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Derivatives | 3 Months Ended
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Mar. 31, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives | Derivatives Hedging Objectives—We are exposed to certain risks relating to ongoing business operations. The primary risks managed by using derivative instruments are foreign currency exchange rate risk and interest rate risk. Forward contracts on various foreign currencies are entered into to manage the foreign currency exchange rate risk on operational exposure denominated in foreign currencies. Interest rate swaps are entered into to manage interest rate risk associated with our floating-rate borrowings. In accordance with authoritative guidance on accounting for derivatives and hedging, we designate foreign currency forward contracts as cash flow hedges on operational exposure and certain interest rate swaps as cash flow hedges of floating-rate borrowings. Cash Flow Hedging Strategy—To protect against the reduction in value of forecasted foreign currency cash flows, we hedge portions of our revenues and expenses denominated in foreign currencies with forward contracts. For example, when the dollar strengthens significantly against the foreign currencies, the decline in present value of future foreign currency expense is offset by losses in the fair value of the forward contracts designated as hedges. Conversely, when the dollar weakens, the increase in the present value of future foreign currency expense is offset by gains in the fair value of the forward contracts. We enter into interest rate swap agreements to manage interest rate risk exposure. The interest rate swap agreements modify our exposure to interest rate risk by converting floating-rate debt to a fixed rate basis, thus reducing the impact of interest rate changes on future interest expense and net earnings. These agreements involve the receipt of floating rate amounts in exchange for fixed rate interest payments over the life of the agreements without an exchange of the underlying principal amount. For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income (loss) ("OCI") and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings. The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item, if any (ineffective portion), and hedge components excluded from the assessment of effectiveness, are recognized in the Other, net in the consolidated statements of operations during the current period. Derivatives not designated as hedging instruments are carried at fair value with changes in fair value reflected in Other, net in the consolidated statement of operations. Forward Contracts—In order to hedge our operational exposure to foreign currency movements, we are a party to certain foreign currency forward contracts that extend until March 2018. We have designated these instruments as cash flow hedges. No hedging ineffectiveness was recorded in earnings relating to the forward contracts during the three months ended March 31, 2017 and 2016. As of March 31, 2017, we estimate that $1 million in gains will be reclassified from other comprehensive income (loss) to earnings over the next 12 months. As of March 31, 2017 and December 31, 2016, we had the following unsettled purchased foreign currency forward contracts that were entered into to hedge our operational exposure to foreign currency movements (in thousands, except for average contract rates):
Outstanding Notional Amounts as of March 31, 2017
Buy Currency |  | Sell Currency |  | Foreign Amount |  | USD Amount |  | Average Contract Rate
Australian Dollar |  | US Dollar |  | 23,500 |  |  | 17,582 |  |  | 0.7482 |
British Pound Sterling |  | US Dollar |  | 22,050 |  |  | 28,356 |  |  | 1.2860 |
Indian Rupee |  | US Dollar |  | 1,392,000 |  |  | 20,280 |  |  | 0.0146 |
Polish Zloty |  | US Dollar |  | 243,500 |  |  | 60,949 |  |  | 0.2503 |
Singapore Dollar |  | US Dollar |  | 60,500 |  |  | 43,546 |  |  | 0.7198 |
Outstanding Notional Amounts as of December 31, 2016
Buy Currency |  | Sell Currency |  | Foreign Amount |  | USD Amount |  | Average Contract Rate
Australian Dollar |  | US Dollar |  | 17,000 |  |  | 12,574 |  |  | 0.7396 |
Euro |  | US Dollar |  | 1,800 |  |  | 2,031 |  |  | 1.1283 |
British Pound Sterling |  | US Dollar |  | 17,750 |  |  | 23,691 |  |  | 1.3347 |
Indian Rupee |  | US Dollar |  | 1,174,500 |  |  | 16,786 |  |  | 0.0143 |
Polish Zloty |  | US Dollar |  | 258,250 |  |  | 64,778 |  |  | 0.2508 |
Singapore Dollar |  | US Dollar |  | 47,700 |  |  | 34,383 |  |  | 0.7208 |
Interest Rate Swap Contracts—Interest rate swaps outstanding during the three months ended March 31, 2017 and 2016 are as follows:
Notional Amount |  | Interest Rate Received |  | Interest Rate Paid |  | Effective Date |  | Maturity Date
Designated as Hedging Instrument |  |  |  |  |  |
$750 million |  | 1 month LIBOR(1) |  | 1.48% |  | December 31, 2015 |  | December 30, 2016
$750 million |  | 1 month LIBOR(2) |  | 1.15% |  | March 31, 2017 |  | December 31, 2017
$750 million |  | 1 month LIBOR(2) |  | 1.65% |  | December 29, 2017 |  | December 31, 2018
$750 million |  | 1 month LIBOR(2) |  | 2.08% |  | December 31, 2018 |  | December 31, 2019
Not Designated as Hedging Instrument |  |  |  |  |  |
$750 million |  | 1 month LIBOR(1) |  | 2.19% |  | December 30, 2016 |  | December 29, 2017
$750 million |  | 1.18% |  | 1 month LIBOR(1) |  | March 31, 2017 |  | December 31, 2017
$750 million |  | 1 month LIBOR(1) |  | 2.61% |  | December 29, 2017 |  | December 31, 2018
$750 million |  | 1.67% |  | 1 month LIBOR(1) |  | December 29, 2017 |  | December 31, 2018
______________________
(1) | Subject to a 1% floor.
