Derivative Financial Instruments

9 Months Ended

Sep. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

(13) Derivative Financial Instruments 

Risk Management Objectives of Using Derivatives - Interest rate risk

The Company is exposed to interest rate risk associated with its vault cash rental obligations and its variable rate debt. The Company uses varying notional amount interest rate swap contracts and interest rate cap agreements (“Interest Rate Derivatives”) to manage the interest rate risk associated with its vault cash rental obligations in the U.S., Canada, the U.K., and Australia. Intermittently, the Company has also used interest rate swap or cap contracts to mitigate its exposure to floating interest rates on its variable rate debt.

The majority of the Company’s Interest Rate Derivatives serve to mitigate interest rate risk exposure by converting a portion of the Company’s monthly floating-rate vault cash rental payments to either monthly fixed-rate vault cash rental payments or to vault cash rental payments with a capped rate. Typically, the Company receives monthly floating-rate payments from its Interest Rate Derivative counterparties that correspond to, in all material respects, the monthly floating-rate payments that are paid by the Company to its vault cash rental providers for the portion of the average outstanding vault cash balances that have been hedged. The floating-rate payments may or may not be capped or limited. In return, the Company pays its counterparties a monthly fixed-rate amount based on the same notional amounts outstanding. By converting the vault cash rental and from time to time the interest on certain debt from floating-rate to a fixed or a capped rate, the impact of favorable and unfavorable changes in future interest rates on the monthly vault cash rental payments recognized in the Cost of ATM operating revenues line in the Consolidated Statement of Operations has been reduced.

Risk Management Objectives of Using Derivatives - Foreign Currency Exchange Rate Risk

The Company is also exposed to foreign currency exchange rate risk with respect to its operations outside the U.S. The Company has at times used foreign currency forward contracts to mitigate its foreign exchange rate risk associated with certain anticipated transactions. The Company regularly designates its foreign currency derivatives as cash flow hedges, however, the Company is not presently party to any foreign currency derivatives designated as cash flow hedges.

Derivative Accounting Policy

The Interest Rate Derivatives discussed above are used by the Company to hedge its exposure to variability in expected future cash flows attributable to a particular risk and therefore typically qualify as and are designated as cash flow hedging instruments.

As discussed above, the Company generally utilizes fixed-for-floating Interest Rate Derivatives where the underlying pricing terms of the cash flow hedging instrument agree, in all material respects, with the pricing terms of the anticipated vault cash rental obligations, anticipated Credit Agreement borrowings or other variable rate debt borrowings. Therefore, the amount of ineffectiveness associated with the Interest Rate Derivatives has historically been immaterial. If the Company concludes 1) that the obligations that have been hedged are no longer probable or 2) that the underlying terms of the agreements have changed such that they do not sufficiently agree to the pricing terms of the Interest Rate Derivatives, the Interest Rate Derivative contracts would be deemed ineffective. The Company does not currently anticipate terminating or modifying terms of its existing Interest Rate Derivative instruments prior to their expiration dates.

The Company recognizes its Interest Rate Derivative contracts as assets or liabilities at fair value and the accumulated changes in the fair values of the related Interest Rate Derivative contracts are reported net of taxes in Accumulated other comprehensive loss, net within the Consolidated Balance Sheets. For additional information related to the Company’s interest rate swap and cap contracts and the associated fair value measurements, see Note 14. Fair Value Measurements.

In accordance with U.S. GAAP, the Company reports the gain or loss related to each highly effective cash flow hedging instrument, including any ineffectiveness, as a component of Accumulated other comprehensive loss, net within the Consolidated Balance Sheets and reclassifies the gain or loss into earnings within the Cost of ATM operating revenues, Interest expense, net, or Other income lines of the Consolidated Statements of Operations in the same period or periods during which the hedged transaction affects and has been forecasted in earnings. The classification of the gain or loss is determined based on the associated hedge designation.

None of the Company’s existing derivative contracts contain credit-risk-related contingent features.

Summary of Outstanding Interest Rate Derivatives

The notional amounts, weighted average fixed rates, and remaining terms associated with the interest rate swap contracts and cap agreements that are currently in place in the U.S., Canada, the U.K, and Australia as of September 30, 2020 are as follows:

Outstanding Interest Rate Derivatives Associated with Vault Cash Rental Obligations

North America – Interest Rate Swap Contracts

Notional Amounts U.S. $		Weighted Average Fixed Rate	Term
(In millions)
$	1,500	1.69%	October 1, 2020 – December 31, 2020
$	1,200	1.46%	January 1, 2021 – December 31, 2021
$	1,000	1.17%	January 1, 2022 – December 31, 2022
$	600	0.98%	January 1, 2023 – December 31, 2024

Notional Amounts CAD $		Weighted Average Fixed Rate	Term
(In millions)
$	125	2.46%	October 1, 2020 – December 31, 2021

North America – Interest Rate Cap Contracts

Notional Amounts U.S. $		Cap Rate (1)	Term
(In millions)
$	200	3.25%	January 1, 2021 – December 31, 2023

(1) Maximum amount of interest to be paid each year as per terms of the cap. The cost of the cap will be amortized through vault cash rental expense over term of the cap.

