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Derivative Financial Instruments | 9 Months Ended
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Sep. 29, 2013
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments | Derivative Financial Instruments The Company’s subsidiaries have had, and will continue to have material future cash flows, including revenue and expenses, which are denominated in currencies other than the Company’s functional currency. The Company and all its subsidiaries designate the U.S. dollar as the functional currency. Changes in exchange rates between the Company’s functional currency and other currencies in which the Company transacts business will cause fluctuations in cash flow expectations and cash flow realized or settled. Accordingly, the Company uses derivatives to mitigate its business exposure to foreign exchange risk. The Company enters into foreign currency forward contracts in Australian dollars, British pounds, Euros, and Japanese yen to manage the exposures to foreign exchange risk related to expected future cash flows on certain forecasted revenue, costs of revenue, operating expenses and existing assets and liabilities. The Company does not enter into derivatives transactions for trading or speculative purposes. The Company’s foreign currency forward contracts do not contain any credit-risk-related contingent features. The Company is exposed to credit losses in the event of nonperformance by the counter-parties of its forward contracts. The Company enters into derivative contracts with high-quality financial institutions and limits the amount of credit exposure to any one counter-party. In addition, the derivative contracts typically mature in less than six months and the Company continuously evaluates the credit standing of its counter-party financial institutions. The counter-parties to these arrangements are large highly rated financial institutions and the Company does not consider non-performance a material risk. The Company may choose not to hedge certain foreign exchange exposures for a variety of reasons, including, but not limited to, immateriality, accounting considerations and the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in foreign exchange rates. The Company’s accounting policies for these instruments are based on whether the instruments are designated as hedge or non-hedge instruments in accordance with the authoritative guidance for derivatives and hedging. The Company records all derivatives on the balance sheet at fair value. The effective portions of cash flow hedges are recorded in other comprehensive income until the hedged item is recognized in earnings. Derivatives that are not designated as hedging instruments and the ineffective portions of its designated hedges are adjusted to fair value through earnings in other income, net in the unaudited condensed consolidated statement of operations. The fair values of the Company’s derivative instruments and the line items on the unaudited condensed consolidated balance sheet to which they were recorded as of September 29, 2013, and December 31, 2012, are summarized as follows (in thousands):
Derivative Assets |  | Balance Sheet Location |  | Fair Value at September 29, 2013 |  | Balance Sheet Location |  | Fair Value at December 31, 2012
Derivative assets not designated as hedging instruments |  | Prepaid expenses and other current assets |  | $ | 219 |  |  | Prepaid expenses and other current assets |  | $ | 1,142 |
Derivative assets designated as hedging instruments |  | Prepaid expenses and other current assets |  | 9 |  |  | Prepaid expenses and other current assets |  | 2 |
Total |  |  |  | $ | 228 |  |  |  |  | $ | 1,144 |
Derivative Liabilities |  | Balance Sheet Location |  | Fair Value at September 29, 2013 |  | Balance Sheet Location |  | Fair Value at December 31, 2012
Derivative liabilities not designated as hedging instruments |  | Other accrued liabilities |  | $ | (1,464 | ) |  | Other accrued liabilities |  | $ | (1,616 | )
Derivative liabilities designated as hedging instruments |  | Other accrued liabilities |  | (149 | ) |  | Other accrued liabilities |  | (3 | )
Total |  |  |  | $ | (1,613 | ) |  |  |  | $ | (1,619 | )
