Derivative Instruments

9 Months Ended

Sep. 30, 2014

Summary of Derivative Instruments [Abstract]

Derivative Instruments

11. Derivative Instruments

We are exposed to various market risks, including the potential loss arising from adverse changes in interest rates. We may elect to use financial derivative instruments to hedge interest rate exposure. These decisions are principally based on our policy to manage the general trend in interest rates at the applicable dates and our perception of the future volatility of interest rates. In addition, non-U.S. investments expose us to the potential losses associated with adverse changes in foreign currency to U.S. Dollar exchange rates. We may elect to manage this risk through the use of forward contracts and issuing debt in foreign currencies.

Interest Rate Swap Contracts and Foreign Currency Forward Contracts Designated as Cash Flow Hedges

For 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 other comprehensive income (“OCI”), and reclassified into earnings 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 earnings. Approximately $613,000 of losses, which are included in accumulated other comprehensive income (“AOCI”), are expected to be reclassified into earnings in the next 12 months.

Foreign Currency Hedges

For instruments that are designated and qualify as net investment hedges, the variability in the foreign currency to U.S. Dollar of the instrument is recorded as a cumulative translation adjustment component of OCI.  The balance of the cumulative translation adjustment will be reclassified to earnings when the hedged investment is sold or substantially liquidated.

The following presents the notional amount of derivatives and other financial instruments as of the dates indicated (in thousands):

		September 30, 2014		December 31, 2013
Derivatives designated as net investment hedges:
Denominated in Canadian Dollars	$	600,000	$	600,000
Denominated in Pounds Sterling	£	350,000	£	350,000
Financial instruments designated as net investment hedges:
Denominated in Canadian Dollars	$	250,000	$	250,000
Denominated in Pounds Sterling	£	550,000	£	550,000
Derivatives designated as cash flow hedges
Denominated in U.S. Dollars	$	57,000	$	57,000
Denominated in Canadian Dollars	$	9,000	$	-
Denominated in Pounds Sterling	£	50,000	£	-
Derivative instruments not designated:
Denominated in Canadian Dollars	$	918,000	$	-

The following presents the impact of derivative instruments on the Consolidated Statements of Comprehensive Income for the periods presented (in thousands):

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
	Location		2014		2013		2014		2013
Gain (loss) on interest rate swap recognized in OCI (effective portion)	OCI	$	(4)	$	(4)	$	(11)	$	(12)
Gain (loss) on interest rate swaps reclassified from AOCI into income (effective portion)	Interest expense		(459)		(477)		(1,338)		(1,428)
Gain (loss) on forward exchange contracts recognized in income	Gain (loss) on derivatives, net		(49)		(4,872)		(400)		(4,465)
Gain on release of cumulative translation adjustment related to net investment hedge of an equity investment	Income (loss) from unconsolidated entities		528		-		528		-
Gain (loss) on foreign exchange contracts and term loans designated as net investment hedge recognized in OCI	OCI		12,880		(110,404)		6,833		(19,867)