Derivative Instruments and Hedging Activities

3 Months Ended

Mar. 31, 2016

Derivative Instruments and Hedging Activities [Abstract]

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

We operate internationally and, in the normal course of business, are exposed to fluctuations in foreign currency exchange rates. The exposures result from portions of our revenues, as well as the related receivables, and expenses that are denominated in currencies other than the U.S. dollar, primarily the Euro and Japanese Yen. We manage our foreign currency transaction risk within specified guidelines through the use of derivatives. All of our derivative instruments are utilized for risk management purposes, and we do not use derivatives for speculative trading purposes.

We enter into foreign exchange forward contracts, with durations of up to 60 months, to hedge exposures resulting from portions of our forecasted revenues, including intercompany revenues, that are denominated in currencies other than the U.S. dollar. The purpose of these hedges is to reduce the volatility of exchange rate fluctuations on our operating results and to increase the visibility of the foreign exchange impact on forecasted revenues. These hedges are designated as cash flow hedges upon contract inception. At March 31, 2016, we had open contracts with notional amounts totaling $2,088,952 that qualified for hedge accounting.

The impact on accumulated other comprehensive income (AOCI) and earnings from foreign exchange contracts that qualified as cash flow hedges, for the three months endedMarch 31, 2016 and 2015 were as follows:

	Three months ended
	March 31,
	2016			2015
Gain (loss) recognized in AOCI, net of tax	$	(49,442	)	$	93,809
Gain reclassified from AOCI to net product sales (effective portion), net of tax	$	14,659		$	25,447
Gain reclassified from AOCI to other income and expense (ineffective portion), net of tax	$	—		$	1,075

Assuming no change in foreign exchange rates from market rates at March 31, 2016, $39,730 of gain recognized in AOCI will be reclassified to revenue over the next 12 months.

We enter into foreign exchange forward contracts, with durations of approximately 90 days, designed to limit the balance sheet exposure of monetary assets and liabilities. We enter into these hedges to reduce the impact of fluctuating exchange rates on our operating results. Hedge accounting is not applied to these derivative instruments as gains and losses on these hedge transactions are designed to offset gains and losses on underlying balance sheet exposures. As of March 31, 2016, the notional amount of foreign exchange contracts where hedge accounting is not applied was $307,585.

We recognized a (loss) gain of $(12,969) and $6,423, in other income and expense, for the three months ended March 31, 2016 and 2015, respectively, associated with the foreign exchange contracts not designated as hedging instruments. These amounts were partially offset by gains or losses on monetary assets and liabilities.

The following tables summarize the fair value of outstanding derivatives at March 31, 2016 and December 31, 2015:

	March 31, 2016
	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Foreign exchange forward contracts	Other current assets	$	55,976	Other current liabilities	$	15,870
Foreign exchange forward contracts	Other non-current assets	35,019		Other non-current liabilities	30,740
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts	Other current assets	2,594		Other current liabilities	16,186
Total fair value of derivative instruments		$	93,589		$	62,796

	December 31, 2015
	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Foreign exchange forward contracts	Other current assets	$	85,058	Other current liabilities	$	1,491
Foreign exchange forward contracts	Other non-current assets	66,309		Other non-current liabilities	4,773
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts	Other current assets	6,687			4,157
Total fair value of derivative instruments		$	158,054		$	10,421

Although we do not offset derivative assets and liabilities within our condensed consolidated balance sheets, our International Swap and Derivatives Association (ISDA) agreements provide for net settlement of transactions that are due to or from the same counterparty upon early termination of the agreement due to an event of default or other termination event. The following tables summarize the potential effect on our condensed consolidated balance sheets of offsetting our foreign exchange forward contracts subject to such provisions:

	March 31, 2016
									Gross Amounts Not Offset in the Condensed Consolidated Balance Sheet
Description	Gross Amounts of Recognized Assets/Liabilities			Gross Amounts Offset in the Condensed Consolidated Balance Sheet		Net Amounts of Assets/Liabilities Presented in the Condensed Consolidated Balance Sheet			Derivative Financial Instruments			Cash Collateral Received (Pledged)		Net Amount
Derivative assets	$	93,589		$	—	$	93,589		$	(27,928	)	$	—	$	65,661
Derivative liabilities	(62,796		)	—		(62,796		)	27,928			—		(34,868		)

	December 31, 2015
									Gross Amounts Not Offset in the Condensed Consolidated Balance Sheet
Description	Gross Amounts of Recognized Assets/Liabilities			Gross Amounts Offset in the Condensed Consolidated Balance Sheet		Net Amounts of Assets/Liabilities Presented in the Condensed Consolidated Balance Sheet			Derivative Financial Instruments			Cash Collateral Received (Pledged)		Net Amount
Derivative assets	$	158,054		$	—	$	158,054		$	(10,421	)	$	—	$	147,633
Derivative liabilities	(10,421		)	—		(10,421		)	10,421			—		—