As a global company, we are exposed in the normal course of business to various risks, including foreign currency and commodity price risks, that could affect our financial position, results of operations, and cash flows. We may use derivative instruments to hedge against these risks and only hold such instruments for hedging purposes, not for speculative or trading purposes.

Depending on the terms of the specific derivative instruments and market conditions, some of our derivative instruments may be assets and others liabilities at any particular balance sheet date. We report all of our derivative instruments at fair value and account for changes in the fair value of derivative instruments within “Accumulated other comprehensive loss” if the derivative instruments qualify for hedge accounting. For those derivative instruments that do not qualify for hedge accounting (i.e., “economic hedges”), we record the changes in fair value directly to earnings. See Note 8. “Fair Value Measurements” to our condensed consolidated financial statements for information about the techniques we use to measure the fair value of our derivative instruments.


	September 30, 2024
	Other Current Assets		Other Current Liabilities
Derivatives designated as hedging instruments:
Commodity swap contracts	$	—	$	469
Total derivatives designated as hedging instruments	$	—	$	469

Derivatives not designated as hedging instruments:
Foreign exchange forward contracts	$	2,228	$	2,602

Total derivatives not designated as hedging instruments	$	2,228	$	2,602
Total derivative instruments	$	2,228	$	3,071


	December 31, 2023
	Other Current Assets		Other Current Liabilities
Derivatives designated as hedging instruments:
Commodity swap contracts	$	—	$	344
Total derivatives designated as hedging instruments	$	—	$	344

Derivatives not designated as hedging instruments:
Foreign exchange forward contracts	$	1,778	$	1,400
Total derivatives not designated as hedging instruments	$	1,778	$	1,400
Total derivative instruments	$	1,778	$	1,744

The following table presents the pretax amounts related to derivative instruments designated as cash flow hedges affecting accumulated other comprehensive income (loss) and our condensed consolidated statements of operations for the nine months ended September 30, 2024 and 2023 (in thousands):


	Commodity Swap Contracts
Balance as of December 31, 2023	$	(1,493)
Amounts recognized in other comprehensive income (loss)	(1,094)
Amount reclassified to cost of sales	1,715
Balance as of September 30, 2024	$	(872)

Balance as of December 31, 2022	$	(7,242)
Amounts recognized in other comprehensive income (loss)	(962)
Amount reclassified to cost of sales	5,576
Balance as of September 30, 2023	$	(2,628)

The following table presents the effect of derivative instruments not designated as hedges on our condensed consolidated statements of operations for the three and nine months ended September 30, 2024 and 2023 (in thousands):


		Amount of Gain (Loss) Recognized in Income Statement
		Three Months Ended September 30,				Nine Months Ended September 30,
	Income Statement Line Item	2024		2023		2024		2023
Foreign exchange forward contracts	Foreign currency loss, net	$	12,759	$	4,533	$	(3,049)	$	(9,568)

Many of our subsidiaries have assets and liabilities (primarily cash, receivables, deferred taxes, payables, accrued expenses, lease liabilities, debt, and solar module collection and recycling liabilities) that are denominated in currencies other than the subsidiaries’ functional currencies. Changes in the exchange rates between the functional currencies of our subsidiaries and the other currencies in which these assets and liabilities are denominated will create fluctuations in our reported condensed consolidated statements of operations. We may enter into foreign exchange forward contracts or other financial instruments to economically hedge assets and liabilities against the effects of currency exchange rate fluctuations. The gains and losses on such foreign exchange forward contracts will economically offset all or part of the transaction gains and losses that we recognize in earnings on the related foreign currency denominated assets and liabilities.

We also enter into foreign exchange forward contracts to economically hedge balance sheet and other exposures related to transactions between certain of our subsidiaries and transactions with third parties. Such contracts are considered economic hedges and do not qualify for hedge accounting. Accordingly, we recognize gains or losses from the fluctuations in foreign exchange rates and the fair value of these derivative contracts in “Foreign currency loss, net” on our condensed consolidated statements of operations.

As of September 30, 2024 and December 31, 2023, the notional values of our foreign exchange forward contracts that do not qualify for hedge accounting were as follows (notional amounts and U.S. dollar equivalents in millions):

September 30, 2024

Transaction

Currency

Notional Amount

USD Equivalent

Sell

Canadian dollar

CAD 4.2

$3.1

Purchase

Euro

€155.5

$173.6

Sell

Euro

€8.6

$9.6

Purchase

Indian rupee

INR 18,055.0

$215.7

Sell

Indian rupee

INR 83,157.0

$993.3

Purchase

Japanese yen

¥1,464.0

$10.3

Sell

Japanese yen

¥563.6

$4.0

Purchase

Malaysian ringgit

MYR 193.0

$46.8

Sell

Malaysian ringgit

MYR 17.0

$4.1

Sell

Mexican peso

MXN 34.6

$1.8

Purchase

Singapore dollar

SGD 14.1

$11.0

Sell

Singapore dollar

SGD 19.7

$15.4

December 31, 2023

Transaction

Currency

Notional Amount

USD Equivalent

Sell

Canadian dollar

CAD 4.2

$3.2

Sell

Chilean peso

CLP 1,372.6

$1.6

Purchase

Euro

€98.3

$108.7

Sell

Euro

€14.1

$15.6

Sell

Indian rupee

INR 62,967.4

$756.9

Purchase

Japanese yen

¥1,053.6

$7.5

Sell

Japanese yen

¥705.2

$5.0

Purchase

Malaysian ringgit

MYR 160.7

$35.0

Sell

Mexican peso

MXN 34.6

$2.0

Purchase

Singapore dollar

SGD 6.5

$4.9

From time to time, we use commodity swap contracts to mitigate our exposure to commodity price fluctuations for certain raw materials used in the production of our modules. During the year ended December 31, 2022, we entered into various commodity swap contracts to hedge a portion of our forecasted cash flows for purchases of aluminum frames between July 2022 and December 2023. Such swaps had an aggregate initial notional value based on metric tons of forecasted aluminum purchases, equivalent to $70.5 million, and entitled us to receive a three-month average London Metals Exchange price for aluminum while requiring us to pay certain fixed prices. The notional amount of the commodity swap contracts proportionately adjusted with forecasted purchases of aluminum frames.

During the nine months ended September 30, 2024, we entered into various commodity swap contracts to hedge a portion of our forecasted cash flows for purchases of steel between April 2024 and December 2024. Such swaps had an aggregate initial notional value based on short tons of forecasted steel purchases, equivalent to $7.6 million, and entitle us to receive the price based on the U.S. Midwest Hot-Rolled Coil Steel Index while requiring us to pay certain fixed prices. The notional amount of the commodity swap contracts proportionately adjusts with forecasted purchases of steel. As of September 30, 2024, the notional value associated with these contracts was $0.2 million.

These commodity swap contracts qualify for accounting as cash flow hedges in accordance with ASC 815, and we designated them as such. We report unrealized gains or losses on such contracts in “Accumulated other comprehensive loss” and subsequently reclassify applicable amounts into earnings when the hedged transactions occur and impact earnings. We determined that these derivative financial instruments were highly effective as cash flow hedges as of September 30, 2024 and December 31, 2023. In the following 12 months, we expect to reclassify into earnings $0.9 million of net unrealized losses related to these commodity swap contracts that are included in “Accumulated other comprehensive loss” at September 30, 2024 as we realize the earnings effects of the related forecasted transactions.