DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

12 Months Ended

Dec. 31, 2012

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

NOTE  5 DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company is exposed to global market risks, including risks from changes in FX rates and changes in interest rates. Accordingly, the Company uses derivatives in certain instances to manage the aforementioned financial exposures that occur in the normal course of business. The Company does not hold or issue derivatives for speculative purposes.

Interest Rate Swaps

In the fourth quarter of 2010, the Company entered into interest rate swaps with a total notional amount of $300 million to convert the fixed interest rate on the Series 2005-1 Notes to a floating interest rate based on the 3-month LIBOR. The purpose of this hedge was to mitigate the risk associated with changes in the fair value of the Series 2005-1 Notes, thus the Company has designated these swaps as fair value hedges. The fair value of the swaps is adjusted quarterly with a corresponding adjustment to the carrying value of the Series 2005-1 Notes. The changes in the fair value of the hedges and the underlying hedged item generally offset and the net cash settlements on the swaps are recorded each period within interest income (expense), net in the Company’s consolidated statements of operations.

In May 2008, the Company entered into interest rate swaps with a total notional amount of $150 million to protect against fluctuations in the LIBOR-based variable interest rate on the 2008 Term Loan further described in Note 14. These interest rate swaps are designated as cash flow hedges. Accordingly, changes in the fair value of these swaps are recorded to other comprehensive income or loss, to the extent that the hedge is effective, and such amounts are reclassified to earnings in the same period during which the hedged transaction affects income.

Foreign Exchange Forwards and Options

The Company engaged in hedging activities to protect against FX risks from forecasted billings and related revenue denominated in the euro and the GBP. FX options and forward exchange contracts were utilized to hedge exposures related to changes in FX rates. As of December 31, 2011, these FX options and forward exchange contracts have matured and all realized gains and losses have been reclassified from AOCI into earnings. These FX options and forward exchange contracts were designated as cash flow hedges.

The Company also enters into foreign exchange forwards to mitigate the change in fair value on certain assets and liabilities denominated in currencies other than the subsidiary’s functional currency. These forward contracts are not designated as hedging instruments under the applicable sections of Topic 815 of the ASC. Accordingly, changes in the fair value of these contracts are recognized immediately in other non-operating income (expense), net in the Company’s consolidated statements of operations along with the FX gain or loss recognized on the assets and liabilities denominated in a currency other than the subsidiary’s functional currency. These contracts have expiration dates at various times through March 2013.

The following table summarizes the notional amounts of the Company’s outstanding foreign exchange forwards:

	December 31, 2012		December 31, 2011
Notional amount of Currency Pair:
Contracts to purchase USD with euros	$	34.3	$	27.5
Contracts to sell USD for euros	$	48.4	$	47.7
Contracts to purchase USD with GBP	$	2.1	$	2.4
Contracts to sell USD for GBP	$	1.7	$	17.6
Contracts to purchase USD with other foreign currencies	$	6.7	$	3.2
Contracts to sell USD for other foreign currencies	$	5.1	$	7.6
Contracts to purchase euros with other foreign currencies	€	14.4	€	13.6
Contracts to purchase euros with GBP	€	—	€	1.6
Contracts to sell euros for GBP	€	8.9	€	7.2

Net Investment Hedges

The Company enters into foreign currency forward contracts to hedge the exposure related to non-U.S. dollar net investments in certain foreign subsidiaries against adverse changes in foreign exchange rates. These forward contracts are designated as hedging instruments under the applicable sections of Topic 815 of the ASC. Hedge effectiveness is assessed based on the overall changes in the fair value of the forward contracts on a pre-tax basis. For hedges that meet the effectiveness requirements, any change in fair value for the hedge is recorded in the currency translation adjustment component of AOCI. Any change in the fair value of these hedges that is the result of ineffectiveness would be recognized immediately in other non-operating (expense) income in the Company’s consolidated statements of operations. These outstanding contracts expire in March 2013.

