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DERIVATIVES | 6 Months Ended
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Jun. 30, 2012
DERIVATIVES [ABSTRACT] |
DERIVATIVES | (6) DERIVATIVES Cash Flow Hedges The Company enters into foreign exchange and interest rate related derivatives. Foreign exchange derivatives entered into consist of forward and option contracts to reduce the Company's exposure to foreign currency exchange rate fluctuations that are associated with forecasted revenue earned in foreign locations. Interest rate derivatives consist of interest rate swaps to reduce the Company's exposure to interest rate fluctuations associated with its variable rate debt. Upon proper qualification, these contracts are designated as cash flow hedges. It is the Company's policy to only enter into derivative contracts with investment grade counterparty financial institutions, and correspondingly, the fair value of derivative assets consider, among other factors, the creditworthiness of these counterparties. Conversely, the fair value of derivative liabilities reflects the Company's creditworthiness. As of June 30, 2012, the Company has not experienced, nor does it anticipate, any issues related to derivative counterparty defaults. The following table summarizes the aggregate unrealized net gain or loss in Accumulated o ther c omprehensive i ncome (loss) for the three and six months ended June 30, 2012 and 2011 (amounts in thousands and net of tax):
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2012 |  | 2011 |  | 2012 |  | 2011
Aggregate unrealized net gain (loss) at beginning of period | $ | 1,245 |  | $ | 5,634 |  | $ | (5,852) |  | $ | 7,091
Add: Net gain/(loss) from change in fair value of cash flow hedges |  | 2,024 |  |  | (3,189) |  |  | 9,095 |  |  | (2,431)
Less: Net (gain)/loss reclassified to earnings from effective hedges |  | (305) |  |  | (1,934) |  |  | (279) |  |  | (4,149)
Aggregate unrealized net gain (loss) at end of period | $ | 2,964 |  | $ | 511 |  | $ | 2,964 |  | $ | 511
The Company's foreign exchange cash flow hedging instruments as of June 30, 2012 and December 31, 2011 are summarized as follows (amounts in thousands). All hedging instruments are forward contracts unless noted otherwise.
As of June 30, 2012 |  | Local Currency Notional Amount |  | U.S. Dollar Notional Amount |  | % Maturing in the Next 12 Months |  | Contracts Maturing Through
Canadian Dollar |  | 15,250 |  | $ | 14,740 |  |  | 78.7 | % |  | March 2014
Costa Rican Colon |  | 500,000 |  |  | 963 |  |  | 100.0 | % |  | August 2012
Philippine Peso |  | 11,270,000 |  |  | 255,746 | (1) |  | 56.9 | % |  | December 2015
Mexican Peso (Forwards) |  | 1,322,500 |  |  | 95,791 |  |  | 50.5 | % |  | December 2015
Mexican Peso (Collars) |  | 70,149 |  |  | 6,000 | (3) |  | 100.0 | % |  | December 2012
British Pound Sterling |  | 6,162 |  |  | 9,628 | (2) |  | 66.6 | % |  | June 2014
New Zealand Dollars |  | 726 |  |  | 550 |  |  | 100.0 | % |  | June 2013
|  |  |  | $ | 383,418 |  |  |  |  |  |
As of December 31, 2011 |  | Local Currency Notional Amount |  | U.S. Dollar Notional Amount |  |  |  |  |  |
Canadian Dollar |  | 25,750 |  | $ | 25,137 |  |  |  |  |  |
Costa Rican Colon |  | 2,000,000 |  |  | 3,874 |  |  |  |  |  |
Philippine Peso |  | 13,304,000 |  |  | 301,361 | (1) |  |  |  |  |
Mexican Peso (Forwards) |  | 1,081,000 |  |  | 80,735 |  |  |  |  |  |
Mexican Peso (Collars) |  | 140,298 |  |  | 12,000 | (4) |  |  |  |  |
British Pound Sterling |  | 8,808 |  |  | 13,822 | (2) |  |  |  |  |
|  |  |  | $ | 436,929 |  |  |  |  |  |
