Derivative Instruments

3 Months Ended

Mar. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

We are exposed to, among other risks, the impact of changes in foreign currency exchange rates as a result of our non-U.S. investments. Our risk management program is designed to manage the exposure and volatility arising from these risks, and utilizes derivative financial instruments and debt issued in foreign currencies to offset a portion of these risks.

  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 deferred 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. 

     Foreign Currency Forward Contracts and Cross Currency Swap Contracts Designated as Net Investment Hedges

We use foreign currency forward and cross currency forward swap contracts to hedge a portion of the net investment in foreign subsidiaries against fluctuations in foreign exchange rates. 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. 

During the three months ended March 31, 2019 and 2018, we settled certain net investment hedges generating cash proceeds of $0 and $8,055,000, respectively. The balance of the cumulative translation adjustment will be reclassified to earnings if the hedged investment is sold or substantially liquidated.

Derivative Contracts Undesignated

We use foreign currency exchange contracts to manage existing exposures to foreign currency exchange risk. Gains and losses resulting from the changes in fair value of these instruments are recorded in interest expense on the Consolidated Statements of Comprehensive Income, and are substantially offset by net revaluation impacts on foreign currency denominated balance sheet exposures. In addition, we have several interest rate cap contracts related to variable rate secured debt agreements. Gains and losses resulting from the changes in fair values of these instruments are also recorded in interest expense.

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

	March 31, 2019			December 31, 2018
Derivatives designated as net investment hedges:
Denominated in Canadian Dollars	$	575,000		$	575,000
Denominated in Pounds Sterling	£	1,340,708		£	890,708
Financial instruments designated as net investment hedges:
Denominated in Canadian Dollars	$	250,000		$	250,000
Denominated in Pounds Sterling	£	1,050,000		£	1,050,000
Derivative instruments not designated:
Interest rate caps denominated in U.S. Dollars	$	405,819		$	405,819
Forward purchase contracts denominated in Canadian Dollars	$	(325,000	)	$	(325,000	)
Forward sales contracts denominated in Canadian Dollars	$	405,000		$	405,000
Forward purchase contracts denominated in Pounds Sterling	£	(350,000	)	£	(350,000	)
Forward sales contracts denominated in Pounds Sterling	£	350,000		£	350,000

 

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

		Three Months Ended March 31,
	Location	2019			2018
Gain (loss) on derivative instruments designated as hedges recognized in income	Interest expense	$	5,333		$	(269	)
Gain (loss) on derivative instruments not designated as hedges recognized in income	Interest expense	$	(1,538	)	$	1,720
Gain (loss) on foreign exchange contracts and term loans designated as net investment hedge recognized in OCI	OCI	$	(87,682	)	$	(62,698	)