The following table summarizes the notional amounts of the Company’s outstanding foreign exchange forward contracts that are designated as net investment hedges:

	December 31, 2012		December 31, 2011
Notional amount of Currency Pair:
Contracts to sell euros for USD	€	50.0		N/A

The table below shows the classification between assets and liabilities on the Company’s consolidated balance sheets for the fair value of the derivative instruments:

	Fair Value of Derivative Instruments
	Balance Sheet Location	December 31, 2012		December 31, 2011
Assets:
Derivatives designated as accounting hedges:
Interest rate swaps	Other assets	$	13.8	$	11.5
Total derivatives designated as accounting hedges			13.8		11.5
Derivatives not designated as accounting hedges:
FX forwards on certain assets and liabilities	Other current assets		1.4		1.1
Total		$	15.2	$	12.6
Liabilities:
Derivatives designated as accounting hedges:
Interest rate swaps	Accounts payable and accrued liabilities	$	0.7	$	4.5
FX forwards on net investment in certain foreign subsidiaries	Accounts payable and accrued liabilities		1.0		—
Total derivatives designated as accounting hedges			1.7		4.5
Derivatives not designated as accounting hedges:
FX forwards on certain assets and liabilities	Accounts payable and accrued liabilities		0.7		2.3
Total		$	2.4	$	6.8

The following table summarizes the net gain (loss) on the Company’s foreign exchange forwards which are not designated as hedging instruments as well as the gain (loss) on the interest rate swaps designated as fair value hedges:

		Amount of Gain (Loss) Recognized in consolidated statement of operations
		Year Ended December 31,
		2012		2011			2010
Derivatives designated as accounting hedges	Location on Consolidated Statements of Operations
Interest rate swaps	Interest Expense, net	$	3.6	$	4.1			—
Derivatives not designated as accounting hedges
Foreign exchange forwards	Other non-operating (expense) income	$	0.9	$	(1.4	)		(2.2	)

The following table provides information on gains (losses) on the company’s cash flow hedges:

Derivatives in Cash Flow Hedging Relationships	Amount of Gain/(Loss) Recognized in AOCI on Derivative (Effective Portion)						Location of Gain/(Loss) Reclassified from AOCI into Income (Effective Portion)	Amount of Gain/(Loss) Reclassified from AOCI into Income (Effective Portion)						Location of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
	Year Ended December 31,							Year Ended December 31,							Year Ended December 31,
	2012		2011		2010			2012		2011		2010			2012		2011		2010
FX options	$	—	$	—	$	—	Revenue	$	—	$	(0.2)	$	(1.0)	Revenue	$	—	$	—	$	—
Interest rate swaps		(0.1)		(0.6)		(3.1)	Interest income (expense), net		(2.4)		(3.0)		(2.8)	N/A		—		—		—
Total	$	(0.1)	$	(0.6)	$	(3.1)		$	(2.4)	$	(3.2)	$	(3.8)		$	—	$	—	$	—

All gains and losses on derivatives designated as cash flow hedges are initially recognized through AOCI. Realized gains and losses reported in AOCI are reclassified into earnings (into revenue for FX options and into interest income (expense), net for the interest rate swaps) as the underlying transaction is recognized.

The following table provides information on gains (losses) on the Company’s net investment hedges:

Derivatives in Net Investment Hedging Relationships	Amount of Gain/(Loss) Recognized in AOCI on Derivative (Effective Portion)					Location of Gain/(Loss) Reclassified from AOCI into Income (Effective Portion)	Amount of Gain/(Loss) Reclassified from AOCI into Income (Effective Portion)				Location of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
	Year Ended December 31,						Year Ended December 31,					Year Ended December 31,
	2012			2011			2012		2011			2012		2011
FX forwards	$	(2.2	)	$	—	N/A	$	—	$	—	N/A	$	—	$	—
Total	$	(2.2	)	$	—		$	—	$	—		$	—	$	—

All gains and losses on derivatives designated as net investment hedges are recognized in the currency translation adjustment component of AOCI.

The cumulative amount of unrecognized hedge losses recorded in AOCI is as follows:

	Unrecognized Losses, net of tax
	December 31, 2012			December 31, 2011
FX forwards on net investment hedges	$	(2.2	)	$	—
Interest rate swaps (1)		(0.7	)		(3.0	)
Total	$	(2.9	)	$	(3.0	)

⁽¹⁾ The unrecognized hedge losses relating to the cash flow hedge on the 2008 Term Loan are expected to be reclassified into earnings within the next five months as the underlying hedge ends with the full repayment of the 2008 Term Loan in the first half of 2013.