Derivative Instruments And Hedging Activities

9 Months Ended

Nov. 30, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments And Hedging Activities

Derivative Instruments and Hedging Activities

We use derivatives to manage certain risks arising from both our business operations and economic conditions, particularly with regard to issuances of debt.  Primary exposures include LIBOR and other rates used as benchmarks in our securitizations and other debt financing.  We enter into derivative instruments to manage exposures related to the future known receipt or payment of uncertain cash amounts, the values of which are impacted by interest rates, and designate these derivative instruments as cash flow hedges for accounting purposes.  Our derivative instruments are used to manage (i) differences in the amount of our known or expected cash receipts and our known or expected cash payments principally related to the funding of our auto loan receivables, and (ii) exposure to variable interest rates associated with our term loan, as further discussed in Note 10.

For the derivatives associated with our securitization program, the effective portion of changes in the fair value is initially recorded in accumulated other comprehensive loss (“AOCL”).  For the majority of these derivatives, the amounts are subsequently reclassified into CAF income in the period that the hedged forecasted transaction affects earnings, which occurs as interest expense is recognized on those future issuances of debt. During the next 12 months, we estimate that an additional $5.5 million will be reclassified from AOCL as a decrease to CAF income.

As of November 30, 2016 and February 29, 2016, we had interest rate swaps outstanding with a combined notional amount of $2.32 billion and $2.42 billion, respectively, that were designated as cash flow hedges of interest rate risk.

Fair Values of Derivative Instruments

	As of November 30, 2016					As of February 29, 2016
(In thousands)	Assets (1)		Liabilities (2)			Assets (1)		Liabilities (2)
Derivatives designated as accounting hedges:
Interest rate swaps	$	8,778	$	(318	)	$	587	$	(8,024	)

⁽¹⁾   Reported in other current assets on the consolidated balance sheets.

⁽²⁾   Reported in accounts payable on the consolidated balance sheets.

Effect of Derivative Instruments on Comprehensive Income

	Three Months Ended						Nine Months Ended
	November 30						November 30
(In thousands)	2016			2015			2016			2015
Derivatives designated as accounting hedges:
Gain (loss) recognized in AOCL (1)	$	7,282		$	(3,325	)	$	6,484		$	(9,596	)
Loss reclassified from AOCL into CAF income(1)	$	(2,935	)	$	(1,944	)	$	(8,868	)	$	(5,902	)
Loss recognized in CAF income (2)	$	—		$	(336	)	$	—		$	(438	)

⁽¹⁾  Represents the effective portion.

⁽²⁾  Represents the ineffective portion.