Document and Entity Information - USD ($)	12 Months Ended
Document and Entity Information - USD ($)	Dec. 31, 2018	Feb. 15, 2019	Jun. 30, 2018
Document And Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2018
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2018
Entity Registrant Name	NATIONAL INSTRUMENTS CORP /DE/
Entity Central Index Key	0000935494
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	Yes
Entity Current Reporting Status	Yes
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Public Float			$ 2,970,344,772
Entity Common Stock, Shares Outstanding		132,241,482

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 259,386	$ 290,164
Short-term investments	271,396	121,888
Accounts receivable, net	242,955	248,825
Inventories, net	194,146	184,592
Prepaid expenses and other current assets	54,337	48,621
Total current assets	1,022,220	894,090
Property and equipment, net	245,201	249,715
Goodwill	264,530	266,783
Intangible assets, net	110,783	123,293
Other long-term assets	28,501	32,553
Total assets	1,671,235	1,566,434
Current liabilities:
Accounts payable and accrued expenses	48,388	49,733
Accrued compensation	45,821	43,309
Deferred revenue - current	127,288	120,638
Other current liabilities	25,913	23,782
Other taxes payable	35,574	31,793
Total current liabilities	282,984	269,255
Deferred income taxes	25,457	33,609
Income tax payable - long-term	74,546	81,515
Liability for uncertain tax positions	9,775	10,158
Deferred revenue - long-term	32,636	33,742
Other long-term liabilities	7,479	10,134
Total liabilities	432,877	438,413
Commitments and contingencies
Stockholders' equity:
Preferred stock: par value $0.01; 5,000,000 shares authorized; none issued and outstanding	0	0
Common stock: par value $0.01; 360,000,000 shares authorized; 132,655,941 and 130,978,947 shares issued and outstanding, respectively	1,327	1,310
Additional paid-in capital	897,544	829,979
Retained earnings	356,418	313,241
Accumulated other comprehensive loss	(16,931)	(16,509)
Total stockholders’ equity	1,238,358	1,128,021
Total liabilities and stockholders’ equity	$ 1,671,235	$ 1,566,434

Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Preferred stock, par value (in usd per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in usd per share)	$ 0.01	$ 0.01
Common stock, shares authorized	360,000,000	360,000,000
Common stock, shares issued	132,655,941	130,978,947
Common stock, shares outstanding	132,655,941	130,978,947

Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Net sales:
Total net sales	$ 1,359,132	$ 1,289,386	$ 1,228,179
Cost of sales:
Total cost of sales	333,727	328,324	313,121
Gross profit	1,025,405	961,062	915,058
Operating expenses:
Sales and marketing	482,576	477,921	461,236
Research and development	261,072	231,761	235,706
General and administrative	108,878	105,602	98,390
Total operating expenses	852,526	815,284	795,332
Operating income	172,879	145,778	119,726
Other income (expense):
Interest income	5,896	2,276	1,122
Net foreign exchange (loss) gain	(3,423)	892	(4,632)
Other income (expense), net	1,101	(1,566)	(1,581)
Income before income taxes	176,453	147,380	114,635
Provision for income taxes	21,396	94,969	31,901
Net income	$ 155,057	$ 52,411	$ 82,734
Basic earnings per share (in usd per share)	$ 1.17	$ 0.40	$ 0.64
Weighted average shares outstanding - basic	131,987	130,300	128,453
Diluted earnings per share (in usd per share)	$ 1.16	$ 0.40	$ 0.64
Weighted average shares outstanding - diluted	133,274	131,387	129,008
Dividends declared per share (in usd per share)	$ 0.92	$ 0.84	$ 0.80
Product
Net sales:
Total net sales	$ 1,220,027	$ 1,173,476	$ 1,116,703
Cost of sales:
Total cost of sales	325,208	318,863	306,730
Software maintenance
Net sales:
Total net sales	139,105	115,910	111,476
Cost of sales:
Total cost of sales	$ 8,519	$ 9,461	$ 6,391

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Statement of Comprehensive Income [Abstract]
Net income	$ 155,057	$ 52,411	$ 82,734
Other comprehensive income, before tax and net of reclassification adjustments:
Foreign currency translation adjustment	(9,768)	24,470	(5,697)
Unrealized (loss) gain on securities available-for-sale	(378)	(120)	210
Unrealized gain (loss) on derivative instruments	12,525	(9,488)	13,166
Other comprehensive income, before tax	2,379	14,862	7,679
Tax provision (benefit) related to items of other comprehensive income	2,801	(3,250)	4,210
Other comprehensive (loss) income, net of tax	(422)	18,112	3,469
Comprehensive income	$ 154,635	$ 70,523	$ 86,203

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Cash flow from operating activities:
Net income	$ 155,057	$ 52,411	$ 82,734
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	70,667	72,695	73,390
Stock-based compensation	37,616	29,145	25,832
Tax benefit from deferred income taxes	(11,738)	(5,774)	(5,430)
Purchase price adjustment	0	0	1,585
Changes in operating assets and liabilities (net of effects of acquisitions):
Accounts receivable	8,446	(15,269)	(14,131)
Inventories	(10,642)	10,154	(9,205)
Prepaid expenses and other assets	12,628	1,971	17,421
Accounts payable and accrued expenses	(3,976)	1,584	(2,506)
Deferred revenue	19,061	1,791	8,864
Taxes, accrued compensation, and other current liabilities	(2,539)	75,734	21,645
Net cash provided by operating activities	274,580	224,442	200,199
Cash flow from investing activities:
Capital expenditures	(34,659)	(30,256)	(44,425)
Capitalization of internally developed software	(14,208)	(41,662)	(31,859)
Additions to other intangibles	(5,399)	(2,384)	(2,342)
Acquisitions, net of cash received	(5,534)	0	(549)
Purchases of short-term investments	(313,726)	(87,735)	(39,097)
Sales and maturities of short-term investments	163,530	39,627	47,769
Net cash used in investing activities	(209,996)	(122,410)	(70,503)
Cash flow from financing activities:
Proceeds from revolving line of credit	0	0	15,000
Principal payments on revolving line of credit	0	(25,000)	(27,000)
Proceeds from issuance of common stock	31,601	29,094	28,907
Repurchase of common stock	0	0	(5,635)
Dividends paid	(121,537)	(109,551)	(102,897)
Other	(907)	(842)	0
Net cash used in financing activities	(90,843)	(106,299)	(91,625)
Effect of exchange rate changes on cash	(4,519)	9,148	(3,917)
Net change in cash and cash equivalents	(30,778)	4,881	34,154
Cash and cash equivalents at beginning of period	290,164	285,283	251,129
Cash and cash equivalents at end of period	259,386	290,164	285,283
Supplemental disclosures:
Interest paid	78	478	520
Income taxes paid	$ 32,786	$ 38,033	$ 2,902

Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Retained Earnings	Accumulated Other Comprehensive Income/(Loss)
Beginning balance (in shares) at Dec. 31, 2015		127,471,604
Beginning balance at Dec. 31, 2015	$ 1,081,721	$ 1,275	$ 717,705	$ 400,831	$ (38,090)
Increase (Decrease) in Stockholders' Equity
Net income	82,734			82,734
Other comprehensive income (loss), net of tax	3,469				3,469
Issuance of common stock under employee plans, including tax benefits (in shares)		1,894,151
Issuance of common stock under employee plans, including tax benefits	28,907	$ 19	28,888
Stock-based compensation	25,920		25,920
Business acquisition (in shares)		44,004
Business acquisition	0	$ 0	0
Repurchase of common stock (in shares)		(206,780)
Repurchase of common stock	(5,635)	$ (2)	(1,167)	(4,466)
Dividends paid	(102,897)			(102,897)
Disqualified dispositions	0		0
Ending balance (in shares) at Dec. 31, 2016		129,202,979.000
Ending balance at Dec. 31, 2016	1,114,219	$ 1,292	771,346	376,202	(34,621)
Increase (Decrease) in Stockholders' Equity
Accounting pronouncements adopted \| Accounting Standards Update 2016-16	(5,821)			(5,821)
Net income	52,411			52,411
Other comprehensive income (loss), net of tax	18,112				18,112
Issuance of common stock under employee plans, including tax benefits (in shares)		1,775,968
Issuance of common stock under employee plans, including tax benefits	29,094	$ 18	29,076
Stock-based compensation	29,557		29,557
Business acquisition	0
Dividends paid	$ (109,551)			(109,551)
Ending balance (in shares) at Dec. 31, 2017	130,978,947	130,978,947.000
Ending balance at Dec. 31, 2017	$ 1,128,021	$ 1,310	829,979	313,241	(16,509)
Increase (Decrease) in Stockholders' Equity
Accounting pronouncements adopted \| Accounting Standards Update 2014-09	9,657			9,657
Net income	155,057			155,057
Other comprehensive income (loss), net of tax	(422)				(422)
Issuance of common stock under employee plans, including tax benefits (in shares)		1,676,994
Issuance of common stock under employee plans, including tax benefits	30,694	$ 17	30,677
Stock-based compensation	36,888		36,888
Dividends paid	$ (121,537)			(121,537)
Ending balance (in shares) at Dec. 31, 2018	132,655,941	132,655,941
Ending balance at Dec. 31, 2018	$ 1,238,358	$ 1,327	$ 897,544	$ 356,418	$ (16,931)

Operations and summary of significant accounting policies

12 Months Ended

Dec. 31, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Operations and summary of significant accounting policies

National Instruments Corporation is a Delaware corporation. We provide flexible application software and modular, multifunction hardware that users combine with industry-standard computers, networks and third party devices to create automated test and automated measurement systems. Our software-centric approach helps our customers quickly and cost-effectively design, prototype and deploy custom-defined solutions for their design, control and test application needs. We offer hundreds of products used to create virtual instrumentation systems for general, commercial, industrial and scientific applications. Our products may be used in different environments, and consequently, specific application of our products is determined by the customer and generally is not known to us.

These financial statements have been prepared in accordance with U.S. generally accepted accounting principles.

Principles of consolidation

The Consolidated Financial Statements include the accounts of National Instruments Corporation and its subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Use of estimates

The preparation of our financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures of contingent assets and liabilities. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. Our critical accounting policies are those that affect our financial statements materially and involve difficult, subjective or complex judgments by management. Although these estimates are based on management's best knowledge of current events and actions that may impact the company in the future, actual results may be materially different from the estimates.

Revenue Recognition

On January 1, 2018, we adopted the new revenue standard using the modified retrospective transition method. Under the modified retrospective transition approach, periods prior to the adoption date were not adjusted and continue to be reported in accordance with historical GAAP.

Impact of adopting Topic 606

A cumulative catch-up adjustment was recorded to beginning retained earnings to reflect the impact of all existing arrangements under the new revenue standard. The impact of adopting the new revenue standard for the year ended December 31, 2018 is further discussed under "Recently Adopted Accounting Pronouncements" beginning on page F-16.

Revenue recognition under Topic 606

Revenue is recognized upon transfer of control of the promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We enter into contracts that can include various combinations of our products or services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities.

Nature of Goods and Services

We derive revenues from two primary sources: products and software maintenance.

Product revenues are primarily generated from the sale of off-the-shelf modular test and measurement hardware components and related drivers, and application software licenses. Sales of most hardware components may also include optional extended hardware warranties, which typically provide additional service-type coverage for three years from the purchase date. Our software licenses typically provide for a perpetual right to use our software. We also offer some term-based software licenses that expire, which are referred to as subscription arrangements. We do not customize software for customers and installation services are not required. The software is delivered before related services are provided and is functional without professional services, updates and technical support. We sell our customer support contracts as a percentage of net software purchases the support is related. Revenues from offerings related to our hardware and software products such as extended hardware warranties, training, consulting and installation services are not significant and presented within product revenues, as further discussed below.

Software maintenance revenues consists of post contract customer support that provides the customer with unspecified upgrades and technical support. For these contracts, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. Standalone selling prices of software licenses are estimated based on our established pricing practices and maximize the use of observable inputs. Standalone selling prices of hardware products are typically estimated based on observable transactions when these services are sold on a standalone basis. Our typical performance obligations include the following:



Performance Obligation	When performance obligation is typically satisfied	When payment is typically due	How standalone selling price is typically estimated
Product revenue
Modular hardware	When customer obtains control of the product (point-in-time)	Within 30-90 days of shipment	Observable in transactions without multiple performance obligations
Software licenses	When software media is delivered to customer or made available for download electronically, and the applicable license period has begun (point-in-time)	Within 30-90 days of the beginning of license period	Established pricing practices for software licenses bundled with maintenance, which are separately observable in renewal transactions
Extended hardware warranty	Ratably over the course of the support contract (over time)	Within 30-90 days of the beginning of the contract period	Observable in renewal transactions
Other related support offerings	As work is performed (over time) or course is delivered (point-in-time)	Within 30-90 days of delivery	Observable in transactions without multiple performance obligations
Software maintenance revenue
Software maintenance	Ratably over the course of the support contract (over time)	Within 30-90 days of the beginning of the contract period	Observable in renewal transactions

Significant Judgments

Judgment is required to determine the standalone selling price ("SSP") for each distinct performance obligation. We use a single amount to estimate SSP for items that are not sold separately, including perpetual and term licenses sold with software maintenance. We use a range of amounts to estimate SSP when we sell each of the products and services separately and need to determine whether there is a discount that needs to be allocated based on the relative SSP of the various products and services.

