Derivatives and Hedging Activities (Notes)

12 Months Ended

Dec. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

DERIVATIVES AND HEDGING ACTIVITIES

    Hedge Accounting and Hedging Program

     The purpose of our cash flow hedging program is to manage the foreign currency exchange rate risk on forecasted expenses denominated in currencies other than the functional currency of the operating unit. We do not issue derivatives for trading or speculative purposes.

To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge, and the hedges must be highly effective in offsetting changes to future cash flows on hedged transactions. The par forward contract is designated and qualifies as a cash flow hedge. Our derivative instrument is recorded at fair value on the Consolidated Balance Sheets and is classified based on the instrument's maturity date. We record changes in the fair value of the effective portion of the derivative instrument as a component of Other Comprehensive Income (Loss) and we reclassify that gain or loss into earnings in the same line item associated with the forecasted transaction and in the same period during which the hedged transaction affects earnings.

We began hedging a portion of our Mexico forecasted expenses denominated in Pesos ("MXN") in May 2017 by entering into a two-year cross-currency par forward contract. The term of this currency forward contract was May 1, 2017 to May 1, 2019. The derivative instrument had a fixed forward rate of 20.01 MXN/USD over the term of the two-year contract.

    In January 2018, we entered into a six-month cross-currency par forward contract. The term of this six-month contract was May 1, 2019 to November 1, 2019. The derivative instrument had a fixed forward rate of 20.43 MXN/USD over the term of the six-month contract.

    In November 2018, we entered into a one-year cross-currency par forward contract. The term of the one-year hedge was November 1, 2019 to November 3, 2020. The derivative instrument matured in equal monthly amounts at a fixed forward rate of 22.109 MXN/USD.

In March 2020, we entered into a one-year cross-currency par forward contract. The total notional amount of this outstanding derivative as of December 31, 2020 was approximately 436.8 million MXN. The term of the one-year contract is November 3, 2020 to December 1, 2021. The derivative instrument matures in equal monthly amounts at a fixed forward rate of 24.26 MXN/USD.

    The following table presents the fair values of our derivative instruments included within the Consolidated Balance Sheets (in thousands):

	Derivatives
		As of December 31,
	Consolidated Balance Sheet Location	2020		2019
Derivatives designated as cash flow hedging instruments
Foreign exchange forward contract:	Prepaid expenses and other current assets	$	3,555	$	2,366
Total derivatives designated as cash flow hedging instruments		$	3,555	$	2,366

    The following table presents the amounts affecting the Consolidated Statements of Operations (in thousands):

		Year Ended December 31,
	Location of Gain in the Consolidated Statements of Operations	2020		2019		2018
Derivatives designated as cash flow hedging instruments
Foreign exchange forward contracts	Cost of goods sold	$	790	$	916	$	743

We recognized the following gains on our foreign exchange contract designated as a cash flow hedge (in thousands):

	Amount of Gain Recognized in Other Comprehensive Income on Derivatives						Amount of Gain Reclassified From Accumulated Other Comprehensive Income into Income
	Year Ended December 31,							Year Ended December 31,
	2020		2019		2018		Location of Gain Reclassified From Accumulated Other Comprehensive Income into Income	2020		2019		2018
Derivatives designated as cash flow hedges:
Foreign exchange forward contract	$	1,980	$	2,550	$	2,063	Cost of goods sold	$	790	$	916	$	743
Total derivatives designated as cash flow hedging instruments	$	1,980	$	2,550	$	2,063		$	790	$	916	$	743

    As of December 31, 2020, we expect approximately $3.6 million of the deferred gain on the outstanding derivatives in accumulated other comprehensive (loss) income to be reclassified to net income during the next 12 months concurrent with the underlying hedged transactions also being reported in net income.