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Derivative Financial Instruments | 9 Months Ended
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Sep. 29, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments | Derivative Financial Instruments The Company’s subsidiaries have had, and will continue to have material future cash flows, including revenue and expenses, which are denominated in currencies other than the Company’s functional currency. The Company and all its subsidiaries designate the U.S. dollar as the functional currency. Changes in exchange rates between the Company’s functional currency and other currencies in which the Company transacts business will cause fluctuations in cash flow expectations and cash flow realized or settled. Accordingly, the Company uses derivatives to mitigate its business exposure to foreign exchange risk. The Company enters into foreign currency forward contracts in Australian dollars, British pounds, euros, and Canadian dollars to manage its exposure to foreign exchange risk related to expected future cash flows on certain forecasted revenue, costs of revenue, operating expenses and existing assets and liabilities. T he Company’s foreign currency forward contracts do not contain any credit risk-related contingent features. The Company is exposed to credit losses in the event of nonperformance by the counter-parties of its forward contracts. The Company enters into derivative contracts with high-quality financial institutions and limits the amount of credit exposure to any one counter-party. In addition, the derivative contracts typically mature in less than six months and the Company continuously evaluates the credit standing of its counter-party financial institutions. The counter-parties to these arrangements are large highly rated financial institutions and the Company does not consider non-performance a material risk. The Company may choose not to hedge certain foreign exchange exposures for a variety of reasons, including, but not limited to, materiality, accounting considerations or the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in foreign exchange rates. The Company’s accounting policies for these instruments are based on whether the instruments are designated as hedge or non-hedge instruments in accordance with the authoritative guidance for derivatives and hedging. The Company records all derivatives on the balance sheets at fair value. Cash flow hedge gains and losses are recorded in other comprehensive income (“OCI”) until the hedged item is recognized in earnings. Derivatives that are not designated as hedging instruments are adjusted to fair value through earnings in Other income (expense), net in the unaudited condensed consolidated statements of operations. Fair value of derivative instruments The fair values of the Company’s derivative instruments and the line items on the unaudited condensed consolidated balance sheets to which they were recorded as of September 29, 2019 and December 31, 2018 are summarized as follows:
Derivative Assets |  | Balance Sheet Location |  | September 29, 2019 |  | December 31, 2018 |  | Balance Sheet Location |  | September 29, 2019 |  | December 31, 2018
|  |  |  | (In thousands) |  |  |  | (In thousands)
Derivative assets not designated as hedging instruments |  | Prepaid expenses and other current assets |  | $ | 336 |  |  | $ | 293 |  |  | Accrued liabilities |  | $ | 46 |  |  | $ | 46 |
Derivative assets designated as hedging instruments |  | Prepaid expenses and other current assets |  | 7 |  |  | 29 |  |  | Accrued liabilities |  | 10 |  |  | 25 |
Total |  |  |  | $ | 343 |  |  | $ | 322 |  |  |  |  | $ | 56 |  |  | $ | 71 |
Refer to Note 4, Fair Value Measurements, for detailed disclosures regarding fair value measurements in accordance with the authoritative guidance for fair value measurements and disclosures. Gross amounts offsetting of derivative instruments The Company has entered into master netting arrangements which allow net settlements under certain conditions. Although netting is permitted, it is currently the Company’s policy and practice to record all derivative assets and liabilities on a gross basis in the unaudited condensed consolidated balance sheets. The following tables set forth the offsetting of derivative assets as of September 29, 2019 and December 31, 2018:
As of September 29, 2019 |  |  |  |  |  |  |  | Gross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets |  |
| Gross Amounts of Recognized Assets |  | Gross Amounts Offset in the Unaudited Condensed Consolidated Balance Sheets |  | Net Amounts Of Assets Presented in the Unaudited Condensed Consolidated Balance Sheets |  | Financial Instruments |  | Cash Collateral Pledged |  | Net Amount
|  | (In thousands)
HSBC |  | $ | 329 |  |  | $ | — |  |  | $ | 329 |  |  | $ | (54 | ) |  | $ | — |  |  | $ | 275 |
Wells Fargo Bank |  | 14 |  |  | — |  |  | 14 |  |  | (2 | ) |  | — |  |  | 12 |
Total |  | $ | 343 |  |  | $ | — |  |  | $ | 343 |  |  | $ | (56 | ) |  | $ | — |  |  | $ | 287 |
As of December 31, 2018 |  |  |  |  |  |  |  | Gross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets |  |
| Gross Amounts of Recognized Assets |  | Gross Amounts Offset in the Unaudited Condensed Consolidated Balance Sheets |  | Net Amounts Of Assets Presented in the Unaudited Condensed Consolidated Balance Sheets |  | Financial Instruments |  | Cash Collateral Pledged |  | Net Amount
