Derivative Instruments

3 Months Ended

Mar. 30, 2014

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):

	March 30, 2014		December 31, 2013
Cash flow hedges	$	177,397	$	208,446
Balance sheet hedges	158,511		172,947
Total outstanding derivative contracts	$	335,908	$	381,393

The outstanding contracts at March 30, 2014 have varying maturities through the third quarter of 2015. 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 atMarch 30, 2014. 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
	March 30, 2014			March 31, 2013
Foreign currency loss, inclusive of the impact of derivatives	$	(230	)	$	(599	)

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 twenty-four 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

Our derivative instruments are subject to master netting arrangements and are presented net in our balance sheet. We do not have any financial collateral related to these netting arrangements. The effect of these netting arrangements on our balance sheet is as follows (in thousands):

	Offsetting of Derivative Assets							Offsetting of Derivative Liabilities
March 30, 2014	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Balance Sheet			Net Amounts Presented in Other Current Assets		Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Balance Sheet			Net Amounts Presented in Other Current Liabilities
Foreign exchange contracts designated as hedging instruments	$	—	$	—		$	—	$	3,876	$	(2,065	)	$	1,811
Foreign exchange contracts not designated as hedging instruments	720		(275		)	445		2,203		(633		)	1,570
Total	$	720	$	(275	)	$	445	$	6,079	$	(2,698	)	$	3,381

	Offsetting of Derivative Assets							Offsetting of Derivative Liabilities
December 31, 2013	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Balance Sheet			Net Amounts Presented in Other Current Assets		Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Balance Sheet			Net Amounts Presented in Other Current Liabilities
Foreign exchange contracts designated as hedging instruments	$	—	$	—		$	—	$	4,362	$	(3,042	)	$	1,320
Foreign exchange contracts not designated as hedging instruments	2,171		(698		)	1,473		2,916		(1,650		)	1,266
Total	$	2,171	$	(698	)	$	1,473	$	7,278	$	(4,692	)	$	2,586

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

	Thirteen Weeks Ended
Foreign Exchange Contracts in Cash Flow Hedging Relationships	March 30, 2014			March 31, 2013
Amount of gain/(loss):
Recognized in OCI (effective portion)	$	(2,202	)	$	(1,799	)
Reclassified from accumulated OCI into revenue (effective portion)	37			—
Reclassified from accumulated OCI into cost of sales (effective portion)	(570		)	(297		)
Recognized in other, net (ineffective portion and amount excluded from effectiveness testing)	—			(25		)
Foreign Exchange Contracts Not in Cash Flow Hedging Relationships
Amount of gain/(loss):
Recognized in other, net	$	3,109		$	767

The unrealized losses at March 30, 2014are expected to be reclassified to net income during the next eighteen months as a result of the underlying hedged transactions also being recorded in net income.