Fair Value Measurements

6 Months Ended

Jun. 30, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Fair Value Measurements

Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset and liability in an orderly transaction between market participants at the measurement date. We estimate fair value of our assets and liabilities utilizing an established three-level hierarchy as described in Note 14 of the Notes to Consolidated Financial Statements in our 2012 Annual Report on Form 10-K.     

The fair value of our financial assets and liabilities is determined by reference to market data and other valuation techniques as appropriate. We believe the fair value of our financial instruments, which are principally cash and cash equivalents, accounts receivable, other current assets, accounts payable and accrued liabilities, approximates their recorded values.

Interest rate swap contracts

On August 6, 2013, we entered into four forward starting interest rate swap contracts (the "2013 Hedges") with an aggregated notional value of $500,000, which become effective on April 15, 2015 and mature in January 2018. The objective of the 2013 Hedges, which are designated as cash flow hedges of a forecasted transaction in accordance with ASC 815, Derivatives and Hedging, is to eliminate the variability of cash flows attributable to the LIBOR component of interest expense to be paid on our forecasted variable-rate debt. Under the 2013 Hedges, we will pay interest on the notional amount of debt at an average fixed rate of 2.2% and receive interest on the notional amount of debt at the then prevailing three-month LIBOR rate.

We believe the 2013 Hedges will be highly effective in offsetting changes in the future expected cash flows due to fluctuation in the three-month LIBOR-based rate associated with the notional amount of forecasted variable-rate debt. The effectiveness of the 2013 Hedges will be measured quarterly on a retrospective basis by comparing the cumulative change in the hedging instrument's fair value to the change in the hedged transaction's fair value. To the extent the 2013 Hedges have no ineffectiveness, all gains and losses from the 2013 Hedges will be recorded in other comprehensive income (loss) until the forecasted underlying transaction occurs. Any realized gains or losses resulting from the cash flow hedges will be recognized together with the hedged transaction as interest expense within our Consolidated Statements of Operations and Comprehensive Income.

Foreign currency forward contracts

During the year ended December 31, 2012, we entered into foreign currency forward contracts for the sale of Euros for U.S. dollars to hedge a portion of the net investment in one of our subsidiaries that is denominated in Euros. Some of these foreign currency forward contracts settled in 2012. In May 2013, we settled the remaining €20,000 in aggregated notional amount of the foreign currency forward contracts with a weighted average rate of approximately 1.2690.

We designated the forward contracts as qualified hedges in accordance with ASC 815, Derivatives and Hedging. Gains and losses from the foreign currency forward contracts are recorded in accumulated other comprehensive (loss) income on our Consolidated Balance Sheets until the investment is liquidated. For the three and six months ended June 30, 2013, we recorded a loss associated with the forward contracts of approximately $325 and a gain of approximately $400, respectively, in other comprehensive (loss) income on our Consolidated Statements of Operations and Comprehensive Income.

In accordance with ASC 323, Investments - Equity Method and Joint Ventures, we record our share of a derivative instrument held by Lotterie Nazionali S.r.l. ("LNS") in which we have a 20% equity investment. Changes in the fair value of the derivative instrument are recorded by LNS within other comprehensive income on LNS' statement of comprehensive income. During the three and six months ended June 30, 2013, we recorded a gain associated with our share of this derivative instrument of $292 and $297, respectively, in other comprehensive (loss) income on our Consolidated Statements of Operations and Comprehensive Income and in equity investments on our Consolidated Balance Sheet.