Derivative Financial Instruments

9 Months Ended

Sep. 30, 2013

Derivative Financial Instruments

Derivative Financial Instruments

Note 3—Derivative Financial Instruments

The Company enters into foreign currency forward contracts with financial institutions to reduce the risk that the Company’s cash flows and earnings will be adversely affected by foreign currency exchange rate fluctuations. These forward contracts are not designated for trading or speculative purposes and are not designated as hedging instruments.

The Company uses foreign currency forward contracts to hedge a portion of its receivable balances denominated in Euro, Swedish Krona, British Pounds, South African Rand and Norwegian Kroner. The Company recognizes gains and losses on these contracts, as well as related costs, in “Interest and other income (expense), net” in the accompanying condensed consolidated statements of operations along with the gains and losses of the related hedged items. The Company records the fair value of derivative instruments as either “Prepaid expenses and other” or “Accrued liabilities” in the accompanying condensed consolidated balance sheets based on current market rates.

At September 30, 2013 and December 31, 2012, net derivative assets (liabilities) associated with forward contracts of approximately $0 and $(27,000), respectively, were included in “Prepaid expenses and other” or “Accrued liabilities” in the accompanying condensed consolidated balance sheets. The effect of the derivative financial instruments on the condensed consolidated statements of operations for the nine months ended September 30, 2013 was to increase foreign exchange gains by approximately $45,000 and reflects net realized and unrealized gains related to our derivative financial instruments. The derivative financial instruments had no effect in the same period last year.

As of September 30, 2013, Advent had no outstanding foreign currency forward contracts.