|  | (In thousands)
HSBC |  | $ | 100 |  |  | $ | — |  |  | $ | 100 |  |  | $ | — |  |  | $ | — |  |  | $ | 100 |
Wells Fargo Bank |  | 222 |  |  | — |  |  | 222 |  |  | (68 | ) |  | — |  |  | 154 |
Total |  | $ | 322 |  |  | $ | — |  |  | $ | 322 |  |  | $ | (68 | ) |  | $ | — |  |  | $ | 254 |
The following tables set forth the offsetting of derivative liabilities as of September 29, 2019 and December 31, 2018:
As of September 29, 2019 |  |  |  |  |  |  |  | Gross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets |  |
| Gross Amounts of Recognized Liabilities |  | Gross Amounts Offset in the Unaudited Condensed Consolidated Balance Sheets |  | Net Amounts Of Liabilities Presented in the Unaudited Condensed Consolidated Balance Sheets |  | Financial Instruments |  | Cash Collateral Pledged |  | Net Amount
|  | (In thousands)
HSBC |  | $ | 54 |  |  | $ | — |  |  | $ | 54 |  |  | $ | (54 | ) |  | $ | — |  |  | $ | — |
Wells Fargo Bank |  | 2 |  |  | — |  |  | 2 |  |  | (2 | ) |  | — |  |  | — |
Total |  | $ | 56 |  |  | $ | — |  |  | $ | 56 |  |  | $ | (56 | ) |  | $ | — |  |  | $ | — |
As of December 31, 2018 |  |  |  |  |  |  |  | Gross Amounts Not Offset in the Unaudited Condensed Consolidated Balance Sheets |  |
| Gross Amounts of Recognized Liabilities |  | Gross Amounts Offset in the Unaudited Condensed Consolidated Balance Sheets |  | Net Amounts Of Liabilities Presented in the Unaudited Condensed Consolidated Balance Sheets |  | Financial Instruments |  | Cash Collateral Pledged |  | Net Amount
|  | (In thousands)
JP Morgan |  | $ | 3 |  |  | $ | — |  |  | $ | 3 |  |  | $ | — |  |  | $ | — |  |  | $ | 3 |
Wells Fargo Bank |  | 68 |  |  | — |  |  | 68 |  |  | (68 | ) |  | — |  |  | — |
Total |  | $ | 71 |  |  | $ | — |  |  | $ | 71 |  |  | $ | (68 | ) |  | $ | — |  |  | $ | 3 |
Cash flow hedges The Company typically hedges portions of its anticipated foreign currency exposure which generally are less than six months. The Company enters into about eight forward contracts per quarter with an average size of $1.4 million USD equivalent related to its cash flow hedging program. The effects of the Company’s cash flow hedges on the unaudited condensed consolidated statements of operations for the three months ended September 29, 2019 are summarized as follows:
|  | Location and Amount of Gains (Losses) Recognized in Income on Cash Flow Hedges
|  | Revenue |  | Cost of revenue |  | Research and development |  | Sales and marketing |  | General and administrative
|  | (In thousands)
Statements of operations |  | $ | 106,116 |  |  | $ | 95,613 |  |  | $ | 16,701 |  |  | $ | 13,657 |  |  | $ | 11,062 |
Gains (losses) on cash flow hedge |  | $ | 86 |  |  | $ | — |  |  | $ | (3 | ) |  | $ | (3 | ) |  | $ | (2 | )
The effects of the Company’s cash flow hedges on the unaudited condensed consolidated statements of operations for the nine months ended September 29, 2019 are summarized as follows:
|  | Location and Amount of Gains (Losses) Recognized in Income on Cash Flow Hedges
|  | Revenue |  | Cost of revenue |  | Research and development |  | Sales and marketing |  | General and administrative
|  | (In thousands)
Statements of operations |  | $ | 247,594 |  |  | $ | 225,496 |  |  | $ | 52,456 |  |  | $ | 42,389 |  |  | $ | 32,512 |
Gains (losses) on cash flow hedge |  | $ | 333 |  |  | $ | (2 | ) |  | $ | (24 | ) |  | $ | (38 | ) |  | $ | (11 | )
The Company expects to reclassify to earnings all of the amounts recorded in AOCI associated with its cash flow hedges over the next twelve months. For information on the unrealized gains or losses on derivatives reclassified out of AOCI into the unaudited condensed consolidated statements of operations, refer to Note 6, Accumulated Other Comprehensive Income (Loss). Derivative instruments designated as cash flow hedges must be de-designated as hedges when it is probable the forecasted hedged transaction will not occur within the designated hedge period or if not recognized within 60 days following the end of the hedge period. The Company did not recognize any material net gains or losses related to the loss of hedge designation as there were no discontinued cash flow hedges during the nine months ended September 29, 2019. Non-designated hedges The Company adjusts its non-designated hedges monthly and enters into about five non-designated derivatives per quarter with an average size of $2.0 million. The hedges range typically from one to three months in duration. The effects of the Company’s non-designated hedge included in Other income (expense), net on the unaudited condensed consolidated statements of operations for the three and nine months ended September 29, 2019 and September 30, 2018 were as follows:
Derivatives Not Designated as Hedging Instruments |  | Location of Gains (Losses) Recognized in Income on Derivative |  | Three Months Ended |  | Nine Months Ended
| September 29, 2019 |  | September 30, 2018 |  | September 29, 2019 |  | September 30, 2018
|  |  |  | (In thousands) |  |  |  |
Foreign currency forward contracts |  | Other income (expense), net |  | $ | 665 |  |  | $ | (57 | ) |  | $ | 521 |  |  | $ | (57 | )

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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