Hedging

3 Months Ended

Mar. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Foreign currency forward contracts - Designated as hedging instruments

We maintain a hedging program intended to mitigate the effect of changes in foreign exchange rates for a portion of our forecasted product revenues denominated in certain foreign currencies. The program includes foreign currency forward contracts that are designated as cash flow hedges under U.S. GAAP having contractual durations from one to eighteen months. We recognize realized gains and losses for the effective portion of such contracts in “Product revenues, net” in our condensed consolidated statements of income in the same period that we recognize the product revenues that were impacted by the hedged foreign exchange rate changes.

We formally document the relationship between foreign currency forward contracts (hedging instruments) and forecasted product revenues (hedged items), as well as our risk management objective and strategy for undertaking various hedging

activities, which includes matching all foreign currency forward contracts that are designated as cash flow hedges to forecasted transactions. We also formally assess, both at the hedge’s inception and on an ongoing basis, whether the foreign currency forward contracts are highly effective in offsetting changes in cash flows of hedged items on a prospective and retrospective basis. If we were to determine that a (i) foreign currency forward contract is not highly effective as a cash flow hedge, (ii) foreign currency forward contract has ceased to be a highly effective hedge or (iii) forecasted transaction is no longer probable of occurring, we would discontinue hedge accounting treatment prospectively. We measure effectiveness based on the change in fair value of the forward contracts and the fair value of the hypothetical foreign currency forward contracts with terms that match the critical terms of the risk being hedged. As of March 31, 2023, all hedges were determined to be highly effective.

We consider the impact of our counterparties’ credit risk on the fair value of the foreign currency forward contracts. As of March 31, 2023 and December 31, 2022, credit risk did not change the fair value of our foreign currency forward contracts.

The following table summarizes the notional amount in U.S. dollars of our outstanding foreign currency forward contracts designated as cash flow hedges under U.S. GAAP:


	As of March 31, 2023		As of December 31, 2022
Foreign Currency	(in millions)
Euro	$	1,325.9	$	1,497.7
British pound sterling	243.5		247.4
Canadian dollar	231.1		216.3
Australian dollar	180.3		174.9
Swiss Franc	65.9		65.2
Total foreign currency forward contracts	$	2,046.7	$	2,201.5

Foreign currency forward contracts - Not designated as hedging instruments

We also enter into foreign currency forward contracts with contractual maturities of less than one month, which are designed to mitigate the effect of changes in foreign exchange rates on monetary assets and liabilities, including intercompany balances. These contracts are not designated as hedging instruments under U.S. GAAP. We recognize realized gains and losses for such contracts in “Other income (expense), net” in our condensed consolidated statements of income each period. As of March 31, 2023, the notional amount of our outstanding foreign currency forward contracts where hedge accounting under U.S. GAAP is not applied was $541.3 million.

During the three months ended March 31, 2023 and 2022, we recognized the following related to foreign currency forward contracts in our condensed consolidated statements of income:


	Three Months Ended March 31,
		2023		2022
		(in millions)
Designated as hedging instruments - Reclassified from AOCI
Product revenues, net		$	22.0	$	20.1
Not designated as hedging instruments
Other income (expense), net		$	3.6	$	(8.4)

Total reported in the Condensed Consolidated Statements of Income
Product revenues, net		$	2,374.8	$	2,097.5
Other income (expense), net		$	1.3	$	(72.8)

The following table summarizes the fair value of our outstanding foreign currency forward contracts designated as cash flow hedges under U.S. GAAP included on our condensed consolidated balance sheets:


As of March 31, 2023
Assets			Liabilities
Classification	Fair Value		Classification	Fair Value
(in millions)
Prepaid expenses and other current assets	$	19.5	Other current liabilities	$	(20.5)
Other assets	0.3		Other long-term liabilities	(0.5)
Total assets	$	19.8	Total liabilities	$	(21.0)


As of December 31, 2022
Assets			Liabilities
Classification	Fair Value		Classification	Fair Value
(in millions)
Prepaid expenses and other current assets	$	47.5	Other current liabilities	$	(14.3)
Other assets	0.8		Other long-term liabilities	(0.9)
Total assets	$	48.3	Total liabilities	$	(15.2)

As of March 31, 2023, we expect the amounts that are related to foreign exchange forward contracts designated as cash flow hedges under U.S. GAAP recorded in “Prepaid expenses and other current assets” and “Other current liabilities” to be reclassified to earnings within twelve months.

We present the fair value of our foreign currency forward contracts on a gross basis within our condensed consolidated balance sheets. The following table summarizes the potential effect of offsetting derivatives by type of financial instrument designated as cash flow hedges under U.S. GAAP on our condensed consolidated balance sheets:


	As of March 31, 2023
	Gross Amounts Recognized		Gross Amounts Offset		Gross Amounts Presented		Gross Amounts Not Offset		Legal Offset
Foreign currency forward contracts	(in millions)
Total assets	$	19.8	$	—	$	19.8	$	(19.8)	$	—
Total liabilities	(21.0)		—		(21.0)		19.8		(1.2)


	As of December 31, 2022
	Gross Amounts Recognized		Gross Amounts Offset		Gross Amounts Presented		Gross Amounts Not Offset		Legal Offset
Foreign currency forward contracts	(in millions)
Total assets	$	48.3	$	—	$	48.3	$	(15.2)	$	33.1
Total liabilities	(15.2)		—		(15.2)		15.2		—