As of October 31, 2020, the balances of the Company's cash equivalents and non-marketable equity securities investments were:



	Cost		Gross Unrealized Gains		Gross Unrealized Losses Less Than 12 Continuous Months		Gross Unrealized Losses 12 Continuous Months or Longer		Estimated Fair Value⁽¹⁾
	(in thousands)
Cash equivalents:
Money market funds	$	304,127	$	—	$	—	$	—	$	304,127
Total:	$	304,127	$	—	$	—	$	—	$	304,127

Other long-term assets:
Non-marketable equity securities	$	13,200	$	—	$	—	$	—	$	13,200
Total:	$	13,200	$	—	$	—	$	—	$	13,200

As of October 31, 2019, the balances of our cash equivalents and non-marketable equity securities investments were:



	Cost		Gross Unrealized Gains		Gross Unrealized Losses Less Than 12 Continuous Months		Gross Unrealized Losses 12 Continuous Months or Longer		Estimated Fair Value⁽¹⁾
	(in thousands)
Cash equivalents:
Money market funds	$	166,024	$	—	$	—	$	—	$	166,024
Total:	$	166,024	$	—	$	—	$	—	$	166,024

Other long-term assets:
Non-marketable equity securities	$	10,951	$	—	$	—	$	—	$	10,951
Total:	$	10,951	$	—	$	—	$	—	$	10,951

Restricted cash. The Company includes amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the consolidated statements of cash flows. All restricted cash is primarily associated with office leases and has no material impact on the Company’s consolidated statements of cash flows.

The following table provides a reconciliation of cash, cash equivalents and restricted cash included in the consolidated balance sheets:



	October 31,
	2020		2019
	(in thousands)
Cash and cash equivalents	$	1,235,653	$	728,597
Restricted cash included in Prepaid expenses and other current assets	1,523		1,174
Restricted cash included in Other long-term assets	794		756
Total cash, cash equivalents and restricted cash	$	1,237,970	$	730,527

Non-marketable equity securities. The Company’s strategic investment portfolio consists of non-marketable equity securities in privately held companies. The investments that the Company does not have the ability to exercise significant influence are accounted using the measurement alternative when the fair value of the investment is not readily determinable. Securities accounted for as equity method investments are recorded at cost plus the proportional share of the issuers’ income or loss, which is recorded in the Company’s other income (expense), net. The cost basis of securities sold is based on the specific identification method. See Note 7. Fair Value Measures.

In the first quarter of 2020, the Company adopted ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedge Activities, which amends the hedge accounting recognition and presentation requirements of ASC 815. Pursuant to the provisions of ASU 2017-12, the Company is not required to separately measure and report hedge ineffectiveness, which was previously recorded in Other income (expense), net in our consolidated statements of operations. Also, prior to the adoption of ASU 2017-12, the forward point components of the cash flow hedges were excluded from assessing effectiveness of the hedging relationship and were recorded on the consolidated statements of operations in other income (expense), net. Following the Company's adoption of ASU 2017-12, the Company presents the related earning impact of the cash flow hedges in the same income statement section as the hedged items. Adoption of the guidance did not impact opening retained earnings or have a material impact on our financial statements.

The Company recognizes derivative instruments as either assets or liabilities in the consolidated balance sheets at fair value and provides qualitative and quantitative disclosures about such derivatives. The Company operates internationally and is exposed to potentially adverse movements in foreign currency exchange rates. The Company enters into hedges in the form of foreign currency forward contracts to reduce its exposure to foreign currency rate changes on non-functional currency denominated forecasted transactions and balance sheet positions including: (1) certain assets and liabilities, (2) shipments forecasted to occur within approximately one month, (3) future billings and revenue on previously shipped orders, and (4) certain future intercompany invoices denominated in foreign currencies.

The duration of forward contracts ranges from approximately one month to 22 months, the majority of which are short-term. The Company does not use foreign currency forward contracts for speculative or trading purposes. The Company enters into foreign exchange forward contracts with high credit quality financial institutions that are rated ‘A’ or above and to date has not experienced nonperformance by counterparties. In addition, the Company mitigates credit risk in derivative transactions by permitting net settlement of transactions with the same counterparty and anticipates continued performance by all counterparties to such agreements.

The assets or liabilities associated with the forward contracts are recorded at fair value in other current assets or accrued liabilities in the consolidated balance sheets. The accounting for gains and losses resulting from changes in fair value depends on the use of the foreign currency forward contract and whether it is designated and qualifies for hedge accounting. The cash flow impact upon settlement of the derivative contracts will be included in “Net cash provided by operating activities” in the consolidated statements of cash flows.

Certain foreign exchange forward contracts are designated and qualify as cash flow hedges. These contracts have durations of approximately 22 months or less. Certain forward contracts are rolled over periodically to capture the full length of exposure to the Company’s foreign currency risk, which can be up to three years. To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge, and the hedges must be highly effective in offsetting changes to future cash flows on the hedged transactions. The related gains or losses resulting from changes in fair value of these hedges is initially reported, net of tax, as a component of other comprehensive income (loss) (OCI), in stockholders’ equity and reclassified into revenue or operating expenses, as appropriate, at the time the hedged transactions affect earnings. The Company expects a majority of the hedge balance in OCI to be reclassified to the statements of operations within the next twelve months.

