Financial Instruments

Cash, Cash Equivalents and Marketable Securities

The Company’s marketable securities are classified as available-for-sale as of the balance sheet date and are reported at fair value with unrealized gains and losses reported, net of tax, as a separate component of accumulated other comprehensive income (loss) in stockholders’ equity. Because the Company views marketable securities as available to support current operations as needed, it has classified all available-for-sale securities as current assets. Realized gains or losses and other-than-temporary impairments, if any, on available-for-sale securities are reported in other income (expense), net, as incurred.

Investments are reviewed periodically to identify potential other-than-temporary impairments. No impairment loss has been recorded on the securities included in the tables below because the Company believes that the decrease in fair value of these securities is temporary and expects to recover up to, or beyond, the initial cost of investment for these securities.

The following table sets forth cash, cash equivalents and marketable securities as of September 30, 2017 (in thousands):



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Cash and Cash Equivalents		Marketable Securities

Cash	$	102,841	$	—	$	—		$	102,841	$	102,841	$	—
Money market funds	129,790		—		—			129,790		129,790		—
U.S. government agencies	50,703		4		—			50,707		25,795		24,912
Corporate debt securities	375,959		50		(118		)	375,891		22,255		353,636
Total	$	659,293	$	54	$	(118	)	$	659,229	$	280,681	$	378,548

The following table sets forth cash, cash equivalents and marketable securities as of December 31, 2016 (in thousands):



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Cash and Cash Equivalents		Marketable Securities

Cash	$	179,076	$	—	$	—		$	179,076	$	179,076	$	—
Money market funds	50,125		—		—			50,125		50,125		—
U.S. government agencies	86,533		8		(15		)	86,526		—		86,526
Corporate debt securities	390,466		24		(204		)	390,286		72,119		318,167
Total	$	706,200	$	32	$	(219	)	$	706,013	$	301,320	$	404,693

The gross unrealized gains or losses on marketable securities as of September 30, 2017 and December 31, 2016 were not material. There were no available-for-sale investments as of September 30, 2017 and December 31, 2016 that have been in a continuous unrealized loss position for greater than 12 months on a material basis.

The following table classifies marketable securities by contractual maturities (in thousands):



	September 30, 2017		December 31, 2016

Due in one year	$	364,734	$	355,152
Due in one to two years	13,814		49,541
Total	$	378,548	$	404,693

Derivative Financial Instruments

The Company operates in foreign countries, which exposes it to market risk associated with foreign currency exchange rate fluctuations between the U.S. dollar and various foreign currencies. In order to manage this risk, the Company may hedge a portion of its foreign currency exposures related to outstanding monetary assets and liabilities as well as forecasted revenues and expenses, using foreign currency exchange forward or option contracts. In general, the market risk related to these contracts is offset by corresponding gains and losses on the hedged transactions. The Company does not enter into derivative contracts for trading or speculative purposes.

Cash Flow Hedges

The Company has entered into foreign currency derivative contracts designated as cash flow hedges to hedge certain forecasted revenue and expense transactions denominated in currencies other than the U.S. dollar. The Company’s cash flow hedges consist of forward contracts with maturities of 12 months or less.

The Company periodically assesses the effectiveness of its cash flow hedges. 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) in stockholders’ equity and subsequently reclassifies the gains or losses into revenue and operating expenses when the underlying hedged transactions are recognized. The Company records the gains or losses related to the ineffective and excluded time value portion of the cash flow hedges, if any, immediately in other income (expense), net. If the hedged transaction becomes probable of not occurring, the corresponding amounts in accumulated other comprehensive income (loss) would immediately be reclassified 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.

The Company had outstanding contracts with a total notional amount of $142.7 million and $0 million in cash flow hedges for forecasted revenue and expense transactions, respectively, as of September 30, 2017, and $20.0 million and $20.9 million in cash flow hedges for forecasted revenue and expense transactions, respectively, as of December 31, 2016.

