FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2017

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

ASC 820, “Fair Value Measurements and Disclosure”, establishes a hierarchy that prioritizes the inputs to those valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are:

Basis of Fair Value Measurement


Level 1	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted instruments.


Level 2	Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly.


Level 3	Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

We evaluate the position of each financial instrument measured at fair value in the hierarchy individually based on the valuation methodology we apply. The carrying amount of financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable and accrued liabilities, approximate their fair value due to the short-term nature of these items. The fair value of our long-term debt is included in Note 4, "Long-term Debt and Other Financing Arrangements".

Hedge Accounting Activities

Cash Flow Hedges of Interest Rate Risk

We are party to interest rate swap agreements to mitigate our exposure to interest rate fluctuations on the outstanding principal amount of our Euro Term Loans. These interest rate swaps, designated as cash flow hedges, provide us with variable-rate cash receipts in exchange for fixed-rate payments over the lives of the agreements, with no exchange of the underlying notional amount. These instruments are carried at fair value on our condensed consolidated balance sheets as other current and other non-current liabilities based on their maturity, and the effective portion of the changes in the fair value is recorded in accumulated other comprehensive income / loss and subsequently reclassified to interest expense when the hedged item affects earnings. The ineffective portion of changes in the fair value is recognized immediately in the change in fair value of derivatives in our condensed consolidated statements of operations and comprehensive income / loss. For the three months ended March 31, 2017 and 2016, we did not recognize any charges related to hedge ineffectiveness.

Information relating to financial instruments is as follows:



Trade Date	Number of Contracts	Description	Aggregate Notional Amount		Maturity Date	Objective	Fair Value as at March 31, 2017
April 5, 2016	5	Interest rate swap	€	468,800	February 21, 2021	Interest rate hedge underlying 2021 Euro Term Loan	$	(893,887	)
April 5, 2016	4	Interest rate swap	€	250,800	November 1, 2018	Interest rate hedge underlying 2018 Euro Term Loan, forward starting on November 1, 2017	$	(282,719	)
November 10, 2015	3	Interest rate swap	€	235,335	November 1, 2019	Interest rate hedge underlying 2019 Euro Term Loan	$	(1,409,599	)
November 14, 2014	2	Interest rate swap	€	250,800	November 1, 2017	Interest rate hedge underlying 2018 Euro Term Loan	$	(336,167	)

We value the interest rate swap agreements using a valuation model which calculates the fair value on the basis of the net present value of the estimated future cash flows. The most significant input used in the valuation model is the expected EURIBOR-based yield curve. These instruments were allocated to Level 2 of the fair value hierarchy because the critical inputs to this model, including current interest rates, relevant yield curves and the known contractual terms of the instruments, were readily observable.



	Accumulated Other Comprehensive Loss
BALANCE December 31, 2016	$	(4,451	)
Unrealized gain on interest rate swaps	573
Reclassified to interest expense	685
BALANCE March 31, 2017	$	(3,193	)

Non-Hedge Accounting Activities

The change in fair value of derivatives not designated as hedging instruments comprised the following for the three months ended March 31, 2017 and 2016:



	For the Three Months Ended March 31,
	2017		2016
Currency swaps	$	368	$	(14,050	)

Foreign Currency Risk

We have entered into the below forward foreign exchange contract to reduce our exposure to movements in foreign exchange rates related to contractual payments under certain dollar-denominated agreements. Information relating to financial instruments is as follows:

Trade Date

Number of Contracts

Description

Aggregate Notional Amount

Maturity Date

Objective

Fair Value as at March 31, 2017

January 31, 2017

EUR / USD forward

19,270

December 21, 2017

USD-denominated operating payments

266

These forward foreign exchange contracts are considered economic hedges but were not designated as hedging instruments, so changes in the fair value of the derivatives were recorded as changes in fair value of derivatives in the condensed consolidated statements of operations and comprehensive income / loss and in the condensed consolidated balance sheet in other current assets. We valued these contracts using an industry-standard pricing model which calculated the fair value on the basis of the net present value of the estimated future cash flows receivable or payable. These instruments were allocated to Level 2 of the fair value hierarchy because the critical inputs to this model, including foreign exchange forward rates and the known contractual terms of the instruments, were readily observable.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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