Due to the various benefits from and the nature of our enterprise agreement program, judgment is required to assess the pattern of delivery, including the exercise pattern of certain benefits across our portfolio of customers. Additionally, whether a renewal option represents a distinct performance obligation could significantly impact the timing of revenue recognized.

Our products are generally sold with a right of return which is accounted for as variable consideration when estimating the amount of revenue to recognize. Returns and credits are estimated at contract inception and updated at the end of each reporting period as additional information becomes available and only to the extent that it is probable that a significant reversal of any incremental revenue will not occur. During the first quarter of 2018, we began to reclassify our allowance for sales returns to

"other current liabilities" from "accounts receivable, net" due to the adoption of ASU 2014-09. Changes to our estimated variable consideration were not material for the periods presented.

Contract Balances

Timing of revenue recognition may differ from the timing of payment from customers. We record a receivable when revenue is recognized prior to invoicing, or deferred revenue when revenue is recognized subsequent to invoicing. Based on the nature of our contracts with customers, we do not typically recognize unbilled receivables related to revenues recognized in excess of amounts billed. For the year ended December 31, 2018, amounts recognized related to unbilled receivables were not material.

In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a significant financing component. The primary purpose of our invoicing terms is to provide customers with efficient and predictable ways of purchasing our products and services, not to receive financing from our customers or to provide customers with financing. Examples include invoicing at the beginning of a maintenance service term with revenue recognized ratably over the contract period.

Accounts Receivable

Accounts receivable are recorded net of allowances for doubtful accounts of $3.5 million and $2.9 million at December 31, 2018 and 2017, respectively. Our allowance for doubtful accounts is based on historical experience. We analyze historical bad debts, customer concentrations, customer creditworthiness and current economic trends when evaluating the adequacy of our allowance for doubtful accounts.



(In thousands)
Year	Description	Balance at Beginning of Period		Provisions		Write-Offs		Balance at End of Period
2016	Allowance for doubtful accounts	$	2,498	$	1,052	$	1,683	$	1,867
2017	Allowance for doubtful accounts	$	1,867	$	1,383	358		$	2,892
2018	Allowance for doubtful accounts	$	2,892	$	1,135	537		$	3,490

Contract Liabilities

We recognize contract liabilities, presented in our Consolidated Balance Sheet as "Deferred revenue" when we have an obligation to transfer goods or services to a customer for which we have received consideration (or an amount of consideration is due) from the customer. Refer to Note 2 - Revenue for additional information, including changes in our contract liability during the year ended December 31, 2018.

Refund Liability

A refund liability for estimated sales returns is made by reducing recorded revenue based on historical experience. We analyze historical returns, current economic trends and changes in customer demand of our products when evaluating the adequacy of our sales returns refund liability. Our sales return refund liability was $2.3 million and $2.1 million at December 31, 2018 and 2017, respectively. As further discussed on page F-16 below, we adopted the new revenue standard on January 1, 2018 using the modified retrospective method. Under the modified retrospective method of adoption, we did not adjust our comparative periods to reflect the adoption of the new revenue standard. In accordance with the new revenue standard, our sales return refund liability as of December 31, 2018 was presented in "Other Current Liabilities" on our balance sheet. Our sales return refund liability as of December 31, 2017 was presented in "Accounts Receivable, net" on our balance sheet.

Assets Recognized from the Costs to Obtain a Contract with a Customer

We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We have determined that certain sales incentive programs meet the requirements to be capitalized. Capitalized incremental costs related to initial contracts and renewals are amortized over the same period because the commissions paid on both the initial contract and renewals are commensurate with one another. Total capitalized costs to obtain a contract were not material during the periods presented and are included in other long-term assets on our consolidated balance sheets. The net effect of capitalization and amortization of these costs was not material to our results of operating during the periods presented.

Shipping and handling costs

Our shipping and handling costs charged to customers are included in net sales, and the associated expense is recorded in cost of sales.

Cash and cash equivalents

Cash and cash equivalents include cash and highly liquid investments with maturities of three months or less at the date of acquisition.

Investments

We value our available-for-sale debt instruments based on pricing from third-party pricing vendors, who may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs) in determining fair value. We classify all of our fixed income available-for-sale securities as having Level 2 inputs. The valuation techniques used to measure the fair value of our financial instruments having Level 2 inputs were derived from non-binding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricing models, such as discounted cash flow techniques. We believe all of these sources reflect the credit risk associated with each of our available-for-sale debt investments. Short-term investments consist of available-for-sale debt securities issued by states of the U.S. and political subdivisions of the U.S., corporate debt securities and debt securities issued by U.S. government organizations and agencies. All short-term investments have contractual maturities of less than 40 months.

Our investments in debt securities are classified as available-for-sale and accordingly are reported at fair value, with unrealized gains and losses reported as other comprehensive income, a component of stockholders’ equity. Unrealized losses are charged against income when a decline in fair value is determined to be other than temporary. Investments with maturities beyond one year are classified as short-term based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations.

The fair value of our short-term investments in debt securities at December 31, 2018 and December 31, 2017 was $271 million and $122 million, respectively. The increase was due to the net purchase of $150 million of short-term investments. We had $5 million U.S. dollar equivalent of corporate bonds that were denominated in Euro at December 31, 2018.

We follow the guidance provided by FASB ASC 320 to assess whether our investments with unrealized loss positions are other than temporarily impaired. Realized gains and losses and declines in value judged to be other than temporary are determined based on the specific identification method and are reported in other income (expense), net, in our Consolidated Statements of Income. In addition, we from time to time make equity investments in non-publicly traded companies. Equity investments in which we do not have control, but have the ability to exercise significant influence over operating and financial policies, are accounted for using the equity method. Our proportionate share of income or loss is recorded in "Other income (expense), net "in the Consolidated Statement of Income. All other non-marketable equity investments do not have readily determinable fair values and are recorded at cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes. We periodically review our non-marketable equity investments for other-than-temporary declines in fair value and write-down specific investments to their fair values when we determine that an other-than-temporary decline has occurred. Our non-marketable equity investments were not material at December 31, 2018 and 2017.

We did not identify or record any other-than-temporary impairments on our investments securities during 2018, 2017, and 2016.

Inventories, net

Inventories are stated at the lower-of-cost or net realizable value. Cost is determined using standard costs, which approximate the first-in first-out (“FIFO”) method. Cost includes the acquisition cost of purchased components, parts and subassemblies, in-bound freight costs, labor and overhead.

Inventory is shown in the table below net of adjustment for excess and obsolete inventories of $15.4 million, $16.4 million and $12.6 million at December 31, 2018, 2017 and 2016, respectively.