Prior to adoption of ASU 2017-12, hedge effectiveness was evaluated monthly using spot rates, with any gain or loss caused by hedging ineffectiveness recorded in other income (expense), net. During fiscal 2020, 2019 and 2018, the amounts recognized in other income (expense) for ineffectiveness and excluded component were immaterial.

Upon adoption of ASU 2017-12, the Company elected to use the forward method to measure hedge effectiveness for its Japanese yen revenue and foreign currency expense cash flow hedges. The Company did not change the process for its backlog cash flow hedges and continues to measure hedging effectiveness on a monthly basis.

The Company’s foreign exchange forward contracts that are used to hedge non-functional currency denominated balance sheet assets and liabilities are not designated as hedging instruments. Accordingly, any gains or losses from changes in the fair value of the forward contracts are recorded in other income (expense), net. The gains and losses on these forward contracts generally offset the gains and losses associated with the underlying assets and liabilities, which are also recorded in other income (expense), net. The duration of the forward contracts for hedging the Company’s balance sheet exposure is approximately one month.

The Company also has certain foreign exchange forward contracts for hedging certain international revenues and expenses that are not designated as hedging instruments. Accordingly, any gains or losses from changes in the fair value of the forward contracts are recorded in other income (expense), net. The gains and losses on these forward contracts generally offset the gains and losses associated with the foreign currency in operating income. The duration of these forward contracts is usually less than one year. The overall goal of the Company’s hedging program is to minimize the impact of currency fluctuations on its net income over its fiscal year.

The notional amounts in the table below for derivative instruments provide one measure of the transaction volume outstanding:



	October 31,
	2020		2019
	(in thousands)
Total gross notional amount	$	981,234	$	817,441
Net fair value	$	6,940	$	3,494

The notional amounts for derivative instruments do not represent the amount of the Company’s exposure to market gain or loss. The Company’s exposure to market gain or loss will vary over time as a function of currency exchange rates. The amounts ultimately realized upon settlement of these financial instruments, together with the gains and



	Fair values of derivative instruments designated as hedging instruments		Fair values of derivative instruments not designated as hedging instruments
	(in thousands)
Balance at October 31, 2020
Other current assets	$	9,182	$	138
Accrued liabilities	$	2,088	$	292
Balance at October 31, 2019
Other current assets	$	7,327	$	53
Accrued liabilities	$	3,715	$	171



	Location of gain (loss) recognized in OCI on derivatives	Amount of gain (loss) recognized in OCI on derivatives (effective portion)			Location of gain (loss) reclassified from OCI	Amount of gain (loss) reclassified from OCI (effective portion)
	(in thousands)
Fiscal year ended October 31, 2020
Foreign exchange contracts	Revenue	$	3,034		Revenue	$	530
Foreign exchange contracts	Operating expenses	4,800			Operating expenses	(603		)
Total		$	7,834			$	(73	)
Fiscal year ended October 31, 2019
Foreign exchange contracts	Revenue	$	278		Revenue	$	1,436
Foreign exchange contracts	Operating expenses	4,455			Operating expenses	(16,073		)
Total		$	4,733			$	(14,637	)
Fiscal year ended October 31, 2018
Foreign exchange contracts	Revenue	$	693		Revenue	$	1,103
Foreign exchange contracts	Operating expenses	(18,121		)	Operating expenses	9,785
Total		$	(17,428	)		$	10,888

On November 28, 2016, the Company entered into an amended and restated credit agreement with several lenders (the Credit Agreement) providing for (i) a $650.0 million senior unsecured revolving credit facility (the Revolver) and (ii) a $150.0 million senior unsecured term loan facility (the Term Loan). The Credit Agreement amended and restated the Company’s previous credit agreement dated May 19, 2015, in order to increase the size of the revolving credit facility from $500.0 million to $650.0 million, provide a new $150.0 million senior unsecured term loan facility, and to extend the termination date of the revolving credit facility from May 19, 2020 to November 28, 2021. Subject to obtaining additional commitments from lenders, the principal amount of the loans provided under the Credit Agreement may be increased by the Company by up to an additional $150.0 million. The Credit Agreement contains financial covenants requiring the Company to operate within a maximum leverage ratio and maintain a minimum interest coverage ratio, as well as other non-financial covenants. As of October 31, 2020, the Company was in compliance with all financial covenants.

As of October 31, 2020, the Company had an outstanding balance of $102.1 million, net of debt issuance costs, under the Term Loan, of which $75.0 million was classified as long-term liabilities. Outstanding principal payments under the Term Loan are due as follows:



Fiscal year	(in thousands)
2021	$	27,187
2022	75,000
Total	$	102,187

The Term Loan and Revolver borrowings bear interest at a floating rate based on a margin over the Company’s choice of market observable base rates as defined in the Credit Agreement. As of October 31, 2020, borrowings under the Term Loan bore interest at LIBOR +1.125% and the applicable interest rate for the Revolver was LIBOR +1.000%. In addition, commitment fees are payable on the Revolver at rates between 0.125% and 0.200% per year based on the Company’s leverage ratio on the daily amount of the revolving commitment.

In July 2018, the Company entered into a 12-year $220.0 million RMB (approximately $33.0 million) credit agreement with a lender in China to support its facilities expansion. Borrowings bear interest at a floating rate based on the 5 year Loan Prime Rate plus 0.74%. As of October 31, 2020, the Company had $25.8 million outstanding under the agreement.