4. 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, the British pound 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.

Derivative instruments measured at fair value and their classification on the condensed consolidated balance sheets are presented in the following tables (in thousands):

	As of June 30, 2018					As of December 31, 2017
	Notional Amount		Fair Value			Notional Amount		Fair Value
Foreign exchange forward contract derivatives in cash flow hedging relationships - included in (accrued and other current liabilities)	$	30,070	$	(1,412	)	$	-	$	-
Foreign exchange forward contract derivatives in cash flow hedging relationships - included in prepaid expenses and other current assets	$	-	$	-		$	66,560	$	551

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

	For the three months ended June 30						For the six months ended June 30
	2018			2017			2018			2017
Foreign Exchange Forward Contract Derivatives in cash flow hedging relationships:
Gains recognized in OCI (a)	$	0		$	1,445		$	356		$	4,332
Losses recognized in OCI (a)	$	(2,202	)		(17	)	$	(2,714	)		(17	)
Gains recognized from accumulated OCI into net income (b)	$	60		$	782		$	317		$	988
Losses recognized from accumulated OCI into net income (b)	$	(395	)	$	(5	)	$	(395	)	$	(10	)

(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 earnings, of which $70 and $265 were recognized within cost of sales and operating expenses, respectively, for the three months ended June 30, 2018; $14 of gains and $92 of losses, were recognized within cost of sales and operating expenses, respectively, for the six months ended June 30, 2018; $54 and $723 were recognized within cost of sales and operating expenses, respectively, for the three months ended June 30, 2017 and $68 and $910 were recognized within cost of sales and operating expenses, respectively, for the six months ended June 30, 2017. All amounts are reflected within the respective condensed consolidated statement of operations.