XML 36 R24.htm IDEA: XBRL DOCUMENT v3.22.1
Risk Management and Derivatives
 3 Months Ended
Mar. 31, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
RISK MANAGEMENT AND DERIVATIVES RISK MANAGEMENT AND DERIVATIVES
The Company is exposed to global market risks, including the effects of changes in foreign currency and interest rates. The Company uses derivative instruments to manage financial exposures that occur in the normal course of business and does not hold or issue derivatives for trading or speculative purposes.
The Company may elect to designate certain derivatives as hedging instruments under U.S. GAAP. The Company formally documents all relationships between designated hedging instruments and hedged items, as well as its risk management objectives and strategies for undertaking hedge transactions. This process includes linking all derivatives designated as hedges to forecasted cash flows and assessing, both at inception and on an ongoing basis, the effectiveness of the hedging relationships.
The Company's foreign exchange risk management program consists of designated cash flow hedges and undesignated hedges. As of March 31, 2022, the Company has hedge instruments primarily for:
•British Pound/U.S. Dollar;
•U.S. Dollar/Chinese Renminbi;
•Euro/U.S. Dollar;
•U.S. Dollar/Canadian Dollar;
•U.S. Dollar/Mexican Peso; and
•U.S. Dollar/Korean Won.
All derivatives are recognized on the Condensed Consolidated Balance Sheets at fair value and classified based on the instrument's maturity date.
The following table presents the fair values of derivative instruments within the Condensed Consolidated Balance Sheets. Refer to Note 15 of the Condensed Consolidated Financial Statements for a discussion of the fair value measurements.
Balance Sheet ClassificationMarch 31, 2022December 31, 2021March 31, 2021
Derivatives designated as hedging instruments under ASC 815
Foreign currency contractsOther current assets$11,561 $7,488 $1,759 
Foreign currency contractsOther long term assets2,730 2,887 727 
Total derivative assets designated as hedging instruments$14,291 $10,375 $2,486 
Foreign currency contractsOther current liabilities$11,209 $8,663 $13,021 
Foreign currency contractsOther long term liabilities3,645 779 3,331 
Total derivative liabilities designated as hedging instruments$14,854 $9,442 $16,352 
Derivatives not designated as hedging instruments under ASC 815
Foreign currency contractsOther current assets$4,412 $1,999 $5,114 
Total derivative assets not designated as hedging instruments$4,412 $1,999 $5,114 
Foreign currency contractsOther current liabilities$1,213 $4,648 $1,087 
Total derivative liabilities not designated as hedging instruments$1,213 $4,648 $1,087 
The following table presents the amounts in the Condensed Consolidated Statements of Operations in which the effects of cash flow hedges are recorded and the effects of cash flow hedge activity on these line items:
Three months ended March 31,
20222021
TotalAmount of Gain (Loss) on Cash Flow Hedge ActivityTotalAmount of Gain (Loss) on Cash Flow Hedge Activity
Net revenues$1,300,945 $2,049 $1,257,195$(3,147)
Cost of goods sold$695,781 $(2,903)$628,554 $(2,218)
Interest income (expense), net$(6,154)$(9)$(14,137)$(9)
Other income (expense), net$(51)$— $(7,180)$— 

The following tables present the amounts affecting the Condensed Consolidated Statements of Comprehensive Income (Loss):
Balance as of
December 31, 2021		Amount of gain (loss) recognized in other comprehensive income (loss) on derivativesAmount of gain (loss) reclassified from other comprehensive income (loss) into incomeBalance as of March 31, 2022
Derivatives designated as cash flow hedges
Foreign currency contracts$(1,617)$804 $(854)$41 
Interest rate swaps(504)— (9)(495)
Total designated as cash flow hedges$(2,121)$804 $(863)$(454)

Balance as of
December 31, 2020		Amount of gain (loss) recognized in other comprehensive income (loss) on derivativesAmount of gain (loss) reclassified from other comprehensive income (loss) into incomeBalance as of
March 31, 2021
Derivatives designated as cash flow hedges
Foreign currency contracts$(25,908)$4,656 $(5,365)$(15,886)
Interest rate swaps(541)— (9)(531)
Total designated as cash flow hedges$(26,449)$4,656 $(5,374)$(16,417)

The following table presents the amounts in the Consolidated Statements of Operations in which the effects of undesignated derivative instruments are recorded and the effects of fair value hedge activity on these line items:
Three months ended March 31,
20222021
TotalAmount of Gain (Loss) on Fair Value Hedge ActivityTotalAmount of Gain (Loss) on Fair Value Hedge Activity
Other income (expense), net$(51)$4,481 $(7,180)$(2,737)
Cash Flow Hedges
The Company is exposed to gains and losses resulting from fluctuations in foreign currency exchange rates relating to transactions generated by its international subsidiaries in currencies other than their local currencies. These gains and losses are driven by non-functional currency generated revenue, non-functional currency inventory purchases, investments in U.S. Dollar denominated available-for-sale debt securities, and certain other intercompany transactions. The Company enters into foreign currency contracts to reduce the risk associated with the foreign currency exchange rate fluctuations on these transactions. Certain contracts are designated as cash flow hedges. As of March 31, 2022, December 31, 2021 and March 31, 2021 the aggregate notional value of the Company's outstanding cash flow hedges was $1,096.5 million, $556.5 million and $688.9 million, respectively, with contract maturities ranging from one to twenty-four months.
The Company may enter into long term debt arrangements with various lenders which bear a range of fixed and variable rates of interest. The nature and amount of the Company's long term debt can be expected to vary as a result of future business requirements, market conditions and other factors. The Company may elect to enter into interest rate swap contracts to reduce the impact associated with interest rate fluctuations. The interest rate swap contracts are accounted for as cash flow hedges. Refer to Note 8 of the Condensed Consolidated Financial Statements for a discussion of long term debt.
For contracts designated as cash flow hedges, the changes in fair value are reported as other comprehensive income (loss) and are recognized in current earnings in the period or periods during which the hedged transaction affects current earnings. Effective hedge results are classified in the Condensed Consolidated Statements of Operations in the same manner as the underlying exposure.
During the three months ended March 31, 2022, the Company voluntarily unwound and de-designated certain derivative instruments previously designated as cash flow hedges. The pre-tax gain of $2.2 million which had been recorded in other comprehensive income prior to the de-designation of the derivative instruments, will remain in other comprehensive income and will be recognized in earnings in the period in which the underlying transactions affect earnings.
Undesignated Derivative Instruments
The Company has entered into foreign exchange forward contracts to mitigate the change in fair value of specific assets and liabilities on the Condensed Consolidated Balance Sheets. Undesignated instruments are recorded at fair value as a derivative asset or liability on the Condensed Consolidated Balance Sheets with their corresponding change in fair value recognized in other expense, net, together with the re-measurement gain or loss from the hedged balance sheet position. As of March 31, 2022, December 31, 2021 and March 31, 2021 the total notional value of the Company's outstanding undesignated derivative instruments was $228.4 million, $258.2 million and $317.7 million, respectively.
Credit Risk
The Company enters into derivative contracts with major financial institutions with investment grade credit ratings and is exposed to credit losses in the event of non-performance by these financial institutions. This credit risk is generally limited to the unrealized gains in the derivative contracts. However, the Company monitors the credit quality of these financial institutions and considers the risk of counterparty default to be minimal.