Europe & Africa – Interest Rate Swap Contracts

Notional Amounts		Weighted Average
U.K. £		Fixed Rate	Term
(In millions)
£	550	0.94%	October 1, 2020 – December 31, 2020
£	500	0.94%	January 1, 2021 – December 31, 2022

Australia & New Zealand – Interest Rate Swap Contracts

Notional Amounts AUS $		Weighted Average Fixed Rate	Term
(In millions)
$	140	1.59%	October 1, 2020 – December 31, 2020
$	40	0.71%	January 1, 2021 – December 31, 2021

Interest Rate Derivatives Associated with Variable Rate Debt

North America – Interest Rate Cap Contracts

Notional Amounts U.S. $		Cap Rate (1)	Term
(In millions)
$	250	1.00%	October 1, 2020 – December 31, 2025

(1) Maximum amount of interest to be paid each year as per terms of the cap. The cost of the cap will be amortized through interest expense over term of the cap.

On July 30, 2020, the Company executed $250.0 million aggregate notional amount interest rate cap contracts that began August 1, 2020 and terminate December 31, 2025. These interest rate cap contracts have a cap rate of 1% and have been designated as cash flow hedges of the floating rate interest associated with the Company’s Term Loan. See Note 9. Current and Long-Term Debt.

Effects of Interest Rate Derivatives on the Consolidated Balance Sheets and Consolidated Statements of Operations

The following tables depict the effects of the use of the Company’s Interest Rate Derivatives on the Consolidated Balance Sheets and Consolidated Statements of Operations:

Balance Sheet Data 

Asset (Liability) Derivative Instruments	Balance Sheet Location	Fair Value
		September 30, 2020		December 31, 2019
		(In thousands)
Derivatives designated as hedging instruments:
Interest rate swap and cap contracts	Prepaid expenses, deferred costs, and other current assets	$	—	$	1,872
Interest rate swap and cap contracts	Prepaid expenses, deferred costs, and other noncurrent assets	—		8,766
Interest rate swap and cap contracts	Current portion of other long-term liabilities	(24,737)		(7,697)
Interest rate swap and cap contracts	Other long-term liabilities	(33,973)		(9,723)
Total derivatives designated as hedging instruments, net		$	(58,710)	$	(6,782)
Derivatives not designated as hedging instruments:
Foreign currency forward contracts	Current portion of other long-term liabilities	—		(7,868)
Total derivative instruments, net		$	(58,710)	$	(14,650)

Statements of Operations Data

	Three Months Ended September 30
Derivatives in Cash Flow Hedging Relationship	Amount of Loss Recognized in Accumulated Other Comprehensive Loss on Derivative Instruments				Location of Loss Reclassified from Accumulated Other Comprehensive Loss into Income	Amount of Loss Reclassified from Accumulated Other Comprehensive Loss into Income
	2020		2019			2020		2019
	(In thousands)					(In thousands)
Interest rate swap and cap contracts	$	(5,072)	$	(3,406)	Cost of ATM operating revenues	$	(8,620)	$	(668)
Interest rate swap and cap contracts	—		(119)		Interest expense, net	—		(59)
Total	$	(5,072)	$	(3,525)		$	(8,620)	$	(727)

	Nine Months Ended September 30
Derivatives in Cash Flow Hedging Relationship	Amount of Loss Recognized in Accumulated Other Comprehensive Loss on Derivative Instruments				Location of Loss Reclassified from Accumulated Other Comprehensive Loss into Income	Amount of Loss Reclassified from Accumulated Other Comprehensive Loss into Income
	2020		2019			2020		2019
	(In thousands)					(In thousands)
Interest rate swap and cap contracts	$	(57,929)	$	(28,989)	Cost of ATM operating revenues	$	(18,562)	$	(210)
Interest rate swap and cap contracts	(210)		(500)		Interest expense, net	(43)		(172)
Total	$	(58,139)	$	(29,489)		$	(18,605)	$	(382)

As of September 30, 2020, the Company expects to reclassify $24.7 million of net derivative-related losses contained in the Accumulated comprehensive loss, net line within its Consolidated Balance Sheets into earnings during the next twelve months concurrent with the recording of the related vault cash rental expense and Term Loan interest expense amounts.

The following tables show the impact of the Company's cash flow hedge accounting relationships on the Consolidated Statement of Operations for the three and nine months ended September 30, 2020 and 2019.

	Location and Amount of Loss Recognized in Income on Cash Flow Hedging Relationships in the Three Months Ended
	September 30, 2020				September 30, 2019
	(In thousands)
	Cost of ATM Operating Revenues		Interest Expense, net		Cost of ATM Operating Revenues		Interest Expense, net
Total amount of expense presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded	$	165,265	$	11,132	$	208,860	$	6,751
Amount of loss reclassified from Accumulated other comprehensive loss into expense	$	8,620	$	—	668		59

	Location and Amount of Loss Recognized in Income on Cash Flow Hedging Relationships in the Nine Months Ended
	September 30, 2020				September 30, 2019
	(In thousands)
	Cost of ATM Operating Revenues		Interest Expense, net		Cost of ATM Operating Revenues		Interest Expense, net
Total amount of expense presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded	$	510,014	$	26,362	$	623,099	$	20,265
Amount of loss reclassified from Accumulated other comprehensive loss into expense	$	18,562	43		210		172