We recognize all of our derivative instruments as either assets or liabilities in our statement of financial position at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, we designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation.

We have operations in approximately 45 countries. Sales outside of the Americas accounted for approximately 59% and 58% of our net sales during the three months ended September 30, 2020 and 2019, and approximately 59% and 60% the nine months ended September 30, 2020 and 2019, respectively. Our activities expose us to a variety of market risks, including the effects of changes in foreign currency exchange rates. These financial risks are monitored and managed by us as an integral part of our overall risk management program.

We maintain a foreign currency risk management strategy that uses derivative instruments (foreign currency forward contracts) to help protect our earnings and cash flows from fluctuations caused by the volatility in currency exchange rates. Movements in foreign currency exchange rates pose a risk to our operations and competitive position, in that exchange rate changes may affect our profitability and cash flow, and the business or pricing strategies of our non-U.S. based competitors.

The vast majority of our foreign sales are denominated in the customers’ local currency. We purchase foreign currency forward contracts as hedges of forecasted sales that are denominated in foreign currencies and as hedges of foreign currency denominated financial assets or liabilities. These contracts are entered into to help protect against the risk that the eventual dollar-net-cash inflows resulting from such sales or firm commitments will be adversely affected by changes in exchange rates. We also purchase foreign currency forward contracts as hedges of forecasted expenses that are denominated in foreign currencies. These contracts are entered into to help protect against the risk that the eventual dollar-net-cash outflows resulting from foreign currency operating and cost of sales expenses will be adversely affected by changes in exchange rates.

We designate foreign currency forward contracts as cash flow hedges of forecasted net sales or forecasted expenses. In addition, we hedge our foreign currency denominated balance sheet exposures using foreign currency forward contracts that are not designated as hedging instruments. None of our derivative instruments contain a credit-risk-related contingent feature.

To help protect against the reduction in value caused by a fluctuation in foreign currency exchange rates of forecasted foreign currency cash flows resulting from international sales over the next one to three years, we have instituted a foreign currency cash flow hedging program. We hedge portions of our forecasted net sales and forecasted expenses denominated in foreign currencies with forward contracts. For forward contracts, when the dollar strengthens significantly against the foreign currencies, the change in the present value of future foreign currency cash flows may be offset by the change in the fair value of the forward contracts designated as hedges. We purchase foreign currency forward contracts for up to 100% of our forecasted exposures in selected currencies (primarily in Euro, Japanese yen, Hungarian forint, British pound, Malaysian ringgit, Korean won and Chinese yuan) and limit the duration of these contracts to 40 months or less.

For derivative instruments that are designated and qualify as a cash flow hedge, the gain or loss on the derivative is reported as a component of accumulated other comprehensive income ("OCI") and reclassified into earnings in the same line item (net sales, operating expenses, or cost of sales) associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings. Hedge effectiveness of foreign currency forwards designated as cash flow hedges are measured by comparing the hedging instrument’s cumulative change in fair value from inception to maturity to the forecasted transaction’s terminal value.


(In thousands)	US Dollar Equivalent
	As of September 30, 2020		As of December 31,
	(Unaudited)		2019
British pound	$	23,251	$	13,988
Chinese yuan	57,943		32,970
Euro	209,385		130,122
Hungarian forint	89,962		95,228
Japanese yen	83,503		53,527
Korean won	26,918		24,728
Malaysian ringgit	41,681		32,725
Total forward contracts notional amount	$	532,643	$	383,288

At September 30, 2020, we expect to reclassify $0.6 million of losses on derivative instruments from accumulated OCI to net sales during the next twelve months when the hedged international sales occur, $1.4 million of losses on derivative instruments from accumulated OCI to cost of sales during the next twelve months when the hedged cost of sales are incurred and $1.0 million of losses on derivative instruments from accumulated OCI to operating expenses during the next twelve months when the hedged operating expenses occur. Expected amounts are based on derivative valuations at September 30, 2020. Actual results may vary materially as a result of changes in the corresponding exchange rates subsequent to this date.

