Derivative Instruments

9 Months Ended

Sep. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

6. Derivative Instruments

The Company’s primary objective for holding derivative instruments is to reduce its exposure to foreign currency rate changes. The Company reduces its exposure by entering into forward foreign exchange contracts with respect to operating expenses that are forecast to be incurred in currencies other than U.S. dollars. Substantially all of the Company’s revenue and capital purchasing activities and a majority of its operating expenditures are transacted in U.S. dollars. However, certain operating expenditures are incurred in or exposed to other currencies, primarily the Israeli shekel and the Euro.

The Company has established forecasted transaction currency risk management programs to protect against fluctuations in fair value and the volatility of future cash flows caused by changes in exchange rates. The Company’s currency risk management program includes forward foreign exchange contracts designated as cash flow hedges. These forward foreign exchange contracts generally mature within 12 months. The Company does not enter into derivative financial instruments for trading purposes.

There were no outstanding derivative instruments as of December 31, 2013. Derivative instruments measured at fair value and their classification on the condensed consolidated balance sheet as of September 30, 2014 is presented in the following table (in thousands):

	Liability as of September 30, 2014
	(unaudited)
	Notional Amount		Fair Value
Foreign Exchange Forward Contract Derivatives in cash flow hedging relationships - included in accrued and other current liabilities	$	7,040	$	419

Gains (losses) on derivative instruments and their classification on the condensed consolidated statement of operations are presented in the following table (in thousands):

	Three months ended September 30,						Nine months ended September 30,
	2014			2013			2014			2013
Foreign Exchange Forward Contract Derivatives in cash flow hedging relationships:
Gains recognized in OCI(a)	$	52		$	240		$	55		$	726
Losses recognized in OCI(a)		(620	)		(7	)		(508	)		(7	)
Gains reclassified from accumulated OCI into net loss(b)		52			561			55			1,144
Losses reclassified from accumulated OCI into net loss(b)		(73	)		—			(89	)		—
Foreign Exchange Forward Contract Derivatives not designated as hedging relationships:
Gains recognized in net loss(c)	$	—		$	40		$	—		$	25
Losses recognized in net loss(c)		—			—			—			(15	)

(a) Net change in the fair value of the effective portion classified in other comprehensive income (loss) (“OCI”).

(b) Effective portion of cash flow hedges reclassified from accumulated other comprehensive income (loss) into net loss, of which $(2) and $(19) were recognized within cost of sales and operating expenses, respectively, for the three months ended September 30, 2014 and $(3) and $(31) were recognized within cost of sales and operating expenses, respectively, for the nine months ended September 30, 2014. $36 and $525 were recognized within cost of sales and operating expenses, respectively for the three months ended September 30, 2013 and $75 and $1,069 were recognized within cost of sales and operating expenses, respectively, for the nine months ended September 30, 2013. All amounts are reflected within the respective condensed consolidated statement of operations.

(c) Classified in other income (expense), net.