in Net revenues in the Consolidated statements of operations. The Company expects to reclassify the entire loss of $4.0 million, net of tax, in Accumulated other comprehensive income to Net revenues during the next 12 months due to the recognition of the hedged forecasted sales.

The Company hedges expenditures denominated in Mexican Peso (“MX$”), which are designated as cash flow hedges and are accounted for under the hedge accounting provisions of the Derivatives and Hedging Topic of the FASB ASC. The Company hedges a portion of the forecasted MX$ denominated expenditures with a cross-currency swap. The effective portion of the hedge gain or loss is initially reported as a component of Accumulated other comprehensive income and subsequently reclassified into Cost of revenues when the hedged exposure affects operations. Any ineffective portion of related gains or losses is recorded in the Consolidated statements of operations immediately. As of March 31, 2011 and 2010, the Company had foreign currency swap contracts of approximately MX$343.9 million and MX$251.3, respectively.

In fiscal 2011 and 2010, there were no material realized gains on Peso cash flow hedges recognized in Cost of revenues in the Consolidated statements of operations and there were no material gains in Accumulated other comprehensive income to be recognized during the next 12 months due to the recognition of the hedged forecasted expenditures.

The following table summarizes the Company's outstanding Peso currency swaps and approximate U.S. Dollar equivalent (“USD”), at March 31, 2011:



	Local Currency	USD Equivalent		Position	Maturity
	(in thousands)	(in thousands)
MX$	343,900	$	27,901	Buy Peso	Monthly over 12 months

The amounts in the tables below include fair value adjustments related to the Company’s own credit risk and counterparty credit risk.

Fair Value of Derivative Contracts

The fair value of derivative contracts were as follows:



	Derivative Assets Reported in Other Current Assets				Derivative Liabilities Reported in Accrued Liabilities
(in thousands)	March 31, 2011		March 31, 2010		March 31, 2011		March 31, 2010
Foreign exchange contracts designated as cash flow hedges	$	360	$	2,845	$	4,174	$	74
Total derivatives designated as hedging instruments	360		2,845		4,174		74
Foreign exchange contracts not designated	—		—		—		—
Total derivatives	$	360	$	2,845	$	4,174	$	74

Effect of Designated Derivative Contracts on Accumulated Other Comprehensive Income

The following table represents only the balance of designated derivative contracts under the Derivatives and Hedging Topic of the FASB ASC as of March 31, 2011 and 2010, and the impact of designated derivative contracts before tax on Accumulated other comprehensive income for fiscal years ended March 31, 2010 and 2011:



(in thousands)	March 31, 2010		Amount of gain (loss) recognized in OCI (effective portion)			Amount of gain (loss) reclassified from OCI to income (loss) (effective portion)			March 31, 2011
Foreign exchange contracts designated as cash flow hedges	$	2,771	$	(3,668	)	$	2,917	—	$	(3,814	)



(in thousands)	March 31, 2009		Amount of gain (loss) recognized in OCI (effective portion)			Amount of gain (loss) reclassified from OCI to income (loss) (effective portion)		March 31, 2010
Foreign exchange contracts designated as cash flow hedges	$	6,738	$	(1,685	)	$	2,282	$	2,771

Effect of Designated Derivative Contracts on the Consolidated Statements of Operations

The effect of designated derivative contracts under the Derivatives and Hedging Topic of the FASB ASC on results of operations recognized in Gross profit in the Consolidated statements of operations was as follows:



	Fiscal Year Ended March 31,
(in thousands)	2011		2010		2009
Gain on foreign exchange contracts designated as cash flow hedges	$	2,917	$	2,282	$	4,505

Effect of Non-Designated Derivative Contracts on the Consolidated Statements of Operations

The effect of non-designated derivative contracts under the Derivatives and Hedging Topic of the FASB ASC on results of operations recognized in Interest and other income (expense), net in the Consolidated statements of operations was as follows:



	Fiscal Year Ended March 31,
(in thousands)	2011			2010			2009
Gain (loss) on foreign exchange contracts	$	(1,800	)	$	(996	)	$	5,590