(1) Includes contracts to purchase Philippine pesos in exchange for New Zealand dollars and Australian dollars, which are translated into equivalent U.S. dollars on June 30, 2012 and December 31, 2011. (2) Includes contracts to purchase British pound sterling in exchange for Euros, which are translated into equivalent U.S. dollars on June 30, 2012 and December 31, 2011. (3) The Mexican peso collars include call options with a floor total of MXN 70.1 million and put options with a cap total of MXN (81.8 million) as of June 30, 2012. (4) The Mexican peso collars include call options with a floor total of MXN 140.3 million and put options with a cap total of MXN (157.0 million) as of December 31, 2011. The Company's interest rate swap arrangement s as of June 30, 2012 and December 31, 2011 were as follows:
|  | Notional Amount (millions) |  | Variable Rate Received |  | Fixed Rate Paid |  | Contract Commencement Date |  | Contract Maturity Date
As of June 30, 2012 |  | $ | 25.0 |  | 1 - month LIBOR |  |  | 2.55 | % |  | April 2012 |  | April 2016
|  |  | 15.0 |  | 1 - month LIBOR |  |  | 3.14 | % |  | May 2012 |  | May 2017
|  | $ | 40.0 |  |  |  |  |  |  |  |  |  |
As of December 31, 2011 |  | $ | 25.0 |  | 1 - month LIBOR |  |  | 2.55 | % |  | April 2012 |  | April 2016
|  |  | 15.0 |  | 1 - month LIBOR |  |  | 3.14 | % |  | May 2012 |  | May 2017
|  | $ | 40.0 |  |  |  |  |  |  |  |  |  |
Fair Value Hedges The Company enters into foreign exchange forward contracts to economically hedge against foreign currency exchange gains and losses on certain receivables and payables of the Company's foreign operations. Changes in the fair value of derivative instruments designated as fair value hedges are recognized in earnings in Other income (expense), net. As of June 30, 2012 and December 31, 2011 the total notional amount of the Company's forward contracts used as fair value hedges were $111.3 million and $49.8 million, respectively. Embedded Derivatives In addition to hedging activities, the Company's foreign subsidiar y in Argentina wa s part y to U.S. dollar denominated lease contracts which the Company determined contain embedded derivatives. As such, the Company bifurcate d the embedded derivative features of the lease contracts and value d these features as foreign currency derivatives. As of June 30, 2012, the fair value of the embedded derivatives was $0.3 million and was included in Other current liabilities and Other long-term liabilities in the accompanying Consolidated Balance Sheets as shown in the table below. Derivative Valuation and Settlements The Company's derivatives as of June 30, 2012 and December 31, 2011 were as follows (amounts in thousands):
|  | June 30, 2012
|  | Designated as Hedging Instruments |  | Not Designated as Hedging Instruments
Derivative contracts: | Foreign Exchange |  | Interest Rate |  | Foreign Exchange |  | Leases
Derivative classification: | Cash Flow |  | Cash Flow |  | Fair Value |  | Embedded Derivative
Fair value and location of derivative in the |  |  |  |  |  |  |  |  |  |  |
| Consolidated Balance Sheet: |  |  |  |  |  |  |  |  |  |  |
Prepaids and other current assets | $ | 6,288 |  | $ | - |  | $ | 900 |  | $ | -
Other long-term assets |  | 4,140 |  |  | - |  |  | - |  |  | -
Other current liabilities |  | (2,047) |  |  | (997) |  |  | - |  |  | (101)
Other long-term liabilities |  | (552) |  |  | (1,877) |  |  | - |  |  | (165)
| Total fair value of derivatives, net | $ | 7,829 |  | $ | (2,874) |  | $ | 900 |  | $ | (266)
|  | December 31, 2011
|  | Designated as Hedging Instruments |  | Not Designated as Hedging Instruments
Derivative contracts: | Foreign Exchange |  | Interest Rate |  | Foreign Exchange |  | Leases
Derivative classification: | Cash Flow |  | Cash Flow |  | Fair Value |  | Embedded Derivative
Fair value and location of derivative in |  |  |  |  |  |  |  |  |  |  |
| the Consolidated Balance Sheet: |  |  |  |  |  |  |  |  |  |  |
Prepaids and other current assets | $ | 2,325 |  | $ | - |  | $ | 12 |  | $ | -
Other long-term assets |  | 1,119 |  |  | - |  |  | - |  |  | -
Other current liabilities |  | (7,828) |  |  | - |  |  | (341) |  |  | -
Other long-term liabilities |  | (2,786) |  |  | (2,263) |  |  | - |  |  | -
| Total fair value of derivatives, net | $ | (7,170) |  | $ | (2,263) |  | $ | (329) |  | $ | -
