DERIVATIVE INSTRUMENTS

3 Months Ended

Mar. 31, 2017

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”. Uncertainty continues to remain around the future effects of Brexit, resulting in continued volatility in the British pound relative to other currencies. This prolonged weakening of the British pound may continue to result 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 March 31, 2017 and December 31, 2016, the total notional value of the Company’s outstanding forward contracts were $36.8 million and $128.4 million, respectively. The fair value of the Company’s outstanding forward contracts was as follows:

(in thousands)	March 31, 2017			December 31, 2016
	Recorded In:	Fair Value		Recorded In:	Fair Value
Asset Derivatives
Foreign currency forward contracts	Other current assets	$	90	Other current assets	$	628
Liability Derivatives
Foreign currency forward contracts	Accrued expenses	$	17	Accrued expenses	$	883

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

	As of March 31, 2017
Currency (in thousands)	2017			2016
Euro	€	12,305		€	15,590
British pound	£	855		£	2,605
Australian dollar	A$	10,160		A$	16,025
Indian rupee	Rs	—		Rs	303,500
United States dollar	$	14,705		$	21,080
	Three Months Ended March 31,
(in thousands)	2017			2016
Loss from the change in the fair value of forward contracts included in other expense, net	$	(279	)	$	(2,297	)
Foreign currency transaction gain from the remeasurement of foreign currency assets and liabilities	$	676		$	1,376
Net gain (loss)	$	397		$	(921	)