DERIVATIVE INSTRUMENTS

9 Months Ended

Sep. 30, 2016

DERIVATIVE INSTRUMENTS

4. DERIVATIVE INSTRUMENTS

The Company uses foreign currency forward contracts (“forward contracts”) to hedge its exposure to fluctuations in foreign currency exchange rates associated with its foreign currency denominated cash, accounts receivable, and intercompany receivables and payables held by its U.S. parent company and United Kingdom (“U.K.”) subsidiary.

The Company is primarily exposed to foreign currency exchange rate fluctuations in the U.S. dollar, the Euro, and the Australian dollar relative to the British pound and the Euro and the Indian rupee relative to the U.S. dollar. At the end of June 2016, the U.K. held a referendum in which U.K. voters approved an exit from the European Union (the “E.U.”), commonly referred to as “Brexit”. The announcement of Brexit resulted in a sharp decline in the value of the British pound, as compared to the U.S. dollar and other currencies. This decline primarily resulted in foreign currency transaction gains from the remeasurement of foreign currency denominated cash and accounts receivable held by the Company’s U.K. subsidiary with corresponding losses on the Company’s forward contracts included in other expense, net.

The forward contracts are not designated as hedging instruments. As a result, the Company records the fair value of these contracts at the end of each reporting period in the accompanying unaudited condensed consolidated balance sheets as other current assets for unrealized gains and accrued expenses for unrealized losses, with any fluctuations in the value of these contracts recognized in other expense, net, in the accompanying unaudited condensed consolidated statements of operations. The cash flows related to these forward contracts are classified as operating activities in the accompanying unaudited condensed consolidated statements of cash flows. The Company does not enter into any forward contracts for trading or speculative purposes.

As of September 30, 2016 and December 31, 2015, the total notional amount of the Company’s outstanding forward contracts was $106.6 million and $32.3 million, respectively.

The fair value of the Company’s outstanding forward contracts was as follows:

	September 30, 2016				December 31, 2015
(in thousands)	Recorded In:		Fair Value		Recorded In:		Fair Value
Asset Derivatives
Foreign currency forward contracts		Other current assets	$	354		Other current assets	$	48
Liability Derivatives
Foreign currency forward contracts		Accrued expenses	$	393		Accrued expenses	$	1,052

The Company had forward contracts outstanding with total notional values as follows:

	As of September 30,
Currency (in thousands)	2016		2015
Euro	€	21,810	€	15,900
British pound	£	5,919	£	1,300
Australian dollar	A$	19,515	A$	11,500
Indian rupee	Rs	—	Rs	300,000
United States dollar	$	59,450	$	23,300

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2016			2015			2016			2015
Loss from the change in the fair value of forward contracts included in other expense, net	$	(1,237	)	$	(319	)	$	(4,955	)	$	(319	)
Foreign currency transaction gain (loss) from the remeasurement of foreign currency assets and liabilities	$	1,082		$	(412	)	$	2,764		$	(4,342	)