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DERIVATIVES
6 Months Ended
Jun. 30, 2020
DERIVATIVES [ABSTRACT]  
DERIVATIVES

(6)DERIVATIVES

Cash Flow Hedges

The Company enters into foreign exchange 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. 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 June 30, 2020, 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 and six months ended June 30, 2020 and 2019 (in thousands and net of tax):

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​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended 

​

Six Months Ended 

​

​

​

June 30,

​

June 30,

​

​

​

2020

    

2019

    

2020

    

2019

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Aggregate unrealized net gain/(loss) at beginning of period

​

$

(3,621)

​

$

(5,217)

​

$

4,182

​

$

(8,278)

​

Add: Net gain/(loss) from change in fair value of cash flow hedges

​

​

3,726

​

​

5,190

​

​

(4,187)

​

​

10,096

​

Less: Net (gain)/loss reclassified to earnings from effective hedges

​

​

58

​

​

(738)

​

​

168

​

​

(2,583)

​

Aggregate unrealized net gain/(loss) at end of period

​

$

163

​

$

(765)

​

$

163

​

$

(765)

​

​

The Company’s foreign exchange cash flow hedging instruments as of June 30, 2020 and December 31, 2019 are summarized as follows (amounts in thousands). All hedging instruments are forward contracts.

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​

​

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​

​

​

​

​

​

​

​

​

​

​

    

Local

    

​

​

    

​

​

    

​

​

 

​

​

Currency

​

U.S. Dollar

​

​

% Maturing

​

​

Contracts

 

​

​

Notional

​

Notional

​

​

in the next

​

​

Maturing

 

As of June 30, 2020

​

Amount

​

Amount

​

​

12 months

​

​

Through

 

Philippine Peso

 

6,955,000

​

 

132,470

(1)  

​

59.9

%  

​

April 2023

​

Mexican Peso

 

1,221,000

​

 

56,033

​

​

52.7

%  

​

December 2022

​

​

​

​

​

$

188,503

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

Local

    

​

​

    

​

​

    

​

​

​

​

​

Currency

​

U.S. Dollar

​

​

​

​

​

     

​

​

​

Notional

​

Notional

 

​

      

 

​

​

​

As of December 31, 2019

​

Amount

​

Amount

 

​

​

​

​

​

​

Philippine Peso

 

7,715,000

​

 

147,654

(1)  

​

​

​

​

​

​

Mexican Peso

 

1,299,500

​

 

61,529

​

​

​

​

​

​

​

​

​

​

​

$

209,183

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(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, 2020 and December 31, 2019.

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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, 2020 and December 31, 2019 the total notional amounts of the Company’s forward contracts used as fair value hedges were $7.4 million and $64.5 million, respectively.

Derivative Valuation and Settlements

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The Company’s derivatives as of June 30, 2020 and December 31, 2019 were as follows (in thousands):

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​

​

​

​

​

​

​

​

​

​

June 30, 2020

 

​

​

Designated

Not Designated

 

​

​

as Hedging

as Hedging

​

Designation:

​

Instruments

Instruments

 

​

    

Foreign

    

Foreign

 

Derivative contract type:

​

Exchange

​

Exchange

 

Derivative classification:

​

Cash Flow

​

Fair Value

​

​

​

​

​

​

​

​

​

Fair value and location of derivative in the Consolidated Balance Sheet:

​

​

​

​

​

​

​

Prepaids and other current assets

​

$

2,962

​

$

—

​

Other long-term assets

​

 

2,296

​

 

—

​

Other current liabilities

​

 

(2,845)

​

 

(21)

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Other long-term liabilities

​

 

(2,188)

​

 

—

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Total fair value of derivatives, net

​

$

225

​

$

(21)

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2019

 

​

​

Designated

Not Designated

 

​

​

as Hedging

as Hedging

​

Designation:

​

Instruments

Instruments

 

​

    

Foreign

    

Foreign

 

Derivative contract type:

​

Exchange

​

Exchange

 

Derivative classification:

​

Cash Flow

​

Fair Value

​

​

​

​

​

​

​

​

​

Fair value and location of derivative in the Consolidated Balance Sheet:

​

​

​

​

​

​

​

Prepaids and other current assets

​

$

3,467

​

$

205

​

Other long-term assets

​

 

3,525

​

 

—

​

Other current liabilities

​

 

(1,223)

​

 

(107)

​

Other long-term liabilities

​

 

(95)

​

 

—

​

Total fair value of derivatives, net

​

$

5,674

​

$

98

​

​

The effects of derivative instruments on the Consolidated Statements of Comprehensive Income (Loss) for the three months ended June 30, 2020 and 2019 were as follows (in thousands):

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​

​

​

​

​

​

​

​

​

Three Months Ended June 30,

 

​

​

2020

​

2019

 

​

​

Designated as Hedging

 

Designation:

​

Instruments

 

Derivative contract type:

​

Foreign Exchange

 

Derivative classification:

 

Cash Flow

​

​

​

​

​

​

​

​

​

Amount of gain or (loss) recognized in Other comprehensive income (loss) - effective portion, net of tax

​

$

58

​

$

(738)

​

​

​

​

​

​

​

​

​

Amount and location of net gain or (loss) reclassified from Accumulated OCI to income - effective portion:

​

​

​

​

​

​

​

Revenue

​

$

79

​

$

(1,011)

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended June 30,

 

​

​

2020

​

2019

 

Designation:

    

Not Designated as Hedging Instruments

​

Derivative contract type:

 

Foreign Exchange

​

Derivative classification:

 

Fair Value

​

​

​

​

​

​

​

​

​

Amount and location of net gain or (loss) recognized in the Consolidated Statement of Comprehensive Income (Loss):

​

​

​

​

​

​

​

Other income (expense), net

 

$

(14)

 

$

(1,465)

​

​

The effects of derivative instruments on the Consolidated Statements of Comprehensive Income (Loss) for the six months ended June 30, 2020 and 2019 were as follows (in thousands):

​

​

​

​

​

​

​

​

​

​

​

Six Months Ended June 30,

​

​

​

2020

​

2019

​

​

​

Designated as Hedging

​

Designation:

​

Instruments

​

Derivative contract type:

​

Foreign Exchange

​

Derivative classification:

 

Cash Flow

​

​

​

​

​

​

​

​

​

Amount of gain or (loss) recognized in Other comprehensive income (loss) - effective portion, net of tax

​

$

168

​

$

(2,583)

​

​

​

​

​

​

​

​

​

Amount and location of net gain or (loss) reclassified from Accumulated OCI to income - effective portion:

​

​

​

​

​

​

​

Revenue

​

$

230

​

$

(3,538)

​

​

​

​

​

​

​

​

​

​

​

​

Six Months Ended June 30,

​

​

​

2020

​

2019

​

Designation:

 

Not Designated as Hedging Instruments

​

Derivative contract type:

 

Foreign Exchange

​

Derivative classification:

 

Fair Value

​

​

​

​

​

​

​

​

​

Amount and location of net gain or (loss) recognized in the Consolidated Statement of Comprehensive Income (Loss):

​

​

​

​

​

​

​

Other income (expense), net

 

$

(343)

 

$

(1,217)

​

​