(In thousands)
Year	Description	Balance at Beginning of Period		Provisions		Write-Offs		Balance at End of Period
2016	Adjustment for excess and obsolete inventories	$	10,054	$	5,793	$	3,208	$	12,639
2017	Adjustment for excess and obsolete inventories	$	12,639	$	7,130	3,322		$	16,447
2018	Adjustment for excess and obsolete inventories	$	16,447	$	7,870	8,932		$	15,385

Property and equipment, net

Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from twenty to forty years for buildings, and three to seven years for purchased internal use software and for equipment which are each included in furniture and equipment.

Intangible assets, net

We capitalize costs related to the development and acquisition of certain software products. Capitalization of costs begins when technological feasibility has been established and ends when the product is available for general release to customers. Technological feasibility for our products is established when the product is available for beta release. Amortization is computed on an individual product basis for those products available for market and is recognized based on the product’s estimated economic life, generally three to six years.

We use the services of outside counsel to search for, document, and apply for patents. Those costs, along with any filing or application fees, are capitalized. Costs related to patents which are abandoned are written off. Once a patent is granted, the patent costs are amortized ratably over the legal life of the patent, generally ten to seventeen years.

Leasehold improvements are amortized over the shorter of the life of the lease or the asset.

At each balance sheet date, the unamortized costs for all intangible assets are reviewed by management and reduced to net realizable value when necessary.

Goodwill

The excess purchase price over the fair value of net assets acquired is recorded as goodwill. We have one operating segment and one reporting unit. Goodwill is tested for impairment on an annual basis, and between annual tests if indicators of potential impairment exist, using a fair-value-based approach based on the market capitalization of the reporting unit.

Effective for the annual goodwill impairment test for 2018 and for future testing, we performed the required annual testing as of November 30 of each year rather than on February 28. In anticipation of this change, we reperformed our annual goodwill impairment test as of November 30, 2017 and determined that it was more likely than not that the estimated fair value for the reporting unit exceeded the carrying amount and that no impairment existed from February 28 to November 30, 2017. We performed our annual goodwill impairment testing as of November 30, 2018 and determined that no impairment existed. We do not believe that the change in the date of the annual goodwill impairment test is a material change in the method of applying an accounting principle nor do we expect that it will result in any delay, acceleration or impact to the results of the impairment testing. We believe this date is preferable because it aligns with the timing of our annual planning process which largely occurs during the fourth quarter. Retrospective application to prior periods is impracticable as we are unable to objectively determine, without the use of hindsight, the assumptions that would be used in those earlier periods.

No impairment of goodwill was identified during 2018 and 2017. Goodwill is deductible for tax purposes in certain jurisdictions.

Concentrations of credit risk

We maintain cash and cash equivalents with various financial institutions located in many countries throughout the world. At December 31, 2018, we had $531 million in cash, cash equivalents and short-term investments. Our cash and cash equivalent balances are held in numerous financial institutions throughout the world, including substantial amounts held outside of the U.S., however, the majority of our short-term investments that are located outside of the U.S. are denominated in the U.S. dollar with the exception of $5 million U.S. dollar equivalent of corporate bonds that are denominated in Euro. The most significant of our operating accounts was our Malaysian Citibank operating account which held approximately $19 million or 7% of our total cash and cash equivalents at a bank that carried Baa1/BBB+/A ratings at December 31, 2018.

The following table presents the geographic distribution of our cash, cash equivalents, and short-term investments as of December 31, 2018 (in millions):



	Domestic	International	Total
Cash and Cash Equivalents	$76.2	$183.2	$259.4
	29%	71%
Short-term Investments	$236.9	$34.5	$271.4
	87%	13%
Cash, Cash Equivalents and Short-term Investments	$313.1	$217.7	$530.8
	59%	41%

The goal of our investment policy is to manage our investment portfolio to preserve principal and liquidity while maximizing the return on our investment portfolio through the full investment of available funds. We place our cash investments in instruments that meet credit quality standards, as specified in our corporate investment policy guidelines. These guidelines also limit the amount of credit exposure to any one issue, issuer or type of instrument. Our cash equivalents and short-term investments carried ratings from the major credit rating agencies that were in accordance with our corporate investment policy. Our investment policy allows investments in the following: government and federal agency obligations, repurchase agreements (“Repos”), certificates of deposit and time deposits, corporate obligations, medium term notes and deposit notes, commercial paper including asset-backed commercial paper (“ABCP”), puttable bonds, general obligation and revenue bonds, money market funds, taxable commercial paper, corporate notes/bonds, municipal notes, municipal obligations and tax exempt commercial paper. All such instruments must carry minimum ratings of A1/P1/F1, MIG1/VMIG1/SP1 and A2/A/A, as applicable, all of which are considered “investment grade”. Our investment policy for marketable securities requires that all securities mature in five years or less, with a weighted average maturity of no longer than 24 months with at least 10% maturing in 90 days or less. (See Note 3 – Short-term investments in Notes to Consolidated Financial Statements for further discussion and analysis of our investments).

Concentration of credit risk with respect to trade accounts receivable is limited due to our large number of customers and their dispersion across many countries and industries. No single customer accounted for more than 3% of sales for the years ended December 31, 2018, 2017, and 2016, respectively. The largest trade account receivable from any individual customer at December 31, 2018 was approximately $3.3 million.

Key supplier risk

Our manufacturing processes use large volumes of high-quality components and subassemblies supplied by outside sources. Several of these items are available through sole or limited sources. Supply shortages or quality problems in connection with these key items could require us to procure items from replacement suppliers, which would cause significant delays in fulfillment of orders and likely result in additional costs. In order to manage this risk, we maintain safety stock of some of these single sourced components and subassemblies and perform regular assessments of a suppliers' performance, grading key suppliers in critical areas such as quality and “on-time” delivery.

Warranty reserve

We offer a one-year limited warranty on most hardware products which is included in the terms of sale of such products. We also offer optional extended warranties on our hardware products for which the related revenue is recognized ratably over the warranty period. Provision is made for estimated future warranty costs at the time of the sale for the estimated costs that may be incurred under the limited warranty. Our estimate is based on historical experience and product sales during the period.

The warranty reserve for the years ended December 31, 2018, 2017, and 2016 was as follows:



(In thousands)
	2018			2017			2016
Balance at the beginning of the year	$	2,846		$	2,686		$	1,755
Accruals for warranties issued during the year	3,026			2,644			2,454
Accruals related to pre-existing warranties	389			274			1,258
Settlements made (in cash or in kind) during the year	(3,088		)	(2,758		)	(2,781		)
Balance at the end of the year	$	3,173		$	2,846		$	2,686

Loss contingencies

We accrue for probable losses from contingencies including legal defense costs, on an undiscounted basis, when such costs are considered probable of being incurred and are reasonably estimable. We periodically evaluate available information, both internal and external, relative to such contingencies and adjust this accrual as necessary.

