Derivative Instruments

9 Months Ended

Sep. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Note 4. Derivative Instruments

The Company uses derivative instruments to manage a variety of risks, including risks related to fluctuations in foreign currency exchange rates and interest rates on debt instruments. We do not use derivative financial instruments for speculative purposes.

The notional amount of the Company's derivatives is summarized as follows (in millions):


	As of
	September 30, 2020		December 31, 2019
Designated derivatives:
Cash flow hedges:
Foreign currency contracts	$	711.7	$	484.0
Interest rate lock contracts	650.0		—
Fair value hedges:
Interest rate swap contracts	300.0		300.0
Total designated derivatives	1,661.7		784.0

Non-designated derivatives	163.3		162.9
Total	$	1,825.0	$	946.9

The fair value of derivative instruments on the Consolidated Balance Sheets was as follows:


		As of
	Balance Sheet Classification	September 30, 2020		December 31, 2019
Derivative assets:
Derivatives designated as hedging instruments:
Foreign currency contracts	Other current assets	$	12.1	$	2.2
Foreign currency contracts	Other long-term assets	8.7		0.3
Interest rate lock contracts	Other long-term assets	10.9		—
Interest rate swap contracts	Other long-term assets	25.9		—
Total derivatives designated as hedging instruments		$	57.6	$	2.5
Derivatives not designated as hedging instruments	Other current assets	0.1		—
Total derivative assets		$	57.7	$	2.5
Derivative liabilities:
Derivatives designated as hedging instruments:
Foreign currency contracts	Other accrued liabilities	$	1.8	$	6.6
Foreign currency contracts	Other long-term liabilities	0.2		—

Interest rate swap contracts	Other long-term liabilities	—		3.1
Total derivatives designated as hedging instruments		$	2.0	$	9.7
Derivatives not designated as hedging instruments	Other accrued liabilities	0.2		0.2
Total derivative liabilities		$	2.2	$	9.9

Designated Derivatives

The Company uses foreign currency forward contracts to hedge the Company's planned cost of revenues and operating expenses denominated in foreign currencies. These derivatives are designated as cash flow hedges and typically have maturities of thirty-six months or less.

In 2020, the Company entered into interest rate locks with large financial institutions, which fix the benchmark interest rates of future debt issuance for an aggregate notional amount of $650.0 million. These contracts are designated as cash flow hedges and are expected to terminate within 5 years.

In 2019, the Company entered into interest rate swaps with an aggregate notional amount of $300.0 million designated as fair value hedges of our fixed-rate 2041 Notes. These swaps convert the fixed interest rates of the notes to floating interest rates based on the LIBOR. Most of the interest rate swaps will expire within nine years or less.

Effect of Derivative Instruments on the Consolidated Statements of Operations

For cash flow hedges, the Company recognized an unrealized gain of $35.3 million and $24.1 million in accumulated other comprehensive income for the effective portion of its derivative instruments for the three and nine months ended September 30, 2020, respectively. The Company recognized an unrealized loss of $12.4 million and $11.1 million in accumulated other comprehensive income for the effective portion of its derivative instruments for the three and nine months ended September 30, 2019, respectively.

For foreign currency forward contracts, the Company reclassified a loss of $1.4 million and $9.8 million out of accumulated other comprehensive income to cost of revenues and operating expenses in the Condensed Consolidated Statements of Operations during the three and nine months ended September 30, 2020, respectively, and a loss of $0.8 million and $1.5 million for the comparable periods ended September 30, 2019, respectively. As of September 30, 2020, an estimated $10.2 million of unrealized net gain within accumulated other comprehensive loss is expected to be reclassified into earnings within the next twelve months.

Non-Designated Derivatives

The Company also uses foreign currency forward contracts to mitigate variability in gains and losses generated from the remeasurement of certain monetary assets and liabilities denominated in foreign currencies. These foreign exchange forward contracts typically have maturities of approximately one to four months. The outstanding non-designated derivative instruments are carried at fair value. Changes in the fair value of these derivatives, which were recorded in other expense, net within the Condensed Consolidated Statements of Operations, were not material during the three and nine months ended September 30, 2020 and September 30, 2019.