Derivative Instruments and Hedging Activities

3 Months Ended

Mar. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

Hedges of Foreign Currency Risk

For the three months ended March 31, 2020 and 2019, amounts excluded from the assessment of effectiveness of our foreign currency forward contracts that are designated as cash flow hedges were not material. As of March 31, 2020, we estimate that $3.5 million of net gains will be reclassified from accumulated other comprehensive loss to earnings during the twelve-month period ending March 31, 2021.

As of March 31, 2020, we had the following outstanding foreign currency forward contracts:



Notional (in millions)	Effective Date(s)	Maturity Date(s)	Index (Exchange Rates)	Weighted-Average Strike Rate	Hedge Designation ⁽¹⁾
30.0 EUR	March 27, 2020	April 30, 2020	Euro ("EUR") to USD	1.10 USD	Not designated
325.7 EUR	Various from May 2018 to March 2020	Various from April 2020 to February 2022	EUR to USD	1.16 USD	Cash flow hedge
437.0 CNY	March 26, 2020	April 30, 2020	USD to Chinese Renminbi ("CNY")	7.12 CNY	Not designated
804.6 CNY	Various from December 2019 to January 2020	Various from April to December 2020	USD to CNY	6.99 CNY	Cash flow hedge
498.0 JPY	March 27, 2020	April 30, 2020	USD to Japanese Yen ("JPY")	107.94 JPY	Not designated
22,742.4 KRW	Various from May 2018 to March 2020	Various from April 2020 to February 2022	USD to Korean Won ("KRW")	1,151.92 KRW	Cash flow hedge
16.0 MYR	March 26, 2020	April 30, 2020	USD to Malaysian Ringgit ("MYR")	4.31 MYR	Not designated
202.0 MXN	March 27, 2020	April 30, 2020	USD to Mexican Peso ("MXN")	23.53 MXN	Not designated
2,961.0 MXN	Various from May 2018 to March 2020	Various from April 2020 to February 2022	USD to MXN	21.36 MXN	Cash flow hedge
2.0 GBP	March 27, 2020	April 30, 2020	British Pound Sterling ("GBP") to USD	1.23 USD	Not Designated
53.7 GBP	Various from May 2018 to March 2020	Various from April 2020 to February 2022	GBP to USD	1.29 USD	Cash flow hedge

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⁽¹⁾	Derivative financial instruments not designated as hedges are used to manage our exposure to currency exchange rate risk. They are intended to preserve economic value, and they are not used for trading or speculative purposes.

Hedges of Commodity Risk

As of March 31, 2020, we had the following outstanding commodity forward contracts, none of which were designated for hedge accounting treatment in accordance with FASB ASC Topic 815, Derivatives and Hedging:



Commodity	Notional	Remaining Contracted Periods	Weighted-Average Strike Price Per Unit
Silver	850,249 troy oz.	April 2020 - February 2022	$16.65
Gold	7,733 troy oz.	April 2020 - February 2022	$1,457.41
Nickel	221,697 pounds	April 2020 - February 2022	$6.16
Aluminum	3,103,095 pounds	April 2020 - February 2022	$0.87
Copper	2,290,867 pounds	April 2020 - February 2022	$2.69
Platinum	7,821 troy oz.	April 2020 - February 2022	$896.59
Palladium	942 troy oz.	April 2020 - February 2022	$1,620.30

Financial Instrument Presentation

The following table presents the fair values of our derivative financial instruments and their classification in the condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019:



	Asset Derivatives					Liability Derivatives
	Balance Sheet Location	March 31, 2020		December 31, 2019		Balance Sheet Location	March 31, 2020		December 31, 2019
Derivatives designated as hedging instruments
Foreign currency forward contracts	Prepaid expenses and other current assets	$	17,224	$	20,957	Accrued expenses and other current liabilities	$	17,139	$	1,055
Foreign currency forward contracts	Other assets	2,840		2,530		Other long-term liabilities	6,504		428
Total		$	20,064	$	23,487		$	23,643	$	1,483

Derivatives not designated as hedging instruments
Commodity forward contracts	Prepaid expenses and other current assets	$	1,635	$	3,069	Accrued expenses and other current liabilities	$	3,603	$	394
Commodity forward contracts	Other assets	444		554		Other long-term liabilities	1,390		68
Foreign currency forward contracts	Prepaid expenses and other current assets	31		74		Accrued expenses and other current liabilities	409		476
Total		$	2,110	$	3,697		$	5,402	$	938

These fair value measurements are all categorized within Level 2 of the fair value hierarchy.

The following tables present the effect of our derivative financial instruments on the condensed consolidated statements of operations and the condensed consolidated statements of comprehensive (loss)/income for the three months ended March 31, 2020 and 2019:



Derivatives designated as hedging instruments	Amount of Deferred Gain/(Loss) Recognized in Other Comprehensive (Loss)/Income					Location of Net Gain Reclassified from Accumulated Other Comprehensive Loss into Net Income	Amount of Net Gain Reclassified from Accumulated Other Comprehensive Loss into Net Income
Derivatives designated as hedging instruments	2020			2019			2020		2019
Foreign currency forward contracts	$	12,544		$	9,118	Net revenue	$	6,623	$	3,219
Foreign currency forward contracts	$	(29,630	)	$	6,078	Cost of revenue	$	1,768	$	128



Derivatives not designated as hedging instruments	Amount of (Loss)/Gain Recognized in Net Income					Location of (Loss)/Gain Recognized in Net Income
Derivatives not designated as hedging instruments	2020			2019		Location of (Loss)/Gain Recognized in Net Income
Commodity forward contracts	$	(5,575	)	$	1,123	Other, net
Foreign currency forward contracts	$	(3,781	)	$	478	Other, net

Credit Risk Related Contingent Features

We have agreements with certain of our derivative counterparties that contain a provision whereby if we default on our indebtedness and repayment of the indebtedness has been accelerated by the lender, then we could also be declared in default on our derivative obligations.

As of March 31, 2020, the termination value of outstanding derivatives in a liability position, excluding any adjustment for non-performance risk, was $29.3 million. As of March 31, 2020, we had not posted any cash collateral related to these agreements. If we breach any of the default provisions on any of our indebtedness as described above, we could be required to settle our obligations under the derivative agreements at their termination values.