Advertising expense

We expense costs of advertising as incurred. Advertising expense for the years ended December 31, 2018, 2017, and 2016 was $8 million, $11 million, and $12 million, respectively.

Foreign currency translation

The functional currency for our international sales operations is the applicable local currency. The assets and liabilities of these operations are translated at the rate of exchange in effect on the balance sheet date and sales and expenses are translated at average rates. The resulting gains or losses from translation are included in a separate component of other comprehensive income. Gains and losses resulting from re-measuring monetary asset and liability accounts that are denominated in a currency other than a subsidiary’s functional currency are included in net foreign exchange gain (loss) and are included in net income.

Foreign currency hedging instruments

All of our derivative instruments are recognized on the balance sheet at their fair value. We currently use foreign currency forward contracts to hedge our exposure to material foreign currency denominated receivables and forecasted foreign currency cash flows.

On the date the derivative contract is entered into, we designate the derivative as a hedge of the variability of foreign currency cash flows to be received or paid (“cash flow” hedge) or as a hedge of our foreign denominated net receivable positions (“other derivatives”). Changes in the fair value of derivatives that are designated and qualify as cash flow hedges and that are deemed to be highly effective are recorded in other comprehensive income. These amounts are subsequently reclassified into earnings in the period during which the hedged transaction is realized. The gain or loss on the other derivatives as well as the offsetting gain or loss on the hedged item attributable to the hedged risk is recognized in current earnings under the line item “Net foreign exchange gain (loss)”. We do not enter into derivative contracts for speculative purposes.

We formally document all relationships between hedging instruments and hedged items, as well as our risk-management objective and strategy for undertaking various hedge transactions at the inception of the hedge. This process includes linking all derivatives that are designated as cash flow hedges to specific forecasted transactions. We also formally assess, both at the hedge’s inception and on an ongoing basis, whether the hedging instruments are highly effective in offsetting changes in cash flows of hedged items.

We prospectively discontinue hedge accounting if (1) it is determined that the derivative is no longer highly effective in offsetting changes in the fair value of a hedged item (forecasted transactions); or (2) the derivative is de-designated as a hedge instrument, because it is unlikely that a forecasted transaction will occur. When hedge accounting is discontinued, the derivative is sold and the resulting gains and losses are recognized immediately in earnings.

Income taxes

We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts. We account for GILTI in deferred taxes. Valuation allowances are established when necessary to reduce deferred tax assets to amounts which are more likely than not to be realized. Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns. Variations in the actual outcome of these future tax consequences could materially impact our financial position or our results of operations. In estimating future tax consequences, all expected future events are considered other than enactments of changes in tax laws or rates. We account for uncertainty in income taxes recognized in our financial statements using prescribed recognition thresholds and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on our tax returns. Our continuing policy is to recognize interest and penalties related to income tax matters in income tax expense.

Earnings per share

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted average number of common shares outstanding during each period. Diluted EPS is computed by dividing net income by the weighted average number of common shares and common share equivalents outstanding (if dilutive) during each period. The number of common share equivalents, which include stock options and restricted stock units (“RSUs”), is computed using the treasury stock method.

The reconciliation of the denominators used to calculate basic EPS and diluted EPS for years ended December 31, 2018, 2017, and 2016 are as follows:



	Years ended December 31,
(In thousands)	2018	2017	2016
Weighted average shares outstanding-basic	131,987	130,300	128,453
Plus: Common share equivalents
RSUs	1,287	1,087	555
Weighted average shares outstanding-diluted	133,274	131,387	129,008

Stock awards to acquire 11,352 shares, 32,400 shares, and 10,900 shares for the years ended December 31, 2018, 2017, and 2016, respectively, were excluded in the computations of diluted EPS because the effect of including the stock awards would have been anti-dilutive.

Stock-based compensation

We account for stock-based compensation plans, which are more fully described in Note 12 – Authorized shares of common and preferred stock and stock-based compensation plans, using a fair-value method and recognize the expense in our Consolidated Statement of Income.

Comprehensive income

Our comprehensive income is comprised of net income, foreign currency translation and unrealized gains and losses on forward contracts and securities available-for-sale. Comprehensive income in 2018, 2017, and 2016 was $155 million, $71 million and $86 million, respectively.

Recently Adopted Accounting Pronouncements

Revenue from Contracts with Customers

On January 1, 2018, we adopted the new revenue standard using the modified retrospective transition method. Under this method, we evaluated all contracts that were not completed at the beginning of 2018 as if those contracts had been accounted for under the new revenue standard. We did not evaluate individual modifications for those periods prior to the adoption date, but the aggregate effect of all modifications as of the adoption date and such effects are provided below. Under the modified retrospective transition approach, periods prior to the adoption date were not adjusted and continue to be reported in accordance with historical GAAP. A cumulative catch-up adjustment was recorded to beginning retained earnings to reflect the impact of all existing arrangements under the new revenue standard.

Impact of Adopting the New Revenue Standard

We do not expect the impact of the adoption of the new revenue standard to be material to our operating results on an ongoing basis. A majority of our sales revenue continues to be recognized when products are shipped from our manufacturing facilities. Historically, we have had to defer revenue for certain types of licenses arrangements and recognize revenue for such licenses ratably over the license term. Under the new revenue standard, we are no longer required to establish vendor-specific objective evidence ("VSOE") to recognize software license revenue separately from the other elements, and we are able to recognize all software license revenue once the customer obtains control of the license, which will generally occur at the start of each license term.

Under the modified retrospective method of adoption, we evaluated all contracts that were not completed at the beginning of 2018 as if those contracts had been accounted for under the new revenue standard. We did not evaluate individual modifications for those periods prior to the adoption date, but the aggregate effect of all modifications as of the adoption date and such effects are provided below.

The cumulative effects of the changes made to our consolidated January 1, 2018 balance sheet for the adoption of ASU 2014-09, Revenue - Revenue from Contracts with Customers were as follows (in thousands):



(In thousands)	Balance at December 31, 2017	Adjustments Due to ASU 2014-09			Balance at January 1, 2018
Balance Sheet
Assets
Accounts receivable, net	248,825	$	2,399		251,224
Other long-term assets	32,553	1,065			33,618

Liabilities and Stockholders' Equity
Deferred revenue - current	120,638	(9,067		)	111,571
Deferred revenue - long-term	33,742	(997		)	32,745
Other current liabilities	23,782	2,100			25,882
Deferred income taxes	33,609	1,771			35,380
Retained earnings	313,241	$	9,657		322,898

The following tables present the amounts by which financial statement line items were affected in the current period due to the adoption of ASU 2014-09. Our historical net cash flows are not impacted by this accounting change.



