Vistaprint 2015 Annual Report Download - page 75

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4. Derivative Financial Instruments
Hedges of Interest Rate Risk
We enter into interest rate swap contracts to manage variability in the amount of our known or expected cash
payments related to our debt. Our objective in using interest rate derivatives is to add stability to interest expense and
to manage our exposure to interest rate movements. We designate our interest rate swaps as cash flow hedges.
Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in
exchange for us making fixed-rate payments over the life of the derivative agreements without exchange of the
underlying notional amount. Realized gains or losses from interest rate swaps are recorded in earnings, as a component
of interest expense, net.
During the year ended June 30, 2015, two interest rate derivative instruments were de-designated as they
became ineffective and one was subsequently re-designated during the period. As of June 30, 2015, the amount of
unrecognized loss included in accumulated other comprehensive (loss) income for de-designated cash flow hedge
instruments is $123. During the year ended June 30, 2014 we did not hold any interest rate derivative instruments
that were determined to be ineffective.
Amounts reported in accumulated other comprehensive (loss) income related to interest rate swap contracts
will be reclassified to interest expense as interest payments are accrued or made on our variable-rate debt. As of
June 30, 2015, we estimate that $816 will be reclassified from accumulated other comprehensive (loss) income to
interest income during the twelve months ending June 30, 2016. As of June 30, 2015, we had eight outstanding interest
rate swap contracts indexed to one-month LIBOR. These instruments include seven interest rate swap contracts that
were designated and one interest rate swap contract that was de-designated as a cash flow hedge of interest rate risk
and have varying start dates and maturity dates from July 2015 through June 2019. Since the start date of certain
contracts has not yet commenced and contracts have been de-designated, the notional amount of our outstanding
contracts is in excess of the variable-rate debt being hedged as of the balance sheet date.
Interest rate swap contracts outstanding: Notional Amounts
Contracts accruing interest as of June 30, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 240,000
Contracts with a future start date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 305,000
Hedges of Currency Risk
Cross-Currency Swap Contracts
From time to time, we execute cross-currency swap contracts in order to mitigate our currency exposure of
net investments in subsidiaries that have reporting currencies other than U.S. dollar. Cross-currency swaps
designated as net investment hedges involve an initial receipt of the notional amount in the hedge currency in
exchange for our reporting currency based on a contracted exchange rate. Subsequently we receive fixed rate
payments in our reporting currency in exchange for fixed rate payments in the hedged currency over the life of the
derivative contract. At maturity, the final exchange involves the receipt of our reporting currency in exchange for the
notional amount in the hedged currency.
During the year ended June 30, 2015, we entered into two cross-currency swap contracts that were
designated for hedge accounting and were used to hedge the risk of changes in the U.S. Dollar equivalent value of
a portion of our net investment in a consolidated Euro functional subsidiary. As of June 30, 2015, we had two
outstanding cross-currency swap contracts with a total notional amount of $122,969, both maturing during April
2019. During the year ended June 30, 2015, we recorded unrealized losses, net of tax in accumulated other
comprehensive (loss) income as a component of cumulative translation adjustment in the amount $7,779.
Currency Forward Contracts
We execute currency forward contracts in order to mitigate our exposure to fluctuations in various
currencies against our reporting currency, the U.S. dollar. We do not elect hedge accounting for our current
currency forward contract activity; however, we may elect to apply hedge accounting in future scenarios. The
change in the fair value of currency forward contracts is recognized directly in earnings, as a component of other
Form 10-K