Derivative Financial Instruments

9 Months Ended

Sep. 30, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS

Derivatives Designated as Hedging Instruments

As of September 30, 2021, 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. Derivative instruments are recognized as either assets or liabilities and are measured at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. Gains and losses on derivatives that are designated as cash flow hedges are initially reported as a component of Accumulated other comprehensive loss and are subsequently recognized in income when the hedged exposure is recognized in income. Gains and losses from changes in fair values of derivatives that are not designated as hedges are recognized in Other (expense) income, net.

The total cumulative unrealized loss on cash flow derivative instruments was $0.7 million as of September 30, 2021. The total cumulative unrealized gain on cash flow derivative instruments was $3.6 million as of December 31, 2020. Unrealized gains and losses on cash flow derivatives are included in Accumulated other comprehensive loss in the accompanying condensed consolidated balance sheets. The net unrealized loss as of September 30, 2021 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, the Company 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 (expense) income, net.

Fair Values of Derivative Instruments

	Asset Derivatives				Liability Derivatives
	(In thousands)
	September 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020
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	$550	Prepaid expenses and other current assets	$3,945	Accrued expenses and other current liabilities	$1,337	Accrued expenses and other current liabilities	$75
	Asset Derivatives				Liability Derivatives
	(In thousands)
	September 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020
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	$11,525	Prepaid expenses and other current assets	$67	Accrued expenses and other current liabilities	$132	Accrued expenses and other current liabilities	$1,372

The Effect of Derivative Instruments on Financial Performance

	For the Three Months Ended September 30,
	(In thousands)
Derivatives in Cash Flow Hedging Relationships	Amount of (Loss) Gain Recognized in Other Comprehensive Loss				Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income	Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss
	2021		2020			2021		2020
Foreign currency forward contracts	$	(846)	$	2,123	Operating expenses	$	292	$	(390)

	For the Nine Months Ended September 30,
	(In thousands)
Derivatives in Cash Flow Hedging Relationships	Amount of (Loss) Gain Recognized in Other Comprehensive Loss				Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income	Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss
	2021		2020			2021		2020
Foreign currency forward contracts	$	(4,282)	$	667	Operating expenses	$	2,994	$	(1,061)

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

 

	For the Three Months Ended September 30,
	(In thousands)
Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized in Income on Derivative
		2021		2020
Foreign currency forward contracts	Other (expense) income, net	$	3,560	$	(7,407)

	For the Nine Months Ended September 30,
	(In thousands)
Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized in Income on Derivative
		2021		2020
Foreign currency forward contracts	Other (expense) income, net	$	11,844	$	(4,878)

Outstanding Foreign Currency Forward Contracts

As of September 30, 2021, the Company had the following net notional foreign currency forward contracts outstanding (in thousands):

Foreign Currency	Currency Denomination
Australian Dollar	AUD 19,000
Brazilian Real	BRL 2,000
British Pound Sterling	GBP 24,800
Canadian Dollar	CAD 5,950
Chinese Yuan Renminbi	CNY 36,400
Czech Koruna	CZK 71,000
Danish Krone	DKK 16,300
Euro	EUR 31,098
Hong Kong Dollar	HKD 30,975
Indian Rupee	INR 256,000
Japanese Yen	JPY 992,000
Korean Won	KRW 458,000
Singapore Dollar	SGD 12,200
Swedish Krona	SEK 6,800
Swiss Franc	CHF 192,650