(In thousands)	For the year ended December 31, 2018
	Increase / (Decrease)
Consolidated Statements of Income*
Products	7,911
Total net sales	7,911
Operating Expenses	(153)
Operating Income	8,064
Provision for income taxes	1,299
Net income	6,765
* Excludes line items that were not materially affected by our adoption of ASU 2014-09.



(In thousands)	December 31, 2018
	Increase / (Decrease)
Consolidated Balance Sheet
Assets
Accounts receivable, net	2,093
Other long-term assets	1,220

Liabilities and Stockholders' Equity
Deferred revenue - current	(13,807)
Deferred revenue - non-current	(4,417)
Other current liabilities	3,399
Deferred income taxes	1,771
Retained earnings	16,367
* Excludes line items that were not materially affected by our adoption of ASU 2014-09.

Other Recently Adopted Accounting Pronouncements

We also adopted the following accounting pronouncements as of January 1, 2018 which did not have a material impact on our financial statements:


•	ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business


•	ASU 2016-18, Statement of Cash Flows (Topic 230) Restricted Cash


•	ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments


•	ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Liabilities

Recently Issued Accounting Pronouncements

Lease Accounting

In February 2016, the FASB established Topic 842, Leases, by issuing Accounting Standards Update (ASU) No. 2016-02, which supersedes ASC 840, Leases. and requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. Topic 842, as amended, (the "new lease standard") establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

The new lease standard became effective for us on January 1, 2019, with early adoption permitted. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. We adopted the new standard on January 1, 2019 and used the effective date as our date of initial application. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019.

We have completed a qualitative and quantitative assessment of our lease portfolio and are in the process of finalizing our entries to record the impact of initial adoption. Upon adoption we expect to recognize lease liabilities of approximately $53 million, with corresponding ROU assets of the same amount, based on the present value of the remaining minimum rental payments under current leasing standards for our existing operating leases. We also expect to reclassify approximately $19 million related to prepaid leasehold land from "Property, plant, and equipment, net" to "ROU Assets" as a result of adopting the ASU.

The new standard provides a number of optional practical expedients in transition. We expect to elect the ‘package of practical expedients’, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. We do not expect to elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to us. The new standard also provides practical expedients for an entity’s ongoing accounting. We currently expect to elect the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, we will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. We also currently expect to elect the practical expedient to not separate lease and non-lease components for our office leases.

Other Recently Issued Accounting Pronouncements

In August 2018, the SEC issued Release No. 33-10532 that amends and clarifies certain financial reporting requirements. The principal change to our financial reporting will be the inclusion of the annual disclosure requirement of changes in stockholders’ equity in Rule 3-04 of Regulation S-X to interim periods. We will adopt this new rule beginning with our financial reporting for the quarter ended March 31, 2019. Upon adoption, we will include our Consolidated Statements of Stockholders' Equity with each quarterly filing on Form 10-Q.

In January 2018, the FASB issued ASU 2018-02, Income Statement — Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which gives entities the option to reclassify to retained earnings tax effects resulting from the Tax Cuts and Jobs Act (the "Act") related to items that the FASB refers to as having been stranded in accumulated other comprehensive income ("OCI"). The new guidance may be applied retrospectively to each period in which the effect of the Act is recognized or in the period of adoption. We must adopt this guidance for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted for periods for which financial statements have not yet been issued or made available for issuance, including the period the Act was enacted. The guidance, when adopted, will require new disclosures regarding a company’s accounting policy for releasing the tax effects in accumulated OCI and permit the company the option to reclassify to retained earnings the tax effects resulting from the Act that are stranded in accumulated OCI. The adoption of ASU 2018-02 is not expected to have a material effect on our consolidated financial statements. We do not plan to adopt the new standard prior to the required effective date and we do not plan to elect the option to reclassify to retained earnings the tax effects resulting from the Act that are stranded in accumulated OCI.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The ASU simplifies certain aspects of hedge accounting and improves disclosures of hedging arrangements through the elimination of the requirement to separately measure and report hedge ineffectiveness. The ASU generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item in order to align financial reporting of hedge relationships with economic results. Entities must apply the amendments to cash flow and net investment hedge relationships that exist on the date of adoption using a modified retrospective approach. The presentation and disclosure requirements must be applied prospectively. We adopted this guidance in our fiscal year beginning January 1, 2019. We do not expect the adoption of the ASU will have a material impact on our financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The ASU eliminates Step 2 from the goodwill impairment test, which previously measured an impairment loss by comparing the implied fair value of goodwill with its carrying amount. Instead, an entity should recognize an impairment charge for the amount by which the carrying value exceeds the reporting unit's fair value, not to exceed the total amount of goodwill allocated to that reporting unit. The ASU is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. We are currently evaluating the effect of the adoption of this ASU, but anticipate that the adoption will not have a material impact on our financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU requires instruments measured at amortized cost to be presented at the net amount expected to be collected. Entities are also required to record allowances for available-for-sale debt securities rather than reduce the carrying amount. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We expect that the adoption of the ASU will not have a material impact on our financial statements.

Revenue Revenue

12 Months Ended

Dec. 31, 2018

Revenue from Contract with Customer [Abstract]

Revenue

Disaggregation of Revenues

We disaggregate revenue from contracts with customers based on the timing of transfer of goods or services to customers (point-in-time or over time) and geographic region based on the billing location of the customer. The geographic regions that are tracked are the Americas (United States, Canada and Latin America), EMEIA (Europe, Middle East, India and Africa) and APAC (Australia, Japan, Korea, New Zealand, Southeast Asia and China). Total net sales based on the disaggregation criteria described above are as follows:



			Year Ended December 31,
	2018
(In thousands)
Net sales:	Point-in-Time		Over Time		Total
Americas	$	451,047	$	87,341	$	538,388
EMEIA	356,070		76,907		432,977
APAC	355,024		32,743		387,767
Total net sales (1)	$	1,162,141	$	196,991	$	1,359,132
(1) Net sales contains hedging gains and losses, which do not represent revenues recognized from customers. See Note 5 - Derivative instruments and hedging activities for more information on the impact of our hedging activities on our results of operations

Total net sales by the major geographic areas in which we operate, are as follows:



(In thousands)	Years Ended December 31,
	2018		2017 (1)		2016 (1)
Net sales:
Americas	$	538,388	$	504,626	$	482,039
EMEIA	432,977		408,625		389,843
APAC	387,767		376,135		356,297
Total	$	1,359,132	$	1,289,386	$	1,228,179
(1) As discussed in Note 1 - Operations and summary of significant accounting policies, prior periods have not been adjusted for adoption of ASU 2014-09

Information about Contract Balances

Amounts collected in advance of services being provided are accounted for as deferred revenue. Nearly all of our deferred revenue balance is related to extended hardware and software maintenance contracts. Payment terms and conditions vary by contract type, although payment is typically due within 30 to 90 days of contract inception. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a significant financing component. The primary purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our products and services, not to receive financing from our customers, such as invoicing at the beginning of a subscription term with a portion of the revenue recognized ratably over the contract period, or to provide customers with financing, such as multi-year on-premises licenses that are invoiced annually with revenue recognized upfront.

