Derivative Instruments and Hedging Activities

6 Months Ended

Sep. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

Forward Foreign Exchange Contracts

The Company enters into forward foreign exchange contracts to hedge its foreign currency exposures on future production expenses and tax credit receivables denominated in various foreign currencies (i.e., cash flow hedges). The Company also enters into forward foreign exchange contracts that economically hedge certain of its foreign currency risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. The Company monitors its positions with, and the credit quality of, the financial institutions that are party to its financial transactions. Changes in the fair value of the foreign exchange contracts that are designated as hedges are reflected in accumulated other comprehensive income (loss), and changes in the fair value of foreign exchange contracts that are not designated as hedges and do not qualify for hedge accounting are recorded in direct operating expense. Gains and losses realized upon settlement of the foreign exchange contracts that are designated as hedges are amortized to direct operating expense on the same basis as the production expenses being hedged.

As of September 30, 2019, the Company had the following outstanding forward foreign exchange contracts (all outstanding contracts have maturities of less than 22 months from September 30, 2019):



September 30, 2019
Foreign Currency	Foreign Currency Amount			US Dollar Amount		Weighted Average Exchange Rate Per $1 USD
	(Amounts in millions)			(Amounts in millions)
British Pound Sterling		£6.7	in exchange for		$7.3	£0.92
Canadian Dollar		C$27.3	in exchange for		$21.3	C$1.28
Australian Dollar		A$3.5	in exchange for		$2.8	A$1.25

Interest Rate Swaps

The Company is exposed to the impact of interest rate changes primarily through its borrowing activities. The Company’s objective is to mitigate the impact of interest rate changes on earnings and cash flows. The Company primarily uses pay-fixed interest rate swaps to facilitate its interest rate risk management activities, which the Company designates as cash flow hedges of interest payments on floating-rate borrowings. Pay-fixed swaps effectively convert floating-rate borrowings to fixed-rate borrowings. The unrealized gains or losses from these cash flow hedges are deferred in accumulated other comprehensive income (loss) and recognized in interest expense as the interest payments occur.

As of September 30, 2019 and March 31, 2019, the total notional amount of the Company’s pay-fixed interest rate swaps was $1.7 billion and $1.7 billion, respectively.

The major terms of the Company's interest rate swap agreements as of September 30, 2019 are as follows (all related to the Company's LIBOR-based debt, see Note 5):



Effective Date	Notional Amount (in millions)		Fixed Rate Paid	Maturity Date
May 23, 2018		$1,000.0	2.915%	March 24, 2025
June 25, 2018		$200.0	2.723%	March 23, 2025
July 31, 2018		$300.0	2.885%	March 23, 2025
December 24, 2018		$50.0	2.744%	March 23, 2025
December 24, 2018		$100.0	2.808%	March 23, 2025
December 24, 2018		$50.0	2.728%	March 23, 2025

The following table presents the effect, net of tax, of the Company's derivatives on the accompanying consolidated statements of operations and comprehensive loss for the three and six months ended September 30, 2019 and 2018:



	Three Months Ended						Six Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
	(Amounts in millions)
Derivatives designated as cash flow hedges:
Forward exchange contracts
Gain recognized in accumulated other comprehensive income (loss)	$	—		$	0.4		$	—		$	0.4
Gain reclassified from accumulated other comprehensive income (loss) into direct operating expense	$	0.4		$	0.1		$	1.6		$	0.2

Interest rate swap agreements
Gain (loss) recognized in accumulated other comprehensive income (loss)	$	(20.9	)	$	12.2		$	(66.7	)	$	5.4
Loss reclassified from accumulated other comprehensive income (loss) into interest expense	(2.7		)	(2.9		)	(4.4		)	(3.9		)

Derivatives not designated as cash flow hedges:
Forward exchange contracts
Loss recognized in direct operating expense	$	—		$	—		$	—		$	(0.7	)

Total direct operating expense on consolidated statements of operations	$	499.4		$	463.2		$	1,067.4		$	993.2
Total interest expense on consolidated statements of operations⁽¹⁾	$	48.0		$	38.8		$	97.0		$	74.2

________________

(1)Represents interest expense before interest on dissenting shareholders' liability.

The Company classifies its forward foreign exchange contracts and interest rate swap agreements within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments (see Note 8). As of September 30, 2019 and March 31, 2019, the Company had the following amounts recorded in the accompanying consolidated balance sheets related to the Company's use of derivatives:



	September 30, 2019
	Other Current Assets		Accounts Payable and Accrued Liabilities		Other Non-Current Liabilities
	(Amounts in millions)
Derivatives designated as cash flow hedges:
Forward exchange contracts	$	1.6	$	0.7	$	—
Interest rate swap agreements	—		—		130.3
Fair value of derivatives	$	1.6	$	0.7	$	130.3



	March 31, 2019
	Other Current Assets		Accounts Payable and Accrued Liabilities		Other Non-Current Liabilities
	(Amounts in millions)
Derivatives designated as cash flow hedges:
Forward exchange contracts	$	1.5	$	0.6	$	—
Interest rate swap agreements	—		—		63.6
Fair value of derivatives	$	1.5	$	0.6	63.6

As of September 30, 2019, based on the current release schedule, the Company estimates approximately $0.7 million of gains associated with forward foreign exchange contract cash flow hedges in accumulated other comprehensive loss will be reclassified into earnings during the one-year period ending September 30, 2020.

As of September 30, 2019, the Company estimates approximately $20.8 million of losses recorded in accumulated other comprehensive loss associated with interest rate swap agreement cash flow hedges will be reclassified into interest expense during the one-year period ending September 30, 2020.