For details of the Company’s fair value measurements, see Note 13, Fair Value of Financial Instruments. Offsetting Derivative Assets and Liabilities The Company has entered into master netting arrangements which allow net settlements under certain conditions. Although netting is permitted, it is currently the Company's policy and practice to record all derivative assets and liabilities on a gross basis in the condensed consolidated balance sheets. The following tables set forth the offsetting of derivative assets as of September 29, 2013 and December 31, 2012 (in thousands):
As of September 29, 2013 |  |  |  |  |  |  |  | Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets |  |
| Gross Amounts of Recognized Assets |  | Gross Amounts Offset in the Condensed Consolidated Balance Sheets |  | Net Amounts Of Assets Presented in the Condensed Consolidated Balance Sheets |  | Financial Instruments |  | Cash Collateral Pledged |  | Net Amount
Barclays |  | $ | 159 |  |  | $ | — |  |  | $ | 159 |  |  | $ | (159 | ) |  | $ | — |  |  | $ | — |
Wells Fargo Bank |  | 69 |  |  | — |  |  | 69 |  |  | (69 | ) |  | — |  |  | — |
Total |  | $ | 228 |  |  | $ | — |  |  | $ | 228 |  |  | $ | (228 | ) |  | $ | — |  |  | $ | — |
As of December 31, 2012 |  |  |  |  |  |  |  | Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets |  |
| Gross Amounts of Recognized Assets |  | Gross Amounts Offset in the Condensed Consolidated Balance Sheets |  | Net Amounts Of Assets Presented in the Condensed Consolidated Balance Sheets |  | Financial Instruments |  | Cash Collateral Pledged |  | Net Amount
Barclays |  | $ | 1,107 |  |  | $ | — |  |  | $ | 1,107 |  |  | $ | (1,107 | ) |  | $ | — |  |  | $ | — |
Wells Fargo Bank |  | 37 |  |  | — |  |  | 37 |  |  | (37 | ) |  | — |  |  | — |
Total |  | $ | 1,144 |  |  | $ | — |  |  | $ | 1,144 |  |  | $ | (1,144 | ) |  | $ | — |  |  | $ | — |
The following tables set forth the offsetting of derivative liabilities as of September 29, 2013 and December 31, 2012 (in thousands):
As of September 29, 2013 |  |  |  |  |  |  |  | Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets |  |
| Gross Amounts of Recognized Liabilities |  | Gross Amounts Offset in the Condensed Consolidated Balance Sheets |  | Net Amounts Of Liabilities Presented in the Condensed Consolidated Balance Sheets |  | Financial Instruments |  | Cash Collateral Pledged |  | Net Amount
Barclays |  | $ | 711 |  |  | $ | — |  |  | $ | 711 |  |  | $ | (159 | ) |  | $ | — |  |  | $ | 552 |
Wells Fargo Bank |  | 902 |  |  | — |  |  | 902 |  |  | (69 | ) |  | — |  |  | 833 |
Total |  | $ | 1,613 |  |  | $ | — |  |  | $ | 1,613 |  |  | $ | (228 | ) |  | $ | — |  |  | $ | 1,385 |
As of December 31, 2012 |  |  |  |  |  |  |  | Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets |  |
| Gross Amounts of Recognized Liabilities |  | Gross Amounts Offset in the Condensed Consolidated Balance Sheets |  | Net Amounts Of Liabilities Presented in the Condensed Consolidated Balance Sheets |  | Financial Instruments |  | Cash Collateral Pledged |  | Net Amount
Barclays |  | $ | 1,401 |  |  | $ | — |  |  | $ | 1,401 |  |  | $ | (1,107 | ) |  | $ | — |  |  | $ | 294 |
Wells Fargo Bank |  | 218 |  |  | — |  |  | 218 |  |  | (37 | ) |  | — |  |  | 181 |
Total |  | $ | 1,619 |  |  | $ | — |  |  | $ | 1,619 |  |  | $ | (1,144 | ) |  | $ | — |  |  | $ | 475 |
Cash flow hedges To help manage the exposure of operating margins to fluctuations in foreign currency exchange rates, the Company hedges a portion of its anticipated foreign currency revenue, costs of revenue and certain operating expenses. These hedges are designated at the inception of the hedge relationship as cash flow hedges under the authoritative guidance for derivatives and hedging. Effectiveness is tested at least quarterly both prospectively and retrospectively using regression analysis to ensure that the hedge relationship has been effective and is likely to remain effective in the future. The Company typically hedges portions of its anticipated foreign currency exposure for three to five months. The Company enters into about five forward contracts per quarter with an average size of about $7 million USD equivalent related to its cash flow hedging program. The Company expects to reclassify to earnings all of the amounts recorded in other comprehensive income ("OCI") associated with its cash flow hedges over the next twelve months. OCI associated with cash flow hedges of foreign currency revenue is recognized as a component of net revenue in the same period as the related revenue is