XML 61 R13.htm IDEA: XBRL DOCUMENT v2.4.0.6
DERIVATIVES
 3 Months Ended
Mar. 31, 2013
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 considers, among other factors, the creditworthiness of these counterparties. Conversely, the fair value of derivative liabilities reflects the Company's creditworthiness. As of March 31, 2013, 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 other comprehensive income (loss) for the three months ended March 31, 2013 and 2012 (amounts in thousands and net of tax):

 Three Months Ended March 31,
 2013 2012
      
Aggregate unrealized net gain/(loss) at beginning of year$ 9,559 $ (5,852)
Add: Net gain/(loss) from change in fair value of cash flow hedges  4,099   7,071
Less: Net (gain)/loss reclassified to earnings from effective hedges  (1,919)   26
Aggregate unrealized net gain/(loss) at end of period$ 11,739 $ 1,245
      

The Company's foreign exchange cash flow hedging instruments as of March 31, 2013 and December 31, 2012 are summarized as follows (amounts in thousands). All hedging instruments are forward contracts unless noted otherwise.

As of March 31, 2013 Local Currency Notional Amount U.S. Dollar Notional Amount % Maturing in the Next 12 Months Contracts Maturing Through
Canadian Dollar  20,750 $ 20,172   45.8% June 2015
Philippine Peso  11,970,000   280,827 (1)  41.5% December 2016
Mexican Peso  1,130,000   80,569   50.6% December 2015
British Pound Sterling  5,122   7,942 (2)  76.6% June 2014
New Zealand Dollar  199   150   100.0% June 2013
    $ 389,660      

As of December 31, 2012 Local Currency Notional Amount U.S. Dollar Notional Amount      
Canadian Dollar  7,750 $ 7,407      
Philippine Peso  11,710,000   271,970 (1)     
Mexican Peso  1,320,500   94,530      
British Pound Sterling  3,518   5,575 (2)     
New Zealand Dollar  398   300      
    $ 379,782      
            

(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 March 31, 2013 and December 31, 2012.

(2)       Includes contracts to purchase British pound sterling in exchange for Euros, which are translated into equivalent U.S. dollars on March 31, 2013 and December 31, 2012.

The Company's interest rate swap arrangements as of March 31, 2013 and December 31, 2012 were as follows:

  Notional Amount Variable Rate Received Fixed Rate Paid Contract Commencement Date Contract Maturity Date
As of March 31, 2013 $25 million 1 - month LIBOR   2.55% April 2012 April 2016
   15 million 1 - month LIBOR   3.14% May 2012 May 2017
  $40 million          
              
As of December 31, 2012 $25 million 1 - month LIBOR   2.55% April 2012 April 2016
   15 million 1 - month LIBOR   3.14% May 2012 May 2017
  $40 million          
              

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 March 31, 2013 and December 31, 2012 the total notional amount of the Company's forward contracts used as fair value hedges were $212.2 million and $189.3 million, respectively.

Embedded Derivatives

In addition to hedging activities, the Company's foreign subsidiary in Argentina was party to U.S. dollar denominated lease contracts which the Company determined contain embedded derivatives. As such, the Company bifurcates the embedded derivative features of the lease contracts and valued these features as foreign currency derivatives. As of March 31, 2013 and December 31, 2012, the fair value of the embedded derivative was $0.2 million and $0.3 million, respectively, 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 March 31, 2013 and December 31, 2012 were as follows (amounts in thousands):

  March 31, 2013
  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$ 13,859 $ -  $ 237 $ -
Other long-term assets  8,480   -    -    -
Other current liabilities  (238)   (1,111)   (355)   (157)
Other long-term liabilities  (67)   (1,703)   -    (52)
 Total fair value of derivatives, net$ 22,034 $ (2,814) $ (118) $ (209)
             
  December 31, 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$ 11,421 $ -  $ 11 $ -
Other long-term assets  7,619   -    -    -
Other current liabilities  (157)   (1,032)   (476)   (59)
Other long-term liabilities  (65)   (1,955)   -    (219)
 Total fair value of derivatives, net$ 18,818 $ (2,987) $ (465) $ (278)
             

The effects of derivative instruments on the Consolidated Statements of Comprehensive Income for the three months ended March 31, 2013 and 2012 were as follows (amounts in thousands):

  Three Months Ended March 31,
  2013 2012
  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:$ 4,178 $ (79) $ 7,234 $ (163)
             
Amount and location of net gain or (loss) reclassified           
 from accumulated OCI to income - effective portion:           
Revenue$ 3,460 $ -  $ (43) $ -
Interest Expense  -    (257)   -    -
             
Amount and location of net gain or (loss) reclassified           
 from accumulated OCI to income - ineffective portion           
 and amount excluded from effectiveness testing:           
Other income (expense), net$ -  $ -  $ -  $ -
             

  Three Months Ended March 31,
  2013 2012
  Not Designated as Hedging Instruments Not Designated as Hedging Instruments
Derivative contracts:Foreign ExchangeLeases Foreign ExchangeLeases
Derivative classification:Option and Forward ContractsFair ValueEmbedded Derivative Option and Forward ContractsFair ValueEmbedded Derivative
               
Amount and location of net gain or (loss)             
 recognized in the Consolidated Statement             
 of Comprehensive Income:             
Costs of services$ - $ - $ (69) $ - $ - $ -
Other income (expense), net$ - $ 1,438$ -  $ - $ 2,169$ -