Derivative Instruments

6 Months Ended

Jun. 30, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

The Company has global operations and transacts business in multiple currencies, which exposes it to foreign currency exchange rate risk. The Company enters into foreign currency derivative contracts with financial institutions to reduce the risk that its cash flows and earnings will be adversely affected by foreign currency exchange rate fluctuations. The Company’s program is not designated for trading or speculative purposes.

These derivative instruments expose the Company to credit risk to the extent that the counterparties may be unable to meet the terms of the arrangement. The Company seeks to mitigate this credit risk by transacting with major financial institutions with high credit ratings. In addition, the Company generally enters into master netting arrangements, which mitigate credit risk by permitting net settlement of transactions with the same counterparty. The Company is not required to pledge, and is not entitled to receive, cash collateral related to these derivative instruments.

Cash Flow Hedges

The Company uses foreign currency derivative contracts designated as cash flow hedges to hedge forecasted revenue transactions denominated in currencies other than the US dollar. The Company's cash flow hedges consist of forward and option contracts with maturities of 12 months or less.

The Company evaluates the effectiveness of its cash flow hedges on a quarterly basis. Effectiveness represents a derivative instrument's ability to generate offsetting changes in cash flows related to the hedged risk. The Company records the gains or losses, net of tax, related to the effective portion of its cash flow hedges as a component of Accumulated other comprehensive income (loss) ("AOCI") in stockholders' equity and subsequently reclassifies the gains or losses into revenue when the underlying hedged revenue is recognized. The Company records the gains or losses related to the ineffective portion of the cash flow hedges, if any, immediately in Other income (expense), net. The change in time value related to the Company's cash flow hedges is excluded from the assessment of hedge effectiveness and is recorded immediately in Other income (expense), net. If the hedged transaction becomes probable of not occurring, the corresponding amounts in AOCI would immediately be reclassified as ineffectiveness to Other income (expense), net. Cash flows related to the Company's cash flow hedging program are recognized as cash flows from operating activities in its statements of cash flows.

As of June 30, 2016 and December 31, 2015, the Company had outstanding cash flow hedges with a total notional amount of $406.6 million and $321.5 million, respectively.

Balance Sheet Hedges

The Company uses foreign currency derivative contracts not designated as hedging instruments (“balance sheet hedges”) to reduce the exchange rate risk associated with its foreign currency denominated monetary assets and liabilities. These balance sheet hedges are marked-to-market at the end of each reporting period and the related gains and losses are recognized in Other income (expense), net.

As of June 30, 2016 and December 31, 2015, the Company had outstanding balance sheet hedges with a total notional amount of $232.7 million and $239.9 million, respectively.

Other Derivative

The Company's other derivative is related to the accounting for the embedded features on the preferred stock of the Company's joint venture, which is expected to be settled in cash at a value equal to the fair value of the preferred stock, subject to a floor and a cap.

Fair Value of Derivative Contracts

The foreign currency derivative contracts that were not settled at the end of the period and other derivative contract are recorded at fair value, on a gross basis, in the condensed consolidated balance sheets. The following table presents the fair value of the Company’s derivative contracts as of the periods presented (in thousands):

	June 30, 2016		December 31, 2015
Derivative assets:
Cash flow hedges	$	16,854	$	11,897
Balance sheet hedges	6,339		2,611
Total derivative assets	23,193		14,508
Derivative liabilities:
Cash flow hedges	685		790
Balance sheet hedges	687		1,057
Other derivative	16,100		11,600
Total derivative liabilities	17,472		13,447
Total fair value of derivative instruments, net	$	5,721	$	1,061

See Note 2, Fair Value Measurements, for additional information related to the fair value of the Company’s foreign currency and other derivative contracts.    

Financial Statement Effect of Derivative Contracts

The following table presents the activity of the Company’s cash flow hedges in AOCI in stockholders' equity for the periods presented (in thousands):

	December 31, 2015		Amount of gain (loss) recognized in other comprehensive income before tax effect (effective portion)	Amount of (gain) loss reclassified from AOCI before tax effect to net revenue (effective portion)		June 30, 2016
Cash flow hedges	$	11,857	11,381	(7,434	)	$	15,804

	December 31, 2014		Amount of gain (loss) recognized in other comprehensive income before tax effect (effective portion)		Amount of (gain) loss reclassified from AOCI before tax effect to net revenue (effective portion)	June 30, 2015
Cash flow hedges	$	—	(4,191	)	934	$	(3,257	)

The amount recognized in earnings related to the ineffective portion of the Company's cash flow hedges was insignificant for the quarter.

As of June 30, 2016, the Company estimates approximately $15.8 million of net derivative gains related to our cash flow hedges will be reclassified from AOCI into earnings within the next 12 months.

The following table presents the impact of the Company’s derivative contracts on the condensed consolidated statement of operations for the periods presented (in thousands):

		Three Months Ended June 30,						Six Months Ended June 30,
	Location of Gain (Loss)	2016			2015			2016			2015
Cash flow hedges	Net revenue	$	2,892		$	(934	)	$	7,434		$	(934	)
Cash flow hedges	Other expense, net (1)	(3,897		)	(2,407		)	(6,188		)	(2,407		)
Balance sheet hedges	Other expense, net	5,795			(5,491		)	2,543			5,719
Other derivative	Other expense, net	(2,200		)	—			(4,500		)	—
Total gain (loss) from derivative contracts		$	2,590		$	(8,832	)	$	(711	)	$	2,378

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(1) Balances relate to changes in fair value that are excluded from the Company's assessment of hedge effectiveness.