(12)	Financial instruments

We utilize derivative financial instruments, primarily forward exchange contracts, to manage certain foreign currency risk. While these instruments are subject to fluctuations in value, such fluctuations are generally offset by the value of the underlying exposure being hedged. During the six months ended July 1, 2011, we utilized forward contracts to sell forward euro to receive Chinese renminbi. These contracts were used to mitigate the risk of currency fluctuations in our Chinese operations. At July 1, 2011, we had six foreign exchange forward contracts outstanding to sell forward approximately 3.0 million euro, or approximately $4.4 million, to receive Chinese renminbi. The fair value of these forward contracts was a liability of $0.2 million as determined through the use of Level 2 fair value inputs as defined in ASC Topic 815. During the six months ended July 1, 2011 and June 25, 2010, no financial instruments were designated as hedges.

The following presents the classifications and fair values of our derivative instruments not designated as hedges in our Consolidated Balance Sheets (in thousands):

Consolidated Balance Sheets (Liability derivative)

Derivatives	Classification	July 1, 2011			December 31, 2010
Foreign exchange forward contracts	Accrued expenses and Other current liabilities	$	(0.2	)	$	(0.5	)

	Total:	$	(0.2	)	$	(0.5	)

The following presents the classifications and fair values of our derivative instruments not designated as hedges in our Consolidated Statement of Operations (in thousands):

Consolidated Statements of Operations (Unrealized/realized (losses)/gains)
		Three months ended					Six months ended
Derivatives	Classification	July 1, 2011			June 25, 2010		July 1, 2011			June 25, 2010
Foreign exchange forward contracts	Other (expense) income, net	$	(0.2	)	$	0.8	$	(0.5	)	$	1.6

	Total:	$	(0.2	)	$	0.8	$	(0.5	)	$	1.6

During the six months ended July 1, 2011, there were no changes in the fair value level used in the valuation of our financial assets and liabilities measured at fair value on a recurring basis.

We categorize our financial assets and liabilities on our Consolidated Balance Sheets into a three-level fair value hierarchy based on inputs used for valuation, which are categorized as follows:

Level 1–

Financial assets and liabilities whose values are based on quoted prices for identical assets or liabilities in an active public market.

Level 2–

Financial assets and liabilities whose values are based on quoted prices in markets that are not active or a valuation using model inputs that are observable for substantially the full term of the asset or liability.

Level 3–

Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management's assumptions and judgments when pricing the asset or liability.

The following table presents our fair value hierarchy for those financial assets and liabilities measured at fair value on a recurring basis in our Consolidated Balance Sheets as of July 1, 2011 (in millions):

	July 1, 2011			Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Liabilities:
Other (1)	$	(0.2	)	$	--	$	(0.2	)	$	--
Total	$	(0.2	)	$	--	$	(0.2	)	$	--

(1)

Amounts include forward contracts outstanding in our Consolidated Balance Sheet.

The majority of our financial instruments and financial assets approximate fair value, as presented on our Consolidated Balance Sheets. As of July 1, 2011, the estimated fair value of the outstanding borrowings under our senior revolving credit facility was approximately $43.0 million and the estimated fair value of our convertible senior notes was approximately $49.1 million, as determined through the use of Level 2 fair value inputs as defined in the fair value hierarchy of ASC topic 815. These liabilities are not measured at their fair value in our Consolidated Balance Sheets for any period presented.

During the six months ended July 1, 2011, we did not have any non-financial assets or non-financial liabilities that were required to be measured at fair value on a recurring basis. Management believes that there is no material risk of loss from changes in inherent market rates or prices in our financial instruments due to the materiality of our financial instruments in relation to our Consolidated Balance Sheets.

Our financial instruments, including cash and cash equivalents and long-term debt, our financial assets, including accounts receivable and inventory, and our financial liabilities, including accounts payable and accrued expenses, are exposed to interest rate, credit risk and foreign currency risk. We have policies relating to these financial instruments and their associated risks and monitor compliance with those policies.