(2) | Subject to a 0% floor.
As a result of the Term Facility Amendment, we discontinued hedge accounting for our existing swap agreements as of February 22, 2017. Accumulated losses of $14 million in other comprehensive income as of the date hedge accounting was discontinued will be amortized into interest expense through the maturity date of the respective swap agreements, and future interest rate swap payments made will be recorded in Other, net. Losses reclassified from other comprehensive income to interest expense related to the derivatives that no longer qualified for hedge accounting were immaterial for the three months ended March 31, 2017. We also entered into new interest rate swaps with offsetting terms that are not designated as hedging instruments. Adjustments to the fair value of interest rate swaps not designated as hedging instruments resulted in a gain of $2 million and was recorded in earnings in Other, net for the three months ended March 31, 2017. We had no undesignated derivatives as of December 31, 2016. In connection with the Term Facility Amendment, we entered into new forward starting interest rate swaps to hedge the interest payments associated with $750 million of the floating-rate New Term Loan B. We have designated these swaps as cash flow hedges, which are effective March 31, 2017. The total notional amount outstanding is $750 million in each of the remaining nine months in 2017 and the full years 2018 and 2019. The effective portion of changes in the fair value of the interest rate swaps is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings. The estimated fair values of our derivatives designated as hedging instruments and those not designated as hedging instruments as of March 31, 2017 and December 31, 2016 are as follows (in thousands):
|  | Derivative Assets (Liabilities)
|  |  |  | Fair Value as of
Derivatives Designated as Hedging Instruments |  | Consolidated Balance Sheet Location |  | March 31, 2017 |  | December 31, 2016
Foreign exchange contracts |  | Other accrued liabilities |  | $ | (202 | ) |  | $ | (7,360 | )
Foreign exchange contracts |  | Prepaid expenses and other |  | 1,179 |  |  | — |
Interest rate swaps |  | Other accrued liabilities |  | (315 | ) |  | (8,345 | )
Interest rate swaps |  | Other noncurrent liabilities |  | (687 | ) |  | (7,339 | )
|  |  |  | $ | (25 | ) |  | $ | (23,044 | )
|  | Derivative Assets (Liabilities)
|  |  |  | Fair Value as of
Derivatives Not Designated as Hedging Instruments |  | Consolidated Balance Sheet Location |  | March 31, 2017 |  | December 31, 2016
Interest rate swaps |  | Prepaid expenses and other |  | $ | 328 |  |  | $ | — |
Interest rate swaps |  | Other accrued liabilities |  | (7,756 | ) |  | — |
Interest rate swaps |  | Other noncurrent liabilities |  | (5,340 | ) |  | — |
|  |  |  | $ | (12,768 | ) |  | $ | — |
The effects of derivative instruments, net of taxes, on OCI for the three months ended March 31, 2017 and 2016 are as follows (in thousands):
|  | Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)
|  | Three Months Ended March 31,
Derivatives in Cash Flow Hedging Relationships |  | 2017 |  | 2016
Foreign exchange contracts |  | $ | 5,121 |  |  | $ | 3,041 |
Interest rate swaps |  | (665 | ) |  | (3,953 | )
Total |  | $ | 4,456 |  |  | $ | (912 | )
|  |  |  | Amount of Losses Reclassified from Accumulated OCI into Income (Effective Portion)
Derivatives in Cash Flow Hedging Relationships |  | Income Statement Location |  | Three Months Ended March 31,
|  | 2017 |  | 2016
Foreign exchange contracts |  | Cost of revenue |  | $ | 1,519 |  |  | $ | 919 |
Interest rate swaps |  | Interest Expense |  | 1,352 |  |  | 582 |
Total |  |  |  | $ | 2,871 |  |  | $ | 1,501 |

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624171-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=64837297&loc=d3e41620-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624163-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5579240-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624177-113959 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80784-113994 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=64837297&loc=d3e41641-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5579245-113959 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624258-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80748-113994 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5708775-113959 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5708773-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5618551-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5580258-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624181-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=64837297&loc=d3e41638-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 + Details
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