Derivative Instruments and Hedging |
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Derivative Instruments And Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging | Note 13. Derivative Instruments and Hedging The Company’s international operations are subject to risks related to currency fluctuations. The Company uses forward currency contracts, designated as cash flow hedging instruments, to protect against foreign currency exchange rate risks inherent with revenue transactions. A forward currency contract obligates the Company to exchange a predetermined amount of one currency to make equivalent payments in another currency equal to the value of such exchange. The Company has entered into forward currency contracts to sell Australian dollars (“AUD”) and Euros (“EUR”) and buy GBP, which will settle at various times through June 30, 2017. These contracts have been designated as cash flow hedges of anticipated revenue to be recognized in the local currency and are expected to have no or an immaterial amount of ineffectiveness. The contracts provide a natural offset to GBP costs. The notional amount of outstanding forward currency contracts at December 31, 2016 was AUD 7.5 million and EUR 6.9 million. In October 2013, the Company entered into interest rate swap arrangements with notional amounts totaling $275 million, which amortized to $232 million through the August 2, 2018 maturity date of the Term A-1 Loan. The interest rate swap arrangements effectively fixed the Company’s interest payments on the hedged debt at approximately 1.34% plus the credit spread on the Term A-1 Loan. The arrangements, designated as cash flow hedging instruments, protected against adverse fluctuations in interest rates by reducing the Company’s exposure to variability in cash flows relating to interest payments on a portion of its outstanding debt. In July 2015, the Company terminated all of its interest rate swap arrangements, which resulted in a termination payment of $2.3 million. The remaining amount of accumulated other comprehensive loss at the termination date will be amortized through interest expense through August 2018, the remaining life of the previously hedged interest payments. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking hedge transactions. The maximum length of time over which the Company is hedging its exposure to the variability in future cash flows from foreign currency exchange contracts is 12 months. The forward currency contracts and interest rate swaps are recognized in the consolidated balance sheets at fair value. The Company’s asset and liability derivative positions are offset on a counterparty by counterparty basis if the contractual agreement provides for the net settlement of contracts with the counterparty in the event of default or termination of any one contract. Changes in the fair value measurements of the derivative instruments are reflected as adjustments to other comprehensive (loss) income (“OCI”) until such time as the actual foreign currency exposures occur or interest payments are made and the unrealized gain/loss is reclassified from accumulated OCI to current earnings. The fair value of derivative instruments in the Company’s consolidated balance sheets was as follows (in thousands):
The pre-tax derivative instrument gains and losses recognized in OCI were as follows (in thousands):
The pre-tax effect of derivative instruments in the Company’s consolidated statements of operations was as follows (in thousands):
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