Derivative Financial Instruments

9 Months Ended

Sep. 30, 2019

Derivative Financial Instruments [Abstract]

9.	Derivative Financial Instruments

From time to time, the Company enters into non-designated foreign currency derivatives, primarily comprised of foreign currency forward contracts, for which hedge accounting does not apply. The changes in the fair market value of these non-designated derivatives are included in other income/expense in the Company’s consolidated statements of income. The Company at times uses non-designated foreign currency derivatives to hedge foreign-currency-denominated intercompany transactions and to partially mitigate the impact of foreign-currency fluctuations. The fair value of the non-designated foreign currency derivatives is based on third-party quotes.

During the three- and nine-month periods ended September 30, 2019 and 2018, the Company had no gains (losses) related to derivative instruments not designated as hedging instruments.

The Company designates as cash-flow hedges those foreign currency forward contracts it enters to hedge forecasted intercompany transactions that are subject to foreign currency exposures. Changes in the fair value of these forward contracts designated as cash-flow hedges are recorded as a component of accumulated other comprehensive loss within stockholders’ equity (deficit) and are recognized in the consolidated statement of income during the period which approximates the time the hedged transaction is settled.

As of September 30, 2019, and 2018, the Company held no forward contracts.

The following table summarizes gains (losses) related to derivative instruments recorded in other comprehensive income (loss) during the three- and nine-month periods ended September 30, 2019 and 2018 (U.S. dollars in thousands):

	Amount of Gain (Loss) Recognized in Other Comprehensive Loss
Derivatives Designated	Three Months Ended September 30,				Nine Months Ended September 30,
as Hedging Instruments:	2019		2018		2019		2018
Foreign currency forward contracts related to intercompany license fee, product sales, and selling expense hedges	$	—	$	—	$	—	$	(160	)

		Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income
Derivatives Designated	Location of Gain (Loss) Reclassified from Accumulated	Three Months Ended September 30,				Nine Months Ended September 30,
as Hedging Instruments:	Other Comprehensive Loss into Income	2019		2018		2019		2018
Foreign currency forward contracts related to intercompany license fees and product sales hedges	Revenue	$	—	$	—	$	—	$	18

As of September 30, 2019 and December 31, 2018, there were no unrealized gains/(losses) included in accumulated other comprehensive loss related to foreign currency cash flow hedges. The remaining $95.0 million and $79.9 million as of September 30, 2019 and December 31, 2018, respectively, in accumulated other comprehensive loss are related to cumulative translation adjustments. The Company assesses hedge effectiveness at least quarterly. During the three- and nine-month periods ended September 30, 2019 and 2018, all hedges were determined to be effective.

The Company reports its derivatives at fair value as either other current assets or accrued expenses within its consolidated balance sheets. See Note 7 - Fair Value.