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Derivative Instruments | 6 Months Ended
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Jun. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments | Foreign Currency Forward Contracts - Hedging Instruments Due to the global nature of our operations, portions of our revenue and operating expense are recorded in currencies other than the U.S. dollar. The value of revenue and operating expense measured in U.S. dollars is therefore subject to changes in foreign currency exchange rates. We enter into foreign currency forward contracts and foreign currency options with financial institutions with the primary objective to mitigate the impact of foreign currency exchange rate fluctuations on our international revenue and operating expense. Foreign currency forward contracts and foreign currency options in effect as of June 30, 2024 and December 31, 2023, had durations of 1 to 15 months and 1 to 12 months, respectively. These contracts have been designated as cash flow hedges and unrealized gains and losses on the portion of these foreign currency forward contracts and foreign currency options that are included in the effectiveness test are reported in AOCI. Realized gains and losses of such contracts and options are recognized in revenue when the sale of product in the currency being hedged is recognized and in operating expense when the expense in the currency being hedged is recorded. We recognize all cash flow hedge reclassifications from AOCI and fair value changes of excluded portions in the same line item in our condensed consolidated statements of income that have been impacted by the hedged item. The notional amount of foreign currency forward contracts and foreign currency options that were entered into to hedge forecasted revenue and operating expense is summarized as follows:
|  | Notional Amount
(In millions) |  | As of June 30, 2024 |  | As of December 31, 2023
Euro |  | $ | 1,420.3 |  |  | $ | 1,169.0 |
British pound |  | 69.6 |  |  | — |
Swiss franc |  | 142.4 |  |  | — |
Canadian dollar |  | 26.2 |  |  | — |
Total foreign currency forward contracts and options |  | $ | 1,658.5 |  |  | $ | 1,169.0 |
The pre-tax portion of the fair value of these foreign currency forward contracts and foreign currency options that were included in AOCI in total equity is summarized as follows:
(In millions) |  | As of June 30, 2024 |  | As of December 31, 2023
Unrealized gains |  | $ | 12.9 |  |  | $ | — |
Unrealized (losses) |  | (9.5) |  |  | (34.8) |
Net unrealized gains (losses) |  | $ | 3.4 |  |  | $ | (34.8) |
We expect the net unrealized gains of approximately $3.4 million to be settled over the next 15 months, of which approximately $1.9 million of these net unrealized gains are expected to be settled over the next 12 months, with any amounts in AOCI to be reported as an adjustment to revenue or operating expense. We consider the impact of our and our counterparties’ credit risk on the fair value of the contracts as well as the ability of each party to execute its contractual obligations. As of June 30, 2024 and December 31, 2023, credit risk did not materially change the fair value of our foreign currency forward contracts and forward currency options. The following tables summarize the effect of foreign currency forward contracts and forward currency options designated as hedging instruments in our condensed consolidated statements of income:
For the Three Months Ended June 30,
Net Gains/(Losses) Reclassified from AOCI into Operating Income |  | Net Gains/(Losses) Excluded from Effectiveness Testing and Recognized in Operating Income
Location |  | 2024 |  | 2023 |  | Location |  | 2024 |  | 2023
Revenue |  | $ | 7.6 |  |  | $ | 2.4 |  |  | Revenue |  | $ | 0.9 |  |  | $ | (1.0) |
Operating expense |  | (4.9) |  |  | 1.4 |  |  | Operating expense |  | (0.7) |  |  | (0.8) |
For the Six Months Ended June 30,
Net Gains/(Losses) Reclassified from AOCI into Operating Income |  | Net Gains/(Losses) Excluded from Effectiveness Testing and Recognized in Operating Income
Location |  | 2024 |  | 2023 |  | Location |  | 2024 |  | 2023
Revenue |  | $ | 10.5 |  |  | $ | 20.0 |  |  | Revenue |  | $ | 1.1 |  |  | $ | 0.6 |
Operating expense |  | (7.0) |  |  | 0.9 |  |  | Operating expense |  | (1.9) |  |  | (2.9) |
Foreign Currency Forward Contracts - Other Derivative Instruments We also enter into other foreign currency forward contracts, usually with durations of one month or less, to mitigate the foreign currency risk related to certain balance sheet positions. We have not elected hedge accounting for these transactions. The aggregate notional amount of these outstanding foreign currency forward contracts was $1,199.3 million and $1,301.5 million as of June 30, 2024 and December 31, 2023, respectively. Net losses of $5.7 million and $30.0 million related to these contracts were recorded as a component of other (income) expense, net for the three and six months ended June 30, 2024, respectively, compared to net losses of $7.2 million and $5.4 million, respectively, in the prior year comparative periods. Summary of Derivative Instruments While certain of our derivative instruments are subject to netting arrangements with our counterparties, we do not offset derivative assets and liabilities in our condensed consolidated balance sheets. The amounts in the table below would not be substantially different if the derivative assets and liabilities were offset. The following table summarizes the fair value and presentation in our condensed consolidated balance sheets of our outstanding derivative instruments, including those designated as hedging instruments:
(In millions) |  | Balance Sheet Location |  | As of June 30, 2024 |  | As of December 31, 2023
Cash Flow Hedging Instruments: |  |  |  |  |  |
Asset derivative instruments |  | Other current assets |  | $ | 17.6 |  |  | $ | 0.3 |
|  | Investments and other assets |  | 1.8 |  |  | — |
Liability derivative instruments |  | Accrued expense and other |  | 8.3 |  |  | 26.5 |
Other Derivative Instruments: |  |  |  |  |  |
Asset derivative instruments |  | Other current assets |  | 5.8 |  |  | 11.6 |
Liability derivative instruments |  | Accrued expense and other |  | 10.3 |  |  | 5.1 |

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/815/tableOfContent + Details
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