Balance Sheet Hedges

The Company enters into foreign exchange contracts to hedge certain monetary assets and liabilities that are denominated in currencies other than the functional currency of its subsidiaries. These foreign exchange contracts are carried at fair value, do not qualify for hedge accounting treatment, and are not designated as hedging instruments. Changes in the value of the foreign exchange contracts are recognized in other income (expense), net, and offset the foreign currency gain or loss on the underlying net monetary assets or liabilities.

The Company had outstanding balance sheet hedges with a total notional amount of $93.6 million and $177.0 million as of September 30, 2017 and December 31, 2016, respectively.

Fair Value of Foreign Currency Derivatives

The foreign currency derivative contracts that were not settled at the end of the period 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 foreign currency derivative contracts as of the periods presented (in thousands):



		September 30, 2017				December 31, 2016
	Balance Sheet Location	Fair Value Derivative Assets		Fair Value Derivative Liabilities		Fair Value Derivative Assets		Fair Value Derivative Liabilities

Cash flow designated hedges	Prepaid expenses and other current assets	$	—	$	—	$	813	$	—
Cash flow designated hedges	Accrued liabilities	—		11,826		—		1,428
Hedges not designated	Prepaid expenses and other current assets	1,307		—		9,812		—
Hedges not designated	Accrued liabilities	—		—		—		2,352
Total fair value of derivative instruments		$	1,307	$	11,826	$	10,625	$	3,780

Financial Statement Effect of Foreign Currency Derivative Contracts

The following table presents the pre-tax impact of the Company’s foreign currency derivative contracts on other comprehensive income (“OCI”) and the condensed consolidated statements of operations for the periods presented (in thousands):



		Three Months Ended						Nine Months Ended
	Income Statement Location	September 30, 2017			October 1, 2016			September 30, 2017			October 1, 2016

Foreign exchange cash flow hedges:
Gain (loss) recognized in OCI – effective portion		$	(6,603	)	$	(560	)	$	(20,590	)	$	975
Gain (loss) reclassified from OCI into income – effective portion	Revenue	(6,617		)	3,060			(6,897		)	1,511
Gain (loss) reclassified from OCI into income – effective portion	Operating expenses	—			(65		)	(1,405		)	2,343
Gain (loss) recognized in income – ineffective portion	Other income (expense), net	—			76			21			(109		)

Gain recognized in income – excluded time value portion	Other income (expense), net	672			—			1,516			—

Foreign exchange balance sheet hedges:
Gain (loss) recognized in income	Other income (expense), net	(2,062		)	(477		)	(8,838		)	3,567

As of September 30, 2017, all net derivative gains related to the Company’s cash flow hedges will be reclassified from OCI into revenue and operating expense within the next 12 months.

Offsetting of Foreign Currency Derivative Contracts

The Company presents its derivative assets and derivative liabilities at gross fair values in the condensed consolidated balance sheets. 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.

The following tables set forth the available offsetting of net derivative assets under the master netting arrangements as of September 30, 2017 and December 31, 2016 (in thousands):



	Gross Amounts Offset in the Condensed Consolidated Balance Sheets						Gross Amounts Not Offset in Condensed Consolidated Balance Sheets
September 30, 2017	Gross Amounts Recognized		Gross Amounts Offset		Net Amounts Presented		Financial Instruments		Cash Collateral Received		Net Amount

Foreign exchange contracts assets	$	1,307	$	—	$	1,307	$	1,307	$	—	$	—
Foreign exchange contracts liabilities	11,826		—		11,826		1,307		—		10,519

	Gross Amounts Offset in the Condensed Consolidated Balance Sheets						Gross Amounts Not Offset in Condensed Consolidated Balance Sheets
December 31, 2016	Gross Amounts Recognized		Gross Amounts Offset		Net Amounts Presented		Financial Instruments		Cash Collateral Received		Net Amount

Foreign exchange contracts assets	$	10,625	$	—	$	10,625	$	3,780	$	—	$	6,845
Foreign exchange contracts liabilities	3,780		—		3,780		3,780		—		—