Financial Derivatives

6 Months Ended

Jun. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Financial Derivatives

Note 5. Financial Derivatives

Cash Flow Hedges – The Company has derivative assets and liabilities relating to outstanding forward contracts and options, designated as cash flow hedges, as defined under ASC 815 “Derivatives and Hedging” (“ASC 815”), consisting of Philippine Peso, Costa Rican Colon, Hungarian Forint and Romanian Leu contracts. These contracts are entered into to protect against the risk that the eventual cash flows resulting from such transactions will be adversely affected by changes in exchange rates.

The deferred gains (losses) and related taxes on the Company’s cash flow hedges recorded in “Accumulated other comprehensive income (loss)” (“AOCI”) in the accompanying Condensed Consolidated Balance Sheets are as follows (in thousands):

	June 30, 2015		December 31, 2014
Deferred gains (losses) in AOCI	$	946	$	(157	)
Tax on deferred gains (losses) in AOCI		11		46
Deferred gains (losses) in AOCI, net of taxes	$	957	$	(111	)
Deferred gains (losses) expected to be reclassified to “Revenues” from AOCI during the next twelve months	$	946

Deferred gains (losses) and other future reclassifications from AOCI will fluctuate with movements in the underlying market price of the forward contracts and options.

Net Investment Hedge – During the six months ended June 30, 2015 and 2014, the Company entered into foreign exchange forward contracts to hedge its net investment in a foreign operation, as defined under ASC 815. The purpose of these derivative instruments is to protect the Company’s interests against the risk that the net assets of certain foreign subsidiaries will be adversely affected by changes in exchange rates and economic exposures related to the Company’s foreign currency-based investments in these subsidiaries.

Non-Designated Hedges – The Company also periodically enters into foreign currency hedge contracts that are not designated as hedges as defined under ASC 815. The purpose of these derivative instruments is to protect the Company’s interests against adverse foreign currency moves relating primarily to intercompany receivables and payables, and other assets and liabilities that are denominated in currencies other than the Company’s subsidiaries’ functional currencies. These contracts generally do not exceed 180 days in duration.

The Company had the following outstanding foreign currency forward contracts and options (in thousands):

	As of June 30, 2015			As of December 31, 2014
Contract Type	Notional Amount in USD		Settle Through Date	Notional Amount in USD		Settle Through Date
Cash flow hedges: (1)
Options:
Philippine Pesos	$	81,000	June 2016	$	73,000	December 2015
Forwards:
Philippine Pesos		1,000	October 2015		9,000	March 2015
Costa Rican Colones		45,900	March 2016		51,600	October 2015
Hungarian Forints		1,377	December 2015		—	—
Romanian Leis		5,194	December 2015		10,414	December 2015
Net investment hedges: (2)
Forwards:
Euros		63,470	March 2016		51,648	March 2016
Non-designated hedges: (3)
Forwards		58,243	December 2015		64,541	March 2015

⁽¹⁾ Cash flow hedge as defined under ASC 815. Purpose is to protect against the risk that eventual cash flows resulting from such transactions will be adversely affected by changes in exchange rates.

⁽²⁾ Net investment hedge as defined under ASC 815. Purpose is to protect against the risk that the net assets of certain of our international subsidiaries will be adversely affected by changes in exchange rates and economic exposures related to our foreign currency-based investments in these subsidiaries.

⁽³⁾ Foreign currency hedge contract not designated as a hedge as defined under ASC 815. Purpose is to reduce the effects on the Company’s operating results and cash flows from fluctuations caused by volatility in currency exchange rates, primarily related to intercompany receivables and payables, and cash held in non-functional currencies.

Master netting agreements exist with each respective counterparty to reduce credit risk by permitting net settlement of derivative positions. In the event of default by the Company or one of its counterparties, these agreements include a set-off clause that provides the non-defaulting party the right to net settle all derivative transactions, regardless of the currency and settlement date. The maximum amount of loss due to credit risk that, based on gross fair value, the Company would incur if parties to the derivative transactions that make up the concentration failed to perform according to the terms of the contracts was $10.7 million and $5.5 million as of June 30, 2015 and December 31, 2014, respectively. After consideration of these netting arrangements and offsetting positions by counterparty, the total net settlement amount as it relates to these positions are asset positions of $10.4 million and $4.4 million as of June 30, 2015 and December 31, 2014, respectively, and liability positions of $0.2 million and $0.1 million as of June 30, 2015 and December 31, 2014, respectively.