The effect s of derivative instruments on the Consolidated Statements of Comprehensive Income for the three months ended June 30, 2012 and 2011 w ere as follows (amounts in thousands):
|  | Three Months Ended June 30,
|  | 2012 |  | 2011
|  | Designated as Hedging Instruments |  | Designated as Hedging Instruments
Derivative contracts: | Foreign Exchange |  | Interest Rate |  | Foreign Exchange |  | Interest Rate
Derivative classification: | Cash Flow |  | Cash Flow |  | Cash Flow |  | Cash Flow
Amount of gain or (loss) recognized in other |  |  |  |  |  |  |  |  |  |  |
| comprehensive income - effective portion, net of tax: | $ | 2,337 |  | $ | (313) |  | $ | (2,673) |  | $ | (516)
Amount and location of net gain or (loss) reclassified |  |  |  |  |  |  |  |  |  |  |
| from accumulated OCI to income - effective portion: |  |  |  |  |  |  |  |  |  |  |
Revenue | $ | 692 |  | $ | - |  | $ | 3,224 |  | $ | -
Interest expense |  | - |  |  | (183) |  |  | - |  |  | -
|  | Three Months Ended June 30,
|  | 2012 |  | 2011
|  | Not Designated as Hedging Instruments |  | Not Designated as Hedging Instruments
Derivative contracts: | Foreign Exchange | Leases |  | Foreign Exchange | Leases
Derivative classification: | Option and Forward Contracts | Fair Value | Embedded Derivative |  | Option and Forward Contracts | Fair Value | Embedded Derivative
Amount and location of net gain or (loss) recognized in the |  |  |  |  |  |  |  |  |  |  |  |
| Consolidated Statement of Comprehensive Income: |  |  |  |  |  |  |  |  |  |  |  |
Costs of services | $ | - | $ | - | $ | (266) |  | $ | - | $ | - | $ | 78
Other income (expense), net | $ | - | $ | 1,686 | $ | - |  | $ | - | $ | (207) | $ | -
The effect s of derivative instruments on the Consolidated Statements of Comprehensive Income for the six months ended June 30, 2012 and 2011 w ere as follows (amounts in thousands):
|  | Six Months Ended June 30,
|  | 2012 |  | 2011
|  | Designated as Hedging Instruments |  | Designated as Hedging Instruments
Derivative contracts: | Foreign Exchange |  | Interest Rate |  | Foreign Exchange |  | Interest Rate
Derivative classification: | Cash Flow |  | Cash Flow |  | Cash Flow |  | Cash Flow
Amount of gain or (loss) recognized in other |  |  |  |  |  |  |  |  |  |  |
| comprehensive income - effective portion, net of tax: | $ | 9,571 |  | $ | (476) |  | $ | (2,104) |  | $ | (327)
Amount and location of net gain or (loss) reclassified |  |  |  |  |  |  |  |  |  |  |
| from accumulated OCI to income - effective portion: |  |  |  |  |  |  |  |  |  |  |
Revenue | $ | 649 |  | $ | - |  | $ | 6,915 |  | $ | -
Interest expense | $ | - |  | $ | (183) |  | $ | - |  | $ | -
|  | Six Months Ended June 30,
|  | 2012 |  | 2011
|  | Not Designated as Hedging Instruments |  | Not Designated as Hedging Instruments
Derivative contracts: | Foreign Exchange | Leases |  | Foreign Exchange | Leases
Derivative classification: | Option and Forward Contracts | Fair Value | Embedded Derivative |  | Option and Forward Contracts | Fair Value | Embedded Derivative
Amount and location of net gain or (loss) recognized in the |  |  |  |  |  |  |  |  |  |  |  |  |
| Consolidated Statement of Comprehensive Income: |  |  |  |  |  |  |  |  |  |  |  |  |
Costs of services | $ | - | $ | - | $ | (266) |  | $ | - | $ | - | $ | 122
Other income (expense), net | $ | - | $ | 3,855 | $ | - |  | $ | - | $ | 503 | $ | -

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- Definition The entire disclosure for the entity's entire derivative instruments and hedging activities. Describes an entity's risk management strategies, derivatives in hedging activities and non-hedging derivative instruments, the assets, obligations, liabilities, revenues and expenses arising therefrom, and the amounts of and methodologies and assumptions used in determining the amounts of such items. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 44 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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