Derivatives

The Company's use of derivative financial instruments is primarily limited to the utilization of interest rate swaps, interest rate caps and foreign exchange contracts. The principal objective of such financial instruments is to minimize the risks and/or costs associated with the Company's operating and financial structure and to manage its exposure to interest rates and foreign exchange rates. Derivatives not designated as hedges are not speculative and are used to manage the Company's exposure to interest rate movements, foreign exchange rate movements, and other identified risks, but may not meet the strict hedge accounting requirements.

The table below presents the fair value of the Company's derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of June 30, 2014 and December 31, 2013 ($ in thousands):



	Derivative Assets as of						Derivative Liabilities as of
	June 30, 2014			December 31, 2013			June 30, 2014			December 31, 2013
Derivative	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Foreign exchange contracts	Other Assets	$	333	Other Assets	$	1,418	Other Liabilities	$	2,133	Other Liabilities	$	1,653
Interest rate swaps	Other Assets	159		Other Assets	650		N/A	—		N/A	—
Interest rate cap	Other Assets	5,617		Other Assets	9,107		N/A	—		N/A	—
Total		$	6,109		$	11,175		$	2,133		$	1,653

The tables below present the effect of the Company's derivative financial instruments on the Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2014 and 2013 ($ in thousands):



Derivatives Designated in Hedging Relationships	Location of Gain (Loss) Recognized in Income	Amount of Gain (Loss) Recognized in Accumulated Other Comprehensive Income (Effective Portion)			Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Earnings (Effective Portion)			Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Earnings (Ineffective Portion)
For the Three Months Ended June 30, 2014
Interest rate cap	Other Expense	$	(2,022	)	$	—		$	(3,634	)
Interest rate swaps	Interest Expense	(693		)	(39		)	N/A
Foreign exchange contracts	Other Expense	(127		)	—			N/A
For the Three Months Ended June 30, 2013
Interest rate swap	Interest Expense	844			79			N/A
Foreign exchange contracts	Other Expense	344			—			N/A
For the six months ended June 30, 2014
Interest rate cap	Other Expense	(2,984		)	—			(3,634		)
Interest rate swaps	Interest Expense	(1,041		)	96			N/A
Foreign exchange contracts	Other Expense	(579		)	—			N/A
For the six months ended June 30, 2013
Interest rate swap	Interest Expense	882			151			N/A
Foreign exchange contracts	Other Expense	344			—			N/A

Foreign Exchange Contracts—The Company is exposed to fluctuations in foreign exchange rates on investments it holds in foreign entities. The Company uses foreign exchange contracts to hedge its exposure to changes in foreign exchange rates on its foreign investments. Foreign exchange contracts involve fixing the U.S. dollar ("USD") to the respective foreign currency exchange rate for delivery of a specified amount of foreign currency on a specified date. The foreign exchange contracts are typically cash settled in USD for their fair value at or close to their settlement date.

For derivatives designated as net investment hedges, the effective portion of changes in the fair value of the derivatives are reported in Accumulated Other Comprehensive Income as part of the cumulative translation adjustment. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. Amounts are reclassified out of Accumulated Other Comprehensive Income into earnings when the hedged foreign entity is either sold or substantially liquidated. In January 2014, the Company entered into a foreign exchange contract to hedge its exposure in a subsidiary whose functional currency is Indian rupee ("INR"). The foreign exchange contract replaced an existing contract which matured in January 2014. As of June 30, 2014, the Company had the following outstanding foreign currency derivatives that were used to hedge its net investments in foreign operations that were designated ($ in thousands):



Derivative Type	Notional Amount		Notional (USD Equivalent)		Maturity
Sells INR/Buys USD Forward	₨	456,000	$	7,576	June 2015

For derivatives not designated as net investment hedges, the changes in the fair value of the derivatives are reported in the Company's Consolidated Statements of Operations within "Other Expense." As of June 30, 2014, the Company had the following outstanding foreign currency derivatives that were used to hedge its net investments in foreign operations that were not designated ($ in thousands):



Derivative Type	Notional Amount		Notional (USD Equivalent)		Maturity
Sells euro ("EUR")/Buys USD Forward	€	46,950	$	64,287	July 2014
Sells pound sterling ("GBP")/Buys USD Forward	£	3,800	$	6,501	July 2014
Sells Canadian dollar ("CAD")/Buys USD Forward	C$	40,500	$	37,966	July 2014



		Amount of Gain or (Loss) Recognized in Income
	Location of Gain or (Loss) Recognized in Income	For the Three Months Ended June 30,						For the Six Months Ended June 30,
Derivatives not Designated in Hedging Relationships	Location of Gain or (Loss) Recognized in Income	2014			2013			2014		2013
Foreign exchange contracts	Other Expense	$	(751	)	$	(414	)	$	747	$	9,742

The Company marks its foreign investments each quarter based on current exchange rates and records the gain or loss through "Other expense" on its Consolidated Statements of Operations for loan investments or "Accumulated other comprehensive income (loss)," on its Consolidated Balance Sheets for net investments in foreign subsidiaries. The Company recorded net gains related to foreign investments of $0.0 million and $0.4 million during the three and six months ended June 30, 2014, respectively, and net losses of $0.4 million and $0.4 million during the three and six months ended June 30, 2013, respectively, in its Consolidated Statements of Operations.

Interest Rate Hedges—For derivatives designated as interest rate hedges, the effective portion of changes in the fair value of the derivatives are reported in Accumulated Other Comprehensive Income. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. In October 2012, the Company entered into an interest rate swap to convert its variable rate debt to fixed rate on a $28.0 million secured term loan maturing in 2019. As of June 30, 2014, the Company had the following outstanding interest rate swap that was used to hedge its variable rate debt that was designated ($ in thousands):

Derivative Type

Notional

Amount

Variable Rate

Fixed Rate

Effective Date

Maturity

Interest rate swap

27,708

LIBOR + 2.00%

3.47%

October 2012

November 2019

For derivatives not designated as interest rate hedges, the changes in the fair value of the derivatives are reported in the Company's Consolidated Statements of Operations within "Other Expense." In August 2013, the Company entered into an interest rate cap agreement to reduce exposure to expected increases in future interest rates and the resulting payments associated with variable interest rate debt. In June 2014, in connection with the full repayment and termination of the Company's February 2013 Secured Credit Facility referenced in Note 8, the Company realized amounts in earnings from other comprehensive loss as a portion of a hedge related to the Company's variable rate debt was no longer expected to be highly effective. The amount realized was a loss of $3.6 million recorded as a component of "Other expense" in the Company's Consolidated Statements of Operations. As of June 30, 2014, the Company had the following outstanding interest rate cap that was used to hedge its variable rate debt that was not designated ($ in thousands):

Derivative Type

Notional

Amount

Variable Rate

Fixed Rate

Effective Date

Maturity

Interest rate cap

500,000

LIBOR

1.00%

July 2014

July 2017

Over the next 12 months, the Company expects that $(0.3) million related to terminated cash flow hedges will be reclassified from "Accumulated other comprehensive income (loss)" into earnings and $0.4 million relating to other cash flow hedges will be reclassified from "Accumulated other comprehensive income (loss)" into interest expense.

Credit Risk-Related Contingent Features—The Company has agreements with each of its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.

In connection with its foreign currency derivatives, as of June 30, 2014 and December 31, 2013, the Company has posted collateral of $6.2 million and $7.2 million, respectively, which is included in "Restricted cash" on the Company's Consolidated Balance Sheets.