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Derivative Financial Instruments
 9 Months Ended
Sep. 30, 2013
Derivative Financial Instruments [Abstract]  
Derivative Financial Instruments
7. Derivative Financial Instruments
 
The majority of our travel programs take place outside of the United States,  and most foreign suppliers require payment in currency other than the U.S. dollar. Accordingly, we are exposed to foreign currency risk relative to changes in foreign currency exchange rates between those currencies and the U.S. dollar for our non-directly delivered programs. We use forward contracts that allow us to acquire the foreign currency at a fixed price for a specified point in time to provide a hedge against foreign currency risk. All of our derivatives are cash flow hedges and at September 30, 2013, all contracts qualified for cash flow hedge accounting.

For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income or loss and reclassified into earnings in the same period during which the hedged transaction is recognized in earnings; this is primarily during the second and third quarters of the year when our student travel programs occur. Gains or losses representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.

At September 30, 2013, the following forward contracts were outstanding (in thousands):
 
 
   
Notional Amount
   
Matures
Forward contracts: 
          
     Australian dollar
   
                      2,950
   
January 2014 - July 2014
     Euro
   
                      1,200
   
January 2014 - March 2014
     British pound
   
                         600
   
March 2014 - June 2014
     Canadian dollar
   
                         550
   
March 2014 - June 2014
            
 
The fair value of our forward contracts were as follows (in thousands):

 
September 30, 2013
 
Derivatives designated as
 hedging instruments
 
Total Net
 
Assets
Liabilities
 
Liabilities
Forward contracts
$116 $206 $90
          
   
December 31, 2012
 
 
Derivatives designated as
hedging instruments
 
Total Net
 
Assets
 
Liabilities
 
Assets
Forward contracts
$952 $115 $837

The net asset and liability derivatives at September 30, 2013 and December 31, 2012 are reported in the consolidated balance sheet as current and long-term foreign currency exchange contracts.

Unrealized gains or losses related to derivative securities are recorded in AOCI. The change in unrealized gains or losses related to derivative securities are recorded in other comprehensive income net of income taxes in the period the change occurred. When derivative securities designated as cash flow hedges are used to pay vendors, the effective portion of the hedge is reclassified into the income statement and recorded in net revenue, non-directly delivered programs. When derivative securities designated as cash flow hedges are de-designated, a realized gain or loss is recognized, and the amount is reclassified from AOCI to the income statement and recorded in foreign currency and other expenses. For the three and nine months ended September 30, 2013 and 2012, a summary of AOCI balances and gains (losses) recognized in OCI is as follows (in thousands):
 
 
Accumulated Other Comprehensive Income (Loss)
 
 
Derivative Securities
 
 
Three months ended
  
Nine months ended
 
 
September 30,
  
September 30,
 
 
2013
  
2012
  
2013
  
2012
 
Balance, beginning of period
$(267) $(413) $544  $(1,153)
Change before reclassification
 253   233   (483)  366 
Reclassification into net revenue, non-directly delivered programs
 (67)  679   (185)  1,613 
Reclassification into foreign currency and other expenses
 -   -   -   - 
Effect of incomes taxes
 23   (238)  65   (565)
Other comprehensive income (loss), net of income taxes
 209   674   (603)  1,414 
Balance, end of period
$(58) $261  $(58) $261