recognized. OCI associated with cash flow hedges of foreign currency costs of revenue and operating expenses are recognized as a component of cost of revenue and operating expense in the same period as the related costs of revenue and operating expenses are recognized. Derivative instruments designated as cash flow hedges must be de-designated as hedges when it is probable the forecasted hedged transaction will not occur within the designated hedge period or if not recognized within 60 days following the end of the hedge period. Deferred gains and losses in other comprehensive income associated with such derivative instruments are reclassified immediately into earnings through other income and expense. Any subsequent changes in fair value of such derivative instruments also are reflected in current earnings unless they are re-designated as hedges of other transactions. The Company did not recognize any material net gains or losses related to the loss of hedge designation on discontinued cash flow hedges during the three and nine months ended September 29, 2013, and September 30, 2012. The effects of the Company’s derivative instruments on OCI and the unaudited condensed consolidated statement of operations for the three and nine months ended September 29, 2013, and September 30, 2012, are summarized as follows (in thousands):
Derivatives Designated as Hedging Instruments |  | Three Months Ended September 29, 2013
| Gain or (Loss) Recognized in OCI - Effective Portion (a) |  | Location of Gain or (Loss) Reclassified from OCI into Income - Effective Portion |  | Gain or (Loss) Reclassified from OCI into Income - Effective Portion (a) |  | Location of Gain or (Loss) Recognized in Income and Excluded from Effectiveness Testing |  | Amount of Gain or (Loss) Recognized in Income and Excluded from Effectiveness Testing
Cash flow hedges: |  |  |  |  |  |  |  |  |  |
Foreign currency forward contracts |  | $ | (173 | ) |  | Net revenue |  | $ | 2 |  |  | Other income, net |  | $ | (35 | )
Foreign currency forward contracts |  | — |  |  | Cost of revenue |  | (2 | ) |  | Other income, net |  | — |
Foreign currency forward contracts |  | — |  |  | Operating expenses |  | 42 |  |  | Other income, net |  | — |
Total |  | $ | (173 | ) |  |  |  | $ | 42 |  |  |  |  | $ | (35 | )
Derivatives Designated as Hedging Instruments |  | Nine Months Ended September 29, 2013
| Gain or (Loss) Recognized in OCI - Effective Portion (a) |  | Location of Gain or (Loss) Reclassified from OCI into Income - Effective Portion |  | Gain or (Loss) Reclassified from OCI into Income - Effective Portion (a) |  | Location of Gain or (Loss) Recognized in Income and Excluded from Effectiveness Testing |  | Amount of Gain or (Loss) Recognized in Income and Excluded from Effectiveness Testing
Cash flow hedges: |  |  |  |  |  |  |  |  |  |
Foreign currency forward contracts |  | $ | 319 |  |  | Net revenue |  | $ | 522 |  |  | Other income, net |  | $ | (83 | )
Foreign currency forward contracts |  | — |  |  | Cost of revenue |  | (5 | ) |  | Other income, net |  | — |
Foreign currency forward contracts |  | — |  |  | Operating expenses |  | (52 | ) |  | Other income, net |  | — |
Total |  | $ | 319 |  |  |  |  | $ | 465 |  |  |  |  | $ | (83 | )
Derivatives Designated as Hedging Instruments |  | Three Months Ended September 30, 2012
| Gain or (Loss) Recognized in OCI - Effective Portion (a) |  | Location of Gain or (Loss) Reclassified from OCI into Income - Effective Portion |  | Gain or (Loss) Reclassified from OCI into Income - Effective Portion (a) |  | Location of Gain or (Loss) Recognized in Income and Excluded from Effectiveness Testing |  | Amount of Gain or (Loss) Recognized in Income and Excluded from Effectiveness Testing
Cash flow hedges: |  |  |  |  |  |  |  |  |  |
Foreign currency forward contracts |  | $ | (411 | ) |  | Net revenue |  | $ | (253 | ) |  | Other income, net |  | $ | (26 | )
Foreign currency forward contracts |  | — |  |  | Cost of revenue |  | 5 |  |  | Other income, net |  | — |
Foreign currency forward contracts |  | — |  |  | Operating expenses |  | 140 |  |  | Other income, net |  | — |
Total |  | $ | (411 | ) |  |  |  | $ | (108 | ) |  |  |  | $ | (26 | )
Derivatives Designated as Hedging Instruments |  | Nine Months Ended September 30, 2012
