XML 26 R16.htm IDEA: XBRL DOCUMENT v3.20.2
DERIVATIVE INSTRUMENTS AND HEDGING STRATEGIES
 9 Months Ended
Sep. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE INSTRUMENTS AND HEDGING STRATEGIES DERIVATIVE INSTRUMENTS AND HEDGING STRATEGIES
The Company uses forward foreign currency exchange contracts (forward contracts) to hedge certain operational exposures resulting from potential changes in foreign currency exchange rates. Such exposures result from portions of the Company’s forecasted revenues and operating expenses being denominated in currencies other than the U.S. Dollar (USD), primarily the Euro. Certain of these forward contracts are designated as hedging instruments and have maturities up to two and a half years. The Company also enters into forward contracts that are considered to be economic hedges that are not designated as hedging instruments and have maturities up to three months. Whether designated or undesignated, these forward contracts protect against the reduction in value of forecasted foreign currency cash flows resulting from product revenues, royalty revenues, operating expenses and asset or liability positions designated in currencies other than the USD. To receive hedge accounting treatment, cash flow hedges must be highly effective in offsetting changes to expected future cash flows on hedged transactions. The Company does not hold or issue derivative instruments for trading or speculative purposes.
The Company is exposed to counterparty credit risk on its derivatives. The Company has established and maintains strict counterparty credit guidelines and enters into hedging agreements with financial institutions that are investment grade or better to minimize the Company’s exposure to potential defaults. The Company is not required to pledge collateral under these agreements.
The following table summarizes the aggregate notional amounts for the Company’s derivatives designated as hedging instruments outstanding as of the periods presented.
Foreign Exchange ContractsSeptember 30, 2020December 31, 2019
Sell$729,998 $820,546 
Purchase$163,116 $212,348 
The following table summarizes the aggregate notional amounts for the Company’s derivatives not designated as hedging instruments outstanding as of the periods presented.
Foreign Exchange ContractsSeptember 30, 2020December 31, 2019
Sell$41,031 $77,335 
Purchase$30,031 $30,818 
The fair value carrying amounts of the Company’s derivatives, as classified within the fair value hierarchy, were as follows:
Balance Sheet LocationSeptember 30, 2020December 31, 2019
Derivatives designated as hedging instruments:
Asset Derivatives - Level 2 (1)
Other current assets$13,537 $19,584 
Other assets4,621 13,539 
Subtotal$18,158 $33,123 
Liability Derivatives - Level 2 (1)
Accounts payable and accrued liabilities$7,704 $8,184 
Other long-term liabilities4,406 5,493 
Subtotal$12,110 $13,677 
Derivatives not designated as hedging instruments:
Asset Derivatives - Level 2 (1)
Other current assets$16 $469 
Liability Derivatives - Level 2 (1)
Accounts payable and accrued liabilities$70 $2,264 
Total Derivatives Assets$18,174 $33,592 
Total Derivatives Liabilities$12,180 $15,941 
(1)    For additional discussion of fair value measurements, see Note 3 – Summary of Significant Accounting Policies included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
The following tables summarize the impact of gains and losses from the Company's derivatives on its Condensed Consolidated Statements of Comprehensive Income (Loss) for the periods presented.
Three Months Ended
September 30, 2020September 30, 2019
Derivatives Designated as Cash Flow Hedging InstrumentsCash Flow Hedging Gains (Losses)
Reclassified into Earnings		Cash Flow Hedging Gains (Losses)
Reclassified into Earnings
Net product revenues as reported$460,741 $2,693 $450,900 $6,196 
Operating expenses as reported$532,725 $(815)$457,087 $(1,388)
Derivatives Not Designated as Hedging InstrumentsGains (Losses) Recognized in EarningsGains (Losses) Recognized in Earnings
Operating expenses$4,166 $(1,286)

Nine Months Ended
September 30, 2020September 30, 2019
Derivatives Designated as Cash Flow Hedging InstrumentsCash Flow Hedging Gains (Losses)
Reclassified into Earnings		Cash Flow Hedging Gains (Losses)
Reclassified into Earnings
Net product revenues as reported$1,368,816 $17,301 $1,224,458 $11,171 
Operating expenses as reported$1,400,263 $(4,274)$1,340,900 $(1,885)
Derivatives Not Designated as Hedging InstrumentsGains (Losses) Recognized in EarningsGains (Losses) Recognized in Earnings
Operating expenses$9,600 $(5,182)
As of September 30, 2020, the Company expected to reclassify unrealized gains of $4.8 million from Accumulated Other Comprehensive Income (AOCI) to earnings as the forecasted revenue and operating expense transactions occur over the next 12 months. For additional discussion of balances in AOCI see Note 13 – Accumulated Other Comprehensive Income.