Derivative Instruments and Hedges

9 Months Ended

Sep. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedges

Derivative Instruments and Hedges

Our risk management and foreign currency derivatives and hedging policy specifies the conditions under which we may enter into derivative contracts. See Notes 1 and 6 to our consolidated financial statements included in our 2014 Annual Report and Note 6 of this Quarterly Report for additional information on our derivatives. We enter into foreign exchange forward and swap contracts to hedge our cash flow risks associated with transactions denominated in currencies other than the local currency of the operation engaging in the transaction. All designated foreign exchange hedging instruments are highly effective as of September 30, 2015.

Foreign exchange contracts designated as hedging instruments had a notional value of $42.7 million and $125.9 million, at September 30, 2015 and December 31, 2014, respectively. Foreign exchange contracts with third parties not designated as hedging instruments had a notional value of $528.1 million and $421.1 million, at September 30, 2015 and December 31, 2014, respectively. At September 30, 2015, the length of foreign exchange contracts currently in place ranged from one day to 28 months.

Previously, as part of our risk management program, we entered into interest rate swap agreements to hedge exposure to floating interest rates on certain portions of our debt. At September 30, 2015 we had no notional amount in outstanding interest rate swaps with third parties, compared to $40.0 million as of December 31, 2014.

We are exposed to risk from credit-related losses resulting from nonperformance by counterparties to our financial instruments. We perform credit evaluations of our counterparties under foreign exchange contracts and interest rate swap agreements and expect all counterparties to meet their obligations. We have not experienced credit losses from our counterparties.

The fair value of foreign exchange contracts not designated as hedging instruments are summarized below:

	September 30,		December 31,
(Amounts in thousands)	2015		2014
Current derivative assets	$	3,546	$	11,709
Noncurrent derivative assets	3		6
Current derivative liabilities	3,200		6,168
Noncurrent derivative liabilities	219		348

The fair value of interest rate swaps and foreign exchange contracts designated as hedging instruments are summarized below:

	September 30,		December 31,
(Amounts in thousands)	2015		2014
Current derivative assets	$	164	$	—
Current derivative liabilities	$	3,236	$	6,952
Noncurrent derivative liabilities	28		411

Current and noncurrent derivative assets are reported in our condensed consolidated balance sheets in prepaid expenses and other and other assets, net, respectively. Current and noncurrent derivative liabilities are reported in our condensed consolidated balance sheets in accrued liabilities and retirement obligations and other liabilities, respectively.

The impact of net changes in the fair values of foreign exchange contracts are summarized below:

	Three Months Ended September 30,				Nine Months Ended September 30,
(Amounts in thousands)	2015		2014		2015		2014
Gain recognized in income	$	4,391	$	1,615	$	31,372	$	1,738

Gains and losses recognized in our condensed consolidated statements of income for foreign exchange contracts are classified as other expense, net.

In March 2015, we designated €255.7 million of our €500.0 million Euro senior notes discussed in Note 5 as a net investment hedge of our investments in certain of our international subsidiaries that use the Euro as their functional currency. We used the spot method to measure the effectiveness of our net investment hedge. Under this method, for each reporting period, the change in the carrying value of the Euro senior notes due to remeasurement of the effective portion is reported in accumulated other comprehensive loss on our condensed consolidated balance sheet and the remaining change in the carrying value of the ineffective portion, if any, is recognized in other expense, net in our condensed statement of income. We evaluate the effectiveness of our net investment hedge on a prospective basis at the beginning of each quarter. We did not record any ineffectiveness for the three and nine months ended September 30, 2015.