Derivative Instruments

6 Months Ended

Jun. 28, 2015

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):

	June 28, 2015		December 31, 2014
Cash flow hedges	$	142,000	$	222,000
Balance sheet hedges	152,726		153,499
Total outstanding derivative contracts	$	294,726	$	375,499

The outstanding contracts at June 28, 2015 have varying maturities through the second quarter of 2016. 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 atJune 28, 2015. 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
	June 28, 2015			June 29, 2014			June 28, 2015			June 29, 2014
Foreign currency loss, inclusive of the impact of derivatives	$	(486	)	$	(723	)	$	(606	)	$	(953	)

Cash Flow Hedges

We use zero cost and net purchased collar contracts and option contracts to hedge certain anticipated foreign currency exchange transactions. The foreign exchange hedging structure may extend, generally, up to 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 rates. The 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
June 28, 2015	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	$	1,249	$	(251	)	$	998	$	—	$	—		$	—
Foreign exchange contracts not designated as hedging instruments	2,593		(349		)	2,244		590		(123		)	467
Total	$	3,842	$	(600	)	$	3,242	$	590	$	(123	)	$	467

	Offsetting of Derivative Assets							Offsetting of Derivative Liabilities
December 31, 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	$	—	$	—		$	—	$	3,283	$	(865	)	$	2,418
Foreign exchange contracts not designated as hedging instruments	2,456		(670		)	1,786		4,729		(2,622		)	2,107
Total	$	2,456	$	(670	)	$	1,786	$	8,012	$	(3,487	)	$	4,525

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	June 28, 2015			June 29, 2014			June 28, 2015			June 29, 2014
Amount of gain/(loss):
Recognized in AOCI (effective portion)	$	(5,436	)	$	(2,057	)	$	(13,724	)	$	(4,259	)
Reclassified from AOCI into revenue (effective portion)	—			9			(112		)	46
Reclassified from AOCI into cost of sales (effective portion)	(3,084		)	(1,096		)	(5,647		)	(1,666		)
Recognized in Other, net (ineffective portion and amount excluded from effectiveness testing)	(15		)	(9		)	(108		)	(9		)
Foreign Exchange Contracts Not in Cash Flow Hedging Relationships
Amount of gain/(loss):
Recognized in Other, net	$	1,473		$	(636	)	$	(5,685	)	$	(3,745	)

The unrealized losses at June 28, 2015 are expected to be reclassified to net income during the next twelve months as a result of the underlying hedged transactions also being recorded in net income.