Changes in deferred revenue, current and long-term, during the twelve months ended December 31, 2018 were as follows:



	Amount
	(In thousands)
Deferred Revenue at December 31, 2017	$	154,380
Impact of adopting new revenue standard	(10,064		)
Deferred Revenue at January 1, 2018	$	144,316
Deferral of revenue billed in current period, net of recognition	125,198
Recognition of revenue deferred in prior periods	(106,138		)
Foreign currency translation impact	(3,452		)
Balance as of December 31, 2018	$	159,924

For the twelve months ended December 31, 2018, revenue recognized from performance obligations related to prior periods (for example, due to changes in transaction price) was not material. Amounts recognized as revenue in excess of amounts billed are recorded as unbilled receivables. Unbilled receivables which are anticipated to be invoiced in the next twelve months are included in "accounts receivable, net" on the consolidated balance sheet. Based on the nature of our contracts with customers, we do not typically recognize unbilled receivables related to revenues recognized in excess of amounts billed. For the twelve months ended December 31, 2018, amounts recognized related to unbilled receivables were not material.

Unsatisfied Performance Obligations

Revenue expected to be recognized in any future period related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less, and excluding contracts where revenue is recognized as invoiced, was approximately $56.9 million as of December 31, 2018. Since we typically invoice customers at contract inception, this amount is included in our current and non-current deferred revenue balances. As of December 31, 2018, we expect to recognize approximately 48% of the revenue related to these unsatisfied performance obligations during 2019, 30% during 2020, and 22% thereafter.

Practical Expedients

As discussed in Note 1 - Operations and summary of significant accounting policies and elsewhere in Note 2 - Revenue, we have elected the following practical expedients in accordance with the new revenue standard:


•	We generally expense sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within sales and marketing expenses.


•	We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.


•	We do not consider the time value of money for contracts with original durations of one year or less.

Short-term investments

12 Months Ended

Dec. 31, 2018

Cash, Cash Equivalents, and Short-term Investments [Abstract]

Short-term investments

The following tables summarize unrealized gains and losses related to our short-term investments designated as available-for-sale:



(In thousands)	As of December 31, 2018
	Adjusted Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
Corporate bonds	$	235,045	$	726	$	(1,298	)	$	234,473
U.S. treasuries and agencies	36,932		2		(11		)	36,923
Short-term investments	$	271,977	$	728	$	(1,309	)	$	271,396



(In thousands)	As of December 31, 2017
	Adjusted Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
Corporate bonds	$	120,341	$	182	$	(395	)	$	120,128
Time deposits	1,760		—		—			1,760
Short-term investments	$	122,101	$	182	$	(395	)	$	121,888

The following tables summarize the contractual maturities of our short-term investments designated as available-for-sale:



(In thousands)	As of December 31, 2018
	Adjusted Cost		Fair Value
Due in less than 1 year	$	146,127	$	145,960
Due in 1 to 5 years	125,850		125,436
Total available-for-sale debt securities	$	271,977	$	271,396

Due in less than 1 year	Adjusted Cost		Fair Value
Corporate bonds	$	109,195	$	109,037
U.S. treasuries and agencies	36,932		36,923
Total available-for-sale debt securities	$	146,127	$	145,960

Due in 1 to 5 years	Adjusted Cost		Fair Value
Corporate bonds	125,850		125,436
Total available-for-sale debt securities	$	125,850	$	125,436

Fair value measurements

12 Months Ended

Dec. 31, 2018

Fair Value Disclosures [Abstract]

Fair value measurements

We define fair value to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, we consider the principal or most advantageous market that market participants may use when pricing the asset or liability.

We follow a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Fair value measurement is determined based on the lowest level input that is significant to the fair value measurement. The three values of the fair value hierarchy are the following:

Level 1 – Quoted prices in active markets for identical assets or liabilities

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

Level 3 – Inputs that are not based on observable market data

Assets and liabilities measured at fair value on a recurring basis are summarized below:

໿



(In thousands)	Fair Value Measurements at Reporting Date Using
Description	December 31, 2018			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets
Cash and cash equivalents available for sale:
Money Market Funds	$	62,094		$	62,094	$	—		$	—
Corporate notes and bonds	9,979			—		9,979			—
Short-term investments available for sale:
Corporate bonds	234,473			—		234,473			—
U.S. treasuries and agencies	36,923			—		36,923			—
Derivatives	9,369			—		9,369			—
Total Assets	$	352,838		$	62,094	$	290,744		$	—

Liabilities
Derivatives	$	(1,483	)	—		(1,483		)	—
Total Liabilities	$	(1,483	)	$	—	$	(1,483	)	$	—



(In thousands)	Fair Value Measurements at Reporting Date Using
Description	December 31, 2017			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets
Cash and cash equivalents available for sale:
Money Market Funds	$	61,423		$	61,423	$	—		$	—
U.S. treasuries and agencies	39,461			—		39,461			—
Short-term investments available for sale:
Corporate bonds	120,128			—		120,128			—
Time deposits	1,760			1,760		—			—
Derivatives	7,232			—		7,232			—
Total Assets	$	230,004		$	63,183	$	166,821		$	—

Liabilities
Derivatives	$	(12,743	)	$	—	$	(12,743	)	$	—
Total Liabilities	$	(12,743	)	$	—	$	(12,743	)	$	—

We value our available-for-sale short-term investments based on pricing from third party pricing vendors, who may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs) in determining fair value. We classify all of our fixed income available-for-sale securities as having Level 2 inputs. The valuation techniques used to measure the fair value of our financial instruments having Level 2 inputs were derived from non-binding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricing models, such as discounted cash flow techniques. We believe all of these sources reflect the credit risk associated with each of our available-for-sale short-term investments. Short-term investments available-for-sale consists of debt securities issued by states of the U.S. and political subdivisions of the U.S., corporate debt securities and debt securities issued by U.S. government organizations and agencies. All short-term investments available-for-sale have contractual maturities of less than 40 months.

Derivatives include foreign currency forward and option contracts. Our foreign currency forward contracts are valued using an income approach (Level 2) based on the spot rate less the contract rate multiplied by the notional amount. Our foreign currency option contracts are valued using a market approach based on the quoted market prices which are derived from observable inputs including current and future spot rates, interest rate spreads as well as quoted market prices of similar instruments. We consider counterparty credit risk in the valuation of our derivatives. However, counterparty credit risk did not impact the valuation of our derivatives during the year ended December 31, 2018. There were not any transfers in or out of Level 1 or Level 2 during the year ended December 31, 2018.

