Financial instruments

9 Months Ended

Sep. 29, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Foreign currency forward contracts

The Company uses derivative instruments for risk management purposes. Foreign currency forward contracts designated as cash flow hedges are used to manage exposure related to foreign currency transactions. Foreign currency forward contracts not designated as hedges for accounting purposes are used to manage exposure related to near term foreign currency denominated monetary assets and liabilities. The Company enters into the non-designated foreign currency forward contracts for periods consistent with its currency translation exposures, which generally approximate one month. For the three and nine months ended September 29, 2019, the Company recognized losses of $1.9 million and $3.5 million, respectively, related to non-designated foreign currency forward contracts. For the three and nine months ended September 30, 2018, the Company recognized gains related to non-designated foreign currency forward contracts of $1.0 million and $0.3 million, respectively.

The total notional amount for all open foreign currency forward contracts designated as cash flow hedges as of September 29, 2019 and December 31, 2018 was $115.6 million and $115.3 million, respectively. The total notional amount for all open non-designated foreign currency forward contracts as of September 29, 2019 and December 31, 2018 was $170.1 million and $125.9 million, respectively. All open foreign currency forward contracts as of September 29, 2019 have durations of 12 months or less.

Cross-currency interest rate swaps

On March 4, 2019, the Company entered into cross-currency swap agreements with five different financial institution counterparties to hedge against the effect of variability in the U.S. dollar to euro exchange rate. Under the terms of the cross-currency swap agreements, the Company has notionally exchanged $250 million at an annual interest rate of 4.8750% for €219.2 million at an annual interest rate of 2.4595%. The swap agreements are designed as net investment hedges and expire on March 4, 2024.

On October 4, 2018, the Company entered into cross-currency swap agreements with six different financial institution counterparties to hedge against the effect of variability in the U.S. dollar to euro exchange rate. Under the terms of the cross-currency swap agreements, the Company has notionally exchanged $500 million at an annual interest rate of 4.625% for €433.9 million at an annual interest rate of 1.942%. The swap agreements are designed as net investment hedges and expire on October 4, 2023.

The swap agreements described above require an exchange of the notional amounts upon expiration or earlier termination of the agreements. We and the counterparties have agreed to effect the exchange through a net settlement.

The cross-currency swaps are marked to market at each reporting date and any changes in fair value are recognized as a component of accumulated other comprehensive income (loss) ("AOCI"). For the three and nine months ended September 29, 2019, the Company recognized foreign exchange gains of $23.5 million and 29.4 million, respectively, within AOCI related to the cross-currency swaps.

Balance sheet presentation

The following table presents the locations in the condensed consolidated balance sheet and fair value of derivative financial instruments as of September 29, 2019 and December 31, 2018:


	September 29, 2019		December 31, 2018
	Fair Value
	(Dollars in thousands)
Asset derivatives:
Designated foreign currency forward contracts	$	998	$	1,216
Non-designated foreign currency forward contracts	289		106
Cross-currency interest rate swap	26,754		14,728
Prepaid expenses and other current assets	28,041		16,050
Cross-currency interest rate swap	23,857		—
Other assets	23,857		—
Total asset derivatives	$	51,898	$	16,050
Liability derivatives:
Designated foreign currency forward contracts	$	795	$	524
Non-designated foreign currency forward contracts	137		264
Other current liabilities	932		788
Cross-currency interest rate swap	—		7,793
Other liabilities	—		7,793
Total liability derivatives	$	932	$	8,581

See Note 12 for information on the location and amount of gains and losses attributable to derivatives that were reclassified from AOCI to expense (income), net of tax.

There was no ineffectiveness related to the Company’s cash flow hedges during the three and nine months ended September 29, 2019 and September 30, 2018.

Trade receivables

The allowance for doubtful accounts as of September 29, 2019 and December 31, 2018 was $9.1 million and $9.3 million, respectively. The current portion of the allowance for doubtful accounts, which was $5.3 million and $4.4 million as of September 29, 2019 and December 31, 2018, respectively, was recognized as a reduction of accounts receivable, net.