Derivative Instruments

12 Months Ended

Dec. 31, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

In general, the Company enters into derivative transactions in certain situations based on management’s assessment of current market conditions and perceived risks. Management intends to respond to evolving business and market conditions and in doing so, may enter into such transactions as deemed appropriate.

Credit Risk. As a result of the use of derivative instruments, the Company is exposed to counterparty credit risk. The Company manages this risk by limiting its counterparties to large financial institutions which meet the Company’s credit rating standards and have an established banking relationship with the Company. As of December 31, 2014, the Company did not expect any losses as a result of default of its counterparties.

Foreign Currency Forward Contracts.The Company’s Mexican subsidiaries have net U.S. dollar-denominated liabilities (primarily debt) which, for Mexican income tax purposes, are subject to periodic revaluation based on changes in the value of the Mexican peso against the U.S. dollar. This revaluation creates fluctuations in the Company’s Mexican cash tax obligation and the effective income tax rate. The Company has entered into foreign currency forward contracts to hedge its exposure to this risk.

In the first quarter of 2014, the Company entered into foreign currency forward contracts with an aggregate notional amount of $345.0 million. These contracts matured on December 31, 2014, and obligated the Company to purchase a total of Ps.4,642.5 million at a weighted-average exchange rate of Ps.13.46 to each U.S. dollar. During October and December 2014, the Company entered into offsetting contracts with an aggregate notional amount of $30.0 million and $291.4 million, respectively. These offsetting contracts matured on December 31, 2014, and obligated the Company sell a total of Ps.403.7 million and Ps.4,238.8 million at a weighted-average exchange rate of Ps.13.46 and Ps.14.57 to each U.S. dollar, respectively.

In December 2014, the Company entered into additional foreign currency forward contracts with an aggregate notional amount of $300.0 million. These contracts matured on January 15, 2015 and obligated the Company to purchase a total of Ps.4,364.7 million at a weighted-average rate of Ps.14.55 to each U.S. dollar. During January 2015, the Company entered into offsetting contracts with an aggregate notional amount of $298.8 million. These offsetting contracts matured on January 15, 2015, and obligated the Company to sell a total of Ps.4,364.7 million at a weighted-average exchange rate of Ps.14.61 to each U.S. dollar.

In the first half of 2013, the Company entered into foreign currency forward contracts with an aggregate notional amount of $325.0 million. These contracts matured on December 31, 2013, and obligated the Company to purchase a total of Ps.4,202.3 million at a weighted-average exchange rate of Ps.12.93 to each U.S. dollar. During December 2013, the Company entered into offsetting contracts with an aggregate notional amount of $324.3 million. These offsetting contracts matured on December 31, 2013, and obligated the Company sell a total of Ps.4,202.3 million at a weighted-average exchange rate of Ps.12.96 to each U.S. dollar.

In 2014 and 2013, the Company did not designate any of the foreign currency forward contracts as hedging instruments for accounting purposes, and the related net loss was recognized in foreign exchange gain (loss) within the consolidated statements of comprehensive income.

As of December 31, 2013, the Company had no outstanding foreign currency forward contracts.

The following table presents the fair value of derivative instruments included in the consolidated balance sheets (in millions):

	Derivative Liabilities
	Balance Sheet Location	December 31, 2014		December 31, 2013
Derivatives not designated as hedging instruments:
Foreign currency forward contracts	Accounts payable and accrued liabilities	$	4.3	$	—
Total derivative liabilities		$	4.3	$	—

The following table presents the effects of derivative instruments on the consolidated statements of income for the years ended December 31 (in millions):

	Location of Gain/(Loss) Recognized in Income on Derivative	Amount of Gain/(Loss) Recognized in Income on Derivative
Derivatives not designated as hedging instruments:		2014			2013			2012
Foreign currency forward contracts	Foreign exchange gain (loss)	$	(27.9	)	$	(0.7	)	$	—
Total		$	(27.9	)	$	(0.7	)	$	—