DERIVATIVE INSTRUMENTS

6 Months Ended

Jun. 30, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

7. DERIVATIVE INSTRUMENTS

We use derivatives to partially offset our business exposure to foreign currency exchange risk. We enter into foreign currency exchange contracts to hedge our anticipated operating commitments that are denominated in foreign currencies. The contracts cover periods commensurate with expected exposure, generally three to nine months, and are principally unsecured foreign exchange contracts. The market risk exposure is essentially limited to risk related to currency rate movements. We operate in Canada, the Philippines, Costa Rica and Honduras. The functional currencies of our Canadian and Philippine operations are the Canadian dollar and the Philippine peso, respectively, which are used to pay labor and other operating costs in those countries. However, our client contracts primarily generate revenues paid to us in U.S. dollars. In Costa Rica and Honduras, our functional currency is the U.S. dollar and the majority of our costs are denominated in U.S. dollars. We have elected to follow cash flow hedge accounting in order to associate the results of the hedges with forecasted future expenses. The current mark-to-market gain or loss is recorded in accumulated other comprehensive income (“AOCI”) as a component of stockholders’ equity and will be re-classified to operations as the forecasted expenses are incurred, typically within one year. During the three months ended June 30, 2012 and 2011, our cash flow hedges were highly effective and there were no amounts charged to the Condensed Consolidated Statements of Operations for hedge ineffectiveness.

During the three and six months ended June 30, 2012, we entered into deliverable forward contracts with respect to the Canadian dollar for a notional amount of 0 and 11,800, respectively. The Company entered into foreign currency option contracts for the Canadian dollar during the three months ended June 30, 2012. The notional principal of foreign currency option contracts to purchase U.S. dollars with foreign currencies was $8,764 at June 30, 2012. The notional principal of foreign exchange contracts to sell U.S. dollars for foreign currencies were $9,180 at June 30, 2012. The Company uses both types of contracts withCanadian dollars to hedge our foreign currency risk with respect to labor costs in Canada. We entered into non-deliverable forward contracts with respect to the Philippine peso for a notional amount of 975,500 and 2,052,160, respectively, Philippine pesos to hedge our foreign currency risk with respect to labor costs in the Philippines. As of June 30, 2012, we have not entered into any arrangements to hedge our exposure to fluctuations in the Costa Rican colon or Honduran lempira relative to the U.S. dollar.

The following table shows the notional principal of our derivative instruments as of June 30, 2012:

	Currency	Notional Principal
Instruments qualifying as accounting hedges:
Foreign exchange contracts	Canadian dollar	13,860
Foreign exchange contracts	Philippine peso	1,380,120

We expect unrealized gains and losses reported in AOCI will be reclassified to earnings during the next twelve months. The estimates of fair value are based on applicable and commonly used pricing models and prevailing financial market information as of June 30, 2012. Refer to Note 8, “Fair Value Measurements,” of this Form 10-Q, for additional information on the fair value measurements for all assets and liabilities, including derivative assets and derivative liabilities, that are measured at fair value in the Condensed Consolidated Financial Statements.

The following table shows our derivative instruments measured at gross fair value as reflected in the Condensed Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011:

	As of
	June 30, 2012		December 31, 2011
Derivative assets:
Foreign exchange contracts	$	798	$	106
Derivative liabilities:
Foreign exchange contracts	$	147	$	616

The following table shows the effect of our derivative instruments designated as cash flow hedges in the Condensed Consolidated Statements of Operations for the three months ended June 30, 2012 and 2011:

	Three Months Ended
	June 30, 2012						June 30, 2011
	Loss Recognized in AOCI, net of tax			Loss Reclassified from AOCI into Income			Loss Recognized in AOCI, net of tax			Gain Reclassified from AOCI into Income		Location of Gain (Loss) Reclassified from AOCI into Income
Cash flow hedges:
Foreign exchange contracts	$	(870	)	$	(38	)	$	(1,165	)	$	594	Cost of services

	Six Months Ended
	June 30, 2012					June 30, 2011
	Loss  Recognized in AOCI, net of  tax			Gain Reclassified  from AOCI  into Income		Loss Recognized in AOCI, net of tax			Gain  Reclassified from AOCI into Income		Location of Gain  (Loss) Reclassified  from AOCI into  Income
Cash flow hedges:
Foreign exchange contracts	$	(819	)	$	81	$	(2,257	)	$	1,298	Cost of services