| Gain or (Loss) Recognized in OCI - Effective Portion (a) |  | Location of Gain or (Loss) Reclassified from OCI into Income - Effective Portion |  | Gain or (Loss) Reclassified from OCI into Income - Effective Portion (a) |  | Location of Gain or (Loss) Recognized in Income and Excluded from Effectiveness Testing |  | Amount of Gain or (Loss) Recognized in Income and Excluded from Effectiveness Testing
Cash flow hedges: |  |  |  |  |  |  |  |  |  |
Foreign currency forward contracts |  | $ | 142 |  |  | Net revenue |  | $ | 431 |  |  | Other income, net |  | $ | (134 | )
Foreign currency forward contracts |  | — |  |  | Cost of revenue |  | (2 | ) |  | Other income, net |  | — |
Foreign currency forward contracts |  | — |  |  | Operating expenses |  | (100 | ) |  | Other income, net |  | — |
Total |  | $ | 142 |  |  |  |  | $ | 329 |  |  |  |  | $ | (134 | )
(a) | Refer to Note 10, Stockholders' Equity, which summarizes the cumulative other comprehensive income activity related to derivatives.
The Company did not recognize any net gain or loss related to the ineffective portion of cash flow hedges during the three and nine months ended September 29, 2013, and September 30, 2012. Non-designated hedges The Company enters into non-designated hedges under the authoritative guidance for derivatives and hedging to manage the exposure of non-functional currency monetary assets and liabilities held on its financial statements to fluctuations in foreign currency exchange rates, as well as to reduce volatility in other income and expense. The non-designated hedges are generally expected to offset the changes in value of its net non-functional currency asset and liability position resulting from foreign exchange rate fluctuations. Foreign currency denominated accounts receivable and payable are hedged with non-designated hedges when the related anticipated foreign revenue and expenses are recognized in the Company’s financial statements. The Company also hedges certain non-functional currency monetary assets and liabilities that may not be incorporated into the cash flow hedge program. The Company adjusts its non-designated hedges monthly and enters into about 13 non-designated derivatives per quarter. The average size of its non-designated hedges is about $2 million USD equivalent and these hedges range from one to five months in duration. The effects of the Company’s derivatives not designated as hedging instruments in other income, net in the unaudited condensed consolidated statements of operations for the three and nine months ended September 29, 2013 and September 30, 2012, are as follows (in thousands):
Derivatives Not Designated as Hedging Instruments |  | Location of Gains or (Losses) Recognized in Income on Derivative |  | Amount of Gains or (Losses) Recognized in Income on Derivative
| Three Months Ended September 29, 2013 |  | Nine Months Ended September 29, 2013
Foreign currency forward contracts |  | Other income, net |  | $ | (1,421 | ) |  | $ | 464 |
Derivatives Not Designated as Hedging Instruments |  | Location of Gains or (Losses) Recognized in Income on Derivative |  | Amount of Gains or (Losses) Recognized in Income on Derivative
| Three Months Ended September 30, 2012 |  | Nine Months Ended September 30, 2012
Foreign currency forward contracts |  | Other income, net |  | $ | (564 | ) |  | $ | (515 | )

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708775-113959 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624163-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708773-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41635-113959 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624258-113959 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5618551-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80748-113994 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624181-113959 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80784-113994 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41620-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624177-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579245-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5580258-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579240-113959 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41641-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41638-113959 Reference 20: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624171-113959 + Details
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