Derivative Instruments

6 Months Ended

Jul. 01, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

DERIVATIVE INSTRUMENTS

In the normal course of business, we are exposed to foreign currency risk and we use derivatives to mitigate financial exposure from movements in foreign currency exchange rates.

The aggregate notional amount of outstanding derivative contracts were as follows (in thousands):

	July 1, 2012		December 31, 2011
Cash flow hedges	$	178,000	$	193,000
Balance sheet hedges	165,432		131,391
Total outstanding derivative contracts	$	343,432	$	324,391

The outstanding contracts at July 1, 2012 have varying maturities through the first quarter of 2014. We do not enter into derivative financial instruments for speculative purposes.

We attempt to mitigate derivative credit risk by transacting with highly rated counterparties. We have evaluated the credit and nonperformance risks associated with our derivative counterparties and believe them to be insignificant and not warranting a credit adjustment atJuly 1, 2012. In addition, there are no credit contingent features in our derivative instruments.

Balance Sheet Related

In countries outside of the U.S., we transact business in U.S. dollars and in various other currencies. We attempt to mitigate our currency exposures for recorded transactions by using forward exchange contracts to reduce the risk that our future cash flows will be adversely affected by changes in exchange rates. We enter into forward sale or purchase contracts for foreign currencies to economically hedge specific cash, receivables or payables positions denominated in foreign currencies.

Changes in fair value of derivatives entered into to mitigate the foreign exchange risks related to these balance sheet items are recorded in other income (expense) together with the transaction gain or loss from the respective balance sheet position as follows (in thousands):

	Thirteen Weeks Ended						Twenty-Six Weeks Ended
	July 1, 2012			July 3, 2011			July 1, 2012			July 3, 2011
Foreign currency loss, inclusive of the impact of derivatives	$	(863	)	$	(716	)	$	(3,045	)	$	(568	)

Cash Flow Hedges

We use zero cost collar contracts and option contracts to hedge certain anticipated foreign currency exchange transactions. The foreign exchange hedging structure is set up, generally, on a 24 month time horizon. The hedging transactions we undertake primarily limit our exposure to changes in the U.S. dollar/euro and the U.S. dollar/Czech koruna exchange rate. The zero cost collar contract hedges are designed to protect us as the U.S. dollar weakens, but also provide us with some flexibility if the dollar strengthens.

These derivatives meet the criteria to be designated as hedges and, accordingly, we record the change in fair value of the effective portion of these hedge contracts relating to anticipated transactions in other comprehensive income rather than net income until the underlying hedged transaction affects net income.Gains and losses resulting from the ineffective portion of the hedge contracts, if any, are recognized as a component of net income. Gains and losses related to cash flow derivative contracts not designated as hedging instruments are recorded as a component of net income.

Summary

The fair value carrying amount of our derivative instruments was included in our balance sheet as follows (in thousands):

	Fair Value of Derivatives at				Fair Value of Derivatives at
	July 1, 2012				December 31, 2011
	Other Current Assets		Other Current Liabilities		Other Current Assets		Other Current Liabilities
Derivatives Designated as Hedging Instruments
Foreign exchange contracts in asset position	$	—	$	—	$	—	$	—
Foreign exchange contracts in liability position	—		6,693		—		7,252
Derivatives Not Designated as Hedging Instruments
Foreign exchange contracts in asset position	$	573	$	—	$	1,668	$	—
Foreign exchange contracts in liability position	—		3,206		—		8,383

The effect of derivative instruments was as follows (in thousands):

	Thirteen Weeks Ended					Twenty-Six Weeks Ended
Foreign Exchange Contracts in Cash Flow Hedging Relationships	July 1, 2012			July 3, 2011		July 1, 2012			July 3, 2011
Amount of gain/(loss):
Recognized in OCI (effective portion)	$	6,583		$	5,190	$	5,368		$	10,181
Reclassified from accumulated OCI into cost of sales (effective portion)	(1,122		)	1,983		(1,392		)	2,665
Recognized in other, net (ineffective portion and amount excluded from effectiveness testing)	(21		)	105		13			163
Foreign Exchange Contracts Not in Cash Flow Hedging Relationships
Amount of gain/(loss):
Recognized in other, net	$	(4,457	)	$	950	$	(3,631	)	$	4,789

The unrealized gains at July 1, 2012are expected to be reclassified to net income during the next 24 months as a result of the underlying hedged transactions also being recorded in net income.