Although legally enforceable master netting arrangements exist between the Company and each counterparty, the Company has elected to present the derivative assets and derivative liabilities on a gross basis in the accompanying Condensed Consolidated Balance Sheets. Additionally, the Company is not required to pledge, nor is it entitled to receive, cash collateral related to these derivative transactions.

The following tables present the fair value of the Company’s derivative instruments included in the accompanying Condensed Consolidated Balance Sheets (in thousands):

	Derivative Assets
	June 30, 2015		December 31, 2014
	Fair Value		Fair Value
Derivatives designated as cash flow hedging instruments under ASC 815:
Foreign currency forward and option contracts (1)	$	1,872	$	974
Derivatives designated as net investment hedging instruments under ASC 815:
Foreign currency forward contracts (1)		8,570		—
Foreign currency forward contracts (2)		—		4,060
		10,442		5,034
Derivatives not designated as hedging instruments under ASC 815:
Foreign currency forward contracts (1)		262		515
Total derivative assets	$	10,704	$	5,549
	Derivative Liabilities
	June 30, 2015		December 31, 2014
	Fair Value		Fair Value
Derivatives designated as cash flow hedging instruments under ASC 815:
Foreign currency forward and option contracts (3)	$	123	$	406
Derivatives not designated as hedging instruments under ASC 815:
Foreign currency forward contracts (3)		348		855
Total derivative liabilities	$	471	$	1,261

⁽¹⁾ Included in “Other current assets” in the accompanying Condensed Consolidated Balance Sheets.

⁽²⁾ Included in “Deferred charges and other assets” in the accompanying Condensed Consolidated Balance Sheets.

⁽³⁾ Included in “Other accrued expenses and current liabilities” in the accompanying Condensed Consolidated Balance Sheets.

The following tables present the effect of the Company’s derivative instruments included in the accompanying Condensed Consolidated Financial Statements for the three months ended June 30, 2015 and 2014 (in thousands):

	Gain (Loss) Recognized in AOCI on Derivatives (Effective Portion)					Gain (Loss) Reclassified From Accumulated AOCI Into “Revenues” (Effective Portion)					Gain (Loss) Recognized in “Revenues” on Derivatives (Ineffective Portion and Amount Excluded  from Effectiveness Testing)
	June 30,					June 30,					June 30,
	2015			2014		2015		2014			2015		2014
Derivatives designated as cash flow hedging instruments under ASC 815:
Foreign currency forward and option contracts	$	357		$	2,475	$	739	$	(1,755	)	$	1	$	(1	)
Derivatives designated as net investment hedging instruments under ASC 815:
Foreign currency forward contracts		(1,848	)		108		—		—			—		—
	$	(1,491	)	$	2,583	$	739	$	(1,755	)	$	1	$	(1	)
						Statement of Operations Location					Gain (Loss) Recognized on Derivatives
											June 30,
											2015		2014
Derivatives not designated as hedging instruments under ASC 815:
Foreign currency forward contracts							Other income and (expense)				$	67	$	(1,331	)
Foreign currency forward contracts							Revenues					4		—
											$	71	$	(1,331	)

The following tables present the effect of the Company’s derivative instruments included in the accompanying Condensed Consolidated Financial Statements for the six months ended June 30, 2015 and 2014 (in thousands):

	Gain (Loss) Recognized in AOCI on Derivatives (Effective Portion)					Gain (Loss) Reclassified From Accumulated AOCI Into “Revenues” (Effective Portion)					Gain (Loss) Recognized in “Revenues” on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)
	June 30,					June 30,					June 30,
	2015		2014			2015		2014			2015			2014
Derivatives designated as cash flow hedging instruments under ASC 815:
Foreign currency forward and option contracts	$	2,412	$	(2,543	)	$	1,328	$	(4,129	)	$	2		$	(4	)
Derivatives designated as net investment hedging instruments under ASC 815:
Foreign currency forward contracts		4,510		162			—		—			—			—
	$	6,922	$	(2,381	)	$	1,328	$	(4,129	)	$	2		$	(4	)
						Statement of Operations Location					Gain (Loss) Recognized on Derivatives
											June 30,
											2015			2014
Derivatives not designated as hedging instruments under ASC 815:
Foreign currency forward contracts							Other income and (expense)				$	(97	)	$	(608	)
Foreign currency forward contracts							Revenues					4			—
											$	(93	)	$	(608	)