DERIVATIVE FINANCIAL INSTRUMENTS

Derivatives Designated as Hedging Instruments

As of September 30, 2017, the Company’s derivative assets and liabilities primarily resulted from cash flow hedges related to its forecasted operating expenses transacted in local currencies. A substantial portion of the Company’s overseas expenses are and will continue to be transacted in local currencies. To protect against fluctuations in operating expenses and the volatility of future cash flows caused by changes in currency exchange rates, the Company has established a program that uses foreign exchange forward contracts to hedge its exposure to these potential changes. The terms of these instruments, and the hedged transactions to which they relate, generally do not exceed 12 months.

Generally, when the dollar is weak, foreign currency denominated expenses will be higher, and these higher expenses will be partially offset by the gains realized from the Company’s hedging contracts. Conversely, if the dollar is strong, foreign currency denominated expenses will be lower. These lower expenses will in turn be partially offset by the losses incurred from the Company’s hedging contracts. The change in the derivative component in Accumulated other comprehensive loss includes unrealized gains or losses that arose from changes in market value of the effective portion of derivatives that were held during the period, and gains or losses that were previously unrealized but have been recognized in the same line item as the forecasted transaction in current period net income due to termination or maturities of derivative contracts. This reclassification has no effect on total comprehensive income or equity.

The total cumulative unrealized gain on cash flow derivative instruments was $2.1 million at September 30, 2017, and is included in Accumulated other comprehensive loss in the accompanying condensed consolidated balance sheets. The total cumulative unrealized loss on cash flow derivative instruments was $3.1 million at December 31, 2016, and is included in Accumulated other comprehensive loss in the accompanying condensed consolidated balance sheets. See Note 14 for more information related to comprehensive income. The net unrealized gain as of September 30, 2017 is expected to be recognized in income over the next 12 months at the same time the hedged items are recognized in income.

Derivatives not Designated as Hedging Instruments

A substantial portion of the Company’s overseas assets and liabilities are and will continue to be denominated in local currencies. To protect against fluctuations in earnings caused by changes in currency exchange rates when remeasuring the Company’s balance sheet, it utilizes foreign exchange forward contracts to hedge its exposure to this potential volatility.

These contracts are not designated for hedge accounting treatment under the authoritative guidance. Accordingly, changes in the fair value of these contracts are recorded in Other income (expense), net.

Fair Values of Derivative Instruments

Asset Derivatives

Liability Derivatives

(In thousands)

September 30, 2017

December 31, 2016

September 30, 2017

December 31, 2016

Derivatives Designated as

Hedging Instruments

Balance Sheet

Location

Fair

Value

Balance Sheet

Location

Fair

Value

Balance Sheet

Location

Fair

Value

Balance Sheet

Location

Fair

Value

Foreign currency forward contracts

Prepaid

expenses

and other

current

assets

$2,569

Prepaid

expenses

and other

current

assets

$460

Accrued

expenses

and other

current

liabilities

$293

Accrued

expenses

and other

current

liabilities

$3,816

Asset Derivatives

Liability Derivatives

(In thousands)

September 30, 2017

December 31, 2016

September 30, 2017

December 31, 2016

Derivatives Not Designated as

Hedging Instruments

Balance Sheet

Location

Fair

Value

Balance Sheet

Location

Fair

Value

Balance Sheet

Location

Fair

Value

Balance Sheet

Location

Fair

Value

Foreign currency forward contracts

Prepaid

expenses

and other

current

assets

$1,962

Prepaid

expenses

and other

current

assets

$2,046

Accrued

expenses

and other

current

liabilities

$329

Accrued

expenses

and other

current

liabilities

$619

The Effect of Derivative Instruments on Financial Performance



	For the Three Months Ended September 30, 2017
	(In thousands)
Derivatives in Cash Flow Hedging Relationships	Amount of (Loss) Gain Recognized in Other Comprehensive Income (Effective Portion)					Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)	Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss (Effective Portion)
	2017			2016			2017			2016
Foreign currency forward contracts	$	(340	)	$	1,023	Operating expenses	$	1,116		$	(641	)

	For the Nine Months Ended September 30, 2017
	(In thousands)
Derivatives in Cash Flow Hedging Relationships	Amount of Gain Recognized in Other Comprehensive Income (Effective Portion)					Location of Loss Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)	Amount of Loss Reclassified from Accumulated Other Comprehensive Loss (Effective Portion)
	2017			2016			2017			2016
Foreign currency forward contracts	$	5,214		$	2,049	Operating expenses	$	(551	)	$	(1,663	)

There was no material ineffectiveness in the Company’s foreign currency hedging program in the periods presented.



	For the Three Months Ended September 30, 2017
	(In thousands)
Derivatives Not Designated as Hedging Instruments	Location of Loss Recognized in Income on Derivative	Amount of Loss Recognized in Income on Derivative
		2017			2016
Foreign currency forward contracts	Other income (expense), net	$	(1,148	)	$	(1,693	)

	For the Nine Months Ended September 30, 2017
	(In thousands)
Derivatives Not Designated as Hedging Instruments	Location of Loss Recognized in Income on Derivative	Amount of Loss Recognized in Income on Derivative
		2017			2016
Foreign currency forward contracts	Other income (expense), net	$	(6,298	)	$	(5,658	)

Outstanding Foreign Currency Forward Contracts

As of September 30, 2017, the Company had the following net notional foreign currency forward contracts outstanding (in thousands):



Foreign Currency	Currency Denomination
Australian Dollar	AUD 20,770
Brazilian Real	BRL 11,870
Pounds Sterling	GBP 5,700
Canadian Dollar	CAD 2,640
Chinese Yuan Renminbi	CNY 53,279
Danish Krone	DKK 8,596
Euro	EUR 11,300
Hong Kong Dollar	HKD 26,000
Indian Rupee	INR 238,745
Japanese Yen	JPY 2,012,317
Singapore Dollar	SGD 10,400
Swiss Franc	CHF 2,030