Derivative Instruments and Hedging Activities

9 Months Ended

Sep. 30, 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 are also exposed to fluctuations in interest rates on our outstanding term loan debt. We manage these exposures 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 September 30, 2016, we had open foreign exchange forward contracts with notional amounts totaling $1,902,227 that qualified for hedge accounting.

To achieve a desired mix of floating and fixed interest rates on our term loan, we entered into two interest rate swap agreements in June 2016 that qualified for and are designated as cash flow hedges. The first agreement has a notional amount of $3,281,250 and is effective from June 30, 2016 through December 30, 2016. This agreement hedges the contractual floating interest rate of our term loan. As a result of this agreement, the interest rate for our term loan has been fixed at0.535%, plus the borrowing spread, until December 30, 2016. The second agreement has a notional amount of$656,250and is effective December 31, 2016 through December 31, 2019. The second agreement converts the floating rate on a portion of our term loan to a fixed rate of0.98%, plus a borrowing spread, from December 31, 2016 through December 2019.

The impact on accumulated other comprehensive income (AOCI) and earnings from derivative instruments that qualified as cash flow hedges, for the three and nine months endedSeptember 30, 2016 and 2015 were as follows:

	Three months ended						Nine months ended
	September 30,						September 30,
	2016			2015			2016			2015
Foreign Exchange Contracts:
Gain (loss) recognized in AOCI, net of tax	$	(10,402	)	$	10,206		$	(50,191	)	$	81,794
Gain reclassified from AOCI to net product sales (effective portion), net of tax	$	8,237		$	25,842		$	33,154		$	78,959
Gain (loss) reclassified from AOCI to other income and expense (ineffective portion), net of tax	$	—		$	(328	)	$	—		$	1,003
Interest Rate Contracts:
Gain (loss) recognized in AOCI, net of tax	$	2,517		$	—		$	(1,178	)	$	—
Loss reclassified from AOCI to interest expense, net of tax	$	(218	)	$	—		$	(218	)	$	—

Assuming no change in foreign exchange rates or LIBOR-based interest rates from market rates at September 30, 2016, $22,182 and $(717) of gains (losses) recognized in AOCI will be reclassified to revenue and interest expense, respectively, 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 September 30, 2016, the notional amount of foreign exchange contracts where hedge accounting is not applied was $569,590.

We recognized a (loss) gain of $(2,528) and $2,676, in other income and expense, for the three months ended September 30, 2016 and 2015, respectively, and $(20,643) and $2,439, for the nine months endedSeptember 30, 2016 and 2015, respectively, associated with the foreign exchange contracts not designated as hedging instruments. These amounts were largely offset by gains or losses in monetary assets and liabilities.

The following tables summarize the fair value of outstanding derivatives at September 30, 2016 and December 31, 2015:

	September 30, 2016
	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Foreign exchange forward contracts	Prepaid expenses and other current assets	$	48,014	Other current liabilities	$	25,831
Foreign exchange forward contracts	Other assets	31,122		Other liabilities	38,392
Interest rate contracts	Prepaid expenses and other current assets	229		Other current liabilities	946
Interest rate contracts	Other assets	—		Other liabilities	797
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts	Prepaid expenses and other current assets	2,306		Other current liabilities	9,113
Total fair value of derivative instruments		$	81,671		$	75,079

	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	Prepaid expenses and other current assets	$	85,058	Other current liabilities	$	1,491
Foreign exchange forward contracts	Other assets	66,309		Other liabilities	4,773
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts	Prepaid expenses and other current assets	6,687		Other current liabilities	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 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 and interest rate contracts subject to such provisions:

	September 30, 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	$	81,671		$	—	$	81,671		$	(49,423	)	$	—	$	32,248
Derivative liabilities	(75,079		)	—		(75,079		)	49,423			—		(25,656		)

	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			—		—