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Derivatives and Hedging
 12 Months Ended
Dec. 31, 2014
Derivatives and Hedging  
Derivatives and Hedging

 

10. Derivatives and Hedging

        We periodically use interest rate swaps to manage interest rate risk associated with our variable rate floor plan debt. We were party to interest rate swap agreements through December 2014 pursuant to which the LIBOR portion of $300.0 million of our floating rate floor plan debt was fixed at a rate of 2.135% and $100.0 million of our floating rate floor plan debt was fixed at a rate of 1.55%.

        We used Level 2 inputs to estimate the fair value of the interest rate swap agreements. As of December 31, 2014 and 2013, the fair value of the swaps designated as hedging instruments was estimated to be a liability of $0 million and $7.7 million, respectively. During 2014 and 2013, there was no hedge ineffectiveness recorded in our income statement. During the year ended December 31, 2014, the swaps increased the weighted average interest rate on our floor plan borrowings by approximately 30 basis points.

        Our commercial vehicle distribution business sells vehicles, engines, parts and other products purchased from manufacturers in the U.S., Germany, and the U.K. In order to protect against exchange rate movements, we enter into foreign exchange forward contracts against anticipated cash flows. The contracts are timed to mature when major shipments are scheduled to arrive in Australia and when receipt of payment from customers is expected. We classify our foreign exchange forward contracts as cash flow hedges and state them at fair value. We used Level 2 inputs to estimate the fair value of the foreign exchange forward contracts. The fair value of the contracts designated as hedging instruments was estimated to be an asset of $1.1 million and $2.2 million as of December 31, 2014 and 2013, respectively.