The gains and losses recognized in earnings due to hedge ineffectiveness were not material for each of the nine months ended September 30, 2020 and 2019 and are included as a component of net income under the line item “Other (expense) income.”

Other derivatives not designated as hedging instruments consist primarily of foreign currency forward contracts that we use to hedge our foreign denominated net receivable or net payable positions to help protect against the change in value caused by a fluctuation in foreign currency exchange rates. We typically attempt to hedge up to 90% of our outstanding foreign denominated net receivables or net payables and typically limit the duration of these foreign currency forward contracts to approximately 90 days or less. The gain or loss on the derivatives as well as the offsetting gain or loss on the hedge item attributable to the hedged risk is recognized in current earnings under the line item “Other (expense) income.” As of September 30, 2020 and December 31, 2019, we held foreign currency forward contracts that were not designated as hedging instruments with a notional amount of $87 million and $41 million, respectively.


	Asset Derivatives
	September 30, 2020			December 31, 2019
(In thousands)	(Unaudited)
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value

Derivatives designated as hedging instruments
Foreign exchange contracts - ST forwards	Prepaid expenses and other current assets	$	2,314	Prepaid expenses and other current assets	$	7,039

Foreign exchange contracts - LT forwards	Other long-term assets	2,639		Other long-term assets	970
Total derivatives designated as hedging instruments		$	4,953		$	8,009

Derivatives not designated as hedging instruments

Foreign exchange contracts - ST forwards	Prepaid expenses and other current assets	$	411	Prepaid expenses and other current assets	$	200
Total derivatives not designated as hedging instruments		$	411		$	200

Total derivatives		$	5,364		$	8,209


	Liability Derivatives
	September 30, 2020			December 31, 2019
(In thousands)	(Unaudited)
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value

Derivatives designated as hedging instruments
Foreign exchange contracts - ST forwards	Other current liabilities	$	(5,305)	Other current liabilities	$	(2,089)

Foreign exchange contracts - LT forwards	Other long-term liabilities	(4,230)		Other long-term liabilities	(351)
Total derivatives designated as hedging instruments		$	(9,535)		$	(2,440)

Derivatives not designated as hedging instruments

Foreign exchange contracts - ST forwards	Other current liabilities	$	(1,241)	Other current liabilities	$	(432)
Total derivatives not designated as hedging instruments		$	(1,241)		$	(432)

Total derivatives		$	(10,776)		$	(2,872)


September 30, 2020
(In thousands)
(Unaudited)
Derivatives in Cash Flow Hedging Relationship	Gain or (Loss) Recognized in OCI on Derivative		Location of Gain or (Loss) Reclassified from Accumulated OCI into Income	Gain or (Loss) Reclassified from Accumulated OCI into Income
Foreign exchange contracts - forwards	$	(12,524)	Net sales	$	334

Foreign exchange contracts - forwards	1,849		Cost of sales	(448)

Foreign exchange contracts - forwards	1,144		Operating expenses	(266)
Total	$	(9,531)		$	(380)


September 30, 2019
(In thousands)
(Unaudited)
Derivatives in Cash Flow Hedging Relationship	Gain or (Loss) Recognized in OCI on Derivative		Location of Gain or (Loss) Reclassified from Accumulated OCI into Income	Gain or (Loss) Reclassified from Accumulated OCI into Income
Foreign exchange contracts - forwards	$	6,736	Net sales	$	3,291

Foreign exchange contracts - forwards	(2,946)		Cost of sales	(176)

Foreign exchange contracts - forwards	(2,163)		Operating expenses	(112)
Total	$	1,627		$	3,003

(In thousands)

Derivatives not Designated as Hedging Instruments

Location of Gain (Loss) Recognized in Income

Amount of Gain (Loss) Recognized in Income

September 30, 2020

September 30, 2019

(Unaudited)

Foreign exchange contracts - forwards

Other expense (income)

(267)

287

Total