Our short-term investments do not include any foreign sovereign debt. The majority of our short-term investments that are located outside of the U.S. are denominated in the U.S. dollar with the exception of $5 million U.S. dollar equivalent of corporate bonds that are denominated in Euro.

We did not have any items that were measured at fair value on a nonrecurring basis at December 31, 2018 and December 31, 2017. The carrying value of net accounts receivable, accounts payable, and long-term debt contained in the Consolidated Balance Sheets approximates fair value.

Derivative instruments and hedging activities

12 Months Ended

Dec. 31, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative instruments and hedging activities

We recognize all of our derivative instruments as either assets or liabilities in our statement of financial position at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, we designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation.

We have operations in approximately 50 countries. Sales outside of the Americas accounted for approximately 60%, 61%, and 61% of our net sales during the years ended December 31, 2018, 2017, and 2016, respectively. Our activities expose us to a variety of market risks, including the effects of changes in foreign currency exchange rates. These financial risks are monitored and managed by us as an integral part of our overall risk management program.

We maintain a foreign currency risk management strategy that uses derivative instruments (foreign currency forward contracts) to help protect our earnings and cash flows from fluctuations caused by the volatility in currency exchange rates. Movements in foreign currency exchange rates pose a risk to our operations and competitive position, since exchange rate changes may affect our profitability and cash flow, and the business or pricing strategies of our non-U.S. based competitors.

The vast majority of our foreign sales are denominated in the customers’ local currency. We purchase foreign currency forward contracts as hedges of forecasted sales that are denominated in foreign currencies and as hedges of foreign currency denominated receivables. These contracts are entered into to help protect against the risk that the eventual dollar-net-cash inflows resulting from such sales or firm commitments will be adversely affected by changes in exchange rates. We also purchase foreign currency forward contracts as hedges of forecasted expenses that are denominated in foreign currencies. These contracts are entered into to help protect against the risk that the eventual dollar-net-cash outflows resulting from foreign currency operating and cost of revenue expenses will be adversely affected by changes in exchange rates.

We designate foreign currency forward contracts as cash flow hedges of forecasted revenues or forecasted expenses. In addition, we hedge our foreign currency denominated balance sheet exposures using foreign currency forward contracts that are not designated as hedging instruments. None of our derivative instruments contain a credit-risk-related contingent feature.

Cash flow hedges

To help protect against the reduction in value caused by a fluctuation in foreign currency exchange rates of forecasted foreign currency cash flows resulting from international sales over the next one to three years, we have instituted a foreign currency cash flow hedging program. We hedge portions of our forecasted revenue and forecasted expenses denominated in foreign currencies with forward contracts. For forward contracts, when the dollar strengthens significantly against the foreign currencies, the change in the present value of future foreign currency cash flows may be offset by the change in the fair value of the forward contracts designated as hedges. We purchase foreign currency forward contracts for up to 100% of our forecasted exposures in selected currencies (primarily in Euro, Japanese yen, Malaysian ringgit, British pound, Chinese yuan, and Hungarian forint) and limit the duration of these contracts to 40 months or less.

For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of accumulated OCI and reclassified into earnings in the same line item (net sales, operating expenses, or cost of sales) associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings or expenses during the current period and are classified as a component of “net foreign exchange gain (loss)”. Hedge effectiveness of foreign currency forwards designated as cash flow hedges are measured by comparing the hedging instrument’s cumulative change in fair value from inception to maturity to the forecasted transaction’s terminal value.

We held forward contracts with the following notional amounts:



(In thousands)	U.S. Dollar Equivalent
	As of December 31, 2018		As of December 31, 2017
Chinese yuan	$	45,520	$	39,197
Euro	134,654		177,406
Japanese yen	15,141		22,857
Hungarian forint	35,384		41,296
British pound	9,948		9,931
Malaysian ringgit	27,778		28,287
Korean won	$	8,331	$	—
Total forward contracts notional amount	$	276,756	$	318,974

The contracts in the foregoing table had contractual maturities of 24 months or less as of December 31, 2018 and December 31, 2017.

At December 31, 2018, we expect to reclassify $6.6 million of gains on derivative instruments from accumulated OCI to net sales during the next twelve months when the hedged international sales occur, $0.2 million of gains on derivative instruments from accumulated OCI to cost of sales when the cost of sales are incurred and $0.2 million of gains on derivative instruments from accumulated OCI to operating expenses during the next twelve months when the hedged operating expenses occur. Expected amounts are based on derivative valuations at December 31, 2018. Actual results may vary as a result of changes in the corresponding exchange rates subsequent to this date.

The gains and losses recognized in earnings due to hedge ineffectiveness were not material for fiscal years 2018, 2017, and 2016 and are included as a component of net income.

Other Derivatives

Other derivatives not designated as hedging instruments consist primarily of foreign currency forward contracts that we use to hedge our foreign denominated net receivable or net payable positions to protect against the change in value caused by a fluctuation in foreign currency exchange rates. We typically attempt to hedge up to 90% of our outstanding foreign denominated net receivables or net payables and typically limit the duration of these foreign currency forward contracts to approximately 90 days. The gain or loss on the derivatives as well as the offsetting gain or loss on the hedge item attributable to the hedged risk is recognized in current earnings under the line item “net foreign exchange gain (loss).” As of December 31, 2018 and December 31, 2017, we held foreign currency forward contracts with a notional amount of $71 million and $63 million, respectively.

The following tables present the fair value of derivative instruments on our Consolidated Balance Sheets and the effect of derivative instruments on our Consolidated Statements of Income.

Fair Values of Derivative Instruments:



	Asset Derivatives
	December 31, 2018			December 31, 2017
(In thousands)
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments
Foreign exchange contracts - ST forwards	Prepaid expenses and other current assets	$	7,594	Prepaid expenses and other current assets	$	4,707

Foreign exchange contracts - LT forwards	Other long-term assets	1,380		Other long-term assets	2,339
Total derivatives designated as hedging instruments		$	8,974		$	7,046

Derivatives not designated as hedging instruments

Foreign exchange contracts - ST forwards	Prepaid expenses and other current assets	$	395	Prepaid expenses and other current assets	$	187
Total derivatives not designated as hedging instruments		$	395		$	187

Total derivatives		$	9,369		$	7,233

Liability Derivatives

December 31, 2018

December 31, 2017

(In thousands)

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Derivatives designated as hedging instruments

Foreign exchange contracts - ST forwards

Other current liabilities

(662

)

Other current liabilities

(7,487

)

Foreign exchange contracts - LT forwards

Other long-term liabilities

(191

)

Other long-term liabilities

(3,959

)

Total derivatives designated as hedging instruments