Quarterly report pursuant to Section 13 or 15(d)

Derivatives

v3.4.0.3
Derivatives
 3 Months Ended
Mar. 31, 2016
Derivatives

5. Derivatives

Our operations in foreign countries expose us to market risk associated with foreign currency exchange rate fluctuations between the U.S. dollar and various foreign currencies. We use derivative instruments to manage a portion of our exposure to changes in currency exchange rates due to payments made by our eco-travel subsidiary to tour operators in Canada, South Africa, Australia, Europe, Denmark, and New Zealand. Our primary objective for entering into currency derivatives is to reduce the volatility that changes in currency exchange rates have on our earnings. In general, the market risk related to these contracts is offset by corresponding gains and losses on the hedged transactions. By working only with major banks and closely monitoring current market conditions, we seek to limit the risk that counterparties to these contracts may be unable to perform. We have presented amounts on a gross basis as we do not have any master netting agreements with counterparties. We do have the legal right to “net settle” transactions of the same currency with a single net amount payable by one party or the other. We do not enter into derivative contracts for trading purposes.

The cash flow effects of our derivative contracts for the three months ended March 31, 2016 are included within Net cash provided by operating activities in the Statements of Cash Flows. Realized and unrealized gains and losses on currency derivatives without hedge accounting designation are included in Interest and other (expense) income, net in the accompanying statements of operations. For the period ended March 31, 2016 the gain recognized was $0.9 million. The asset related to the fair value of the hedging instruments has been included in Other current assets in the accompanying balance sheet.

Total notional amounts and gross fair values for derivative instruments without hedge accounting designation were as follows as of March 31, 2016:

 

     March 31, 2016      December 31, 2015  

(in thousands)

    Notional
Amount in
USD		      Fair Value
of Current
Assets		      Notional
Amount in
USD		      Fair Value of
Current
Liabilities		  

Currency forward contracts

            

Canadian dollars

    $ 10,701       $ 309       $ 4,200       $ (246 ) 

Other currencies

      1,435         44         1,372         (83 ) 
  

 

 

     

 

 

     

 

 

     

 

 

  
   $ 12,136       $ 353         5,572         (329 ) 

Currency option contracts

            

Canadian dollars

      —          —          8,514         (252 ) 
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 12,136       $ 353       $ 14,086       $ (581 ) 
  

 

 

     

 

 

     

 

 

     

 

 

  

As of March 31, 2016, $9.0 million of our outstanding contracts will mature in the next 12 months, and $3.1 million will mature the following year.