Derivative Financial Instruments

12 Months Ended

Dec. 31, 2012

Derivative Financial Instruments

Derivative Financial Instruments

11.       DERIVATIVE FINANCIAL INSTRUMENTS

The Company is exposed to certain risks related to its ongoing business operations. The primary risk managed through the use of derivative instruments is interest rate risk. From time to time, the Company enters into interest rate protection agreements to manage exposure to variability in cash flows relating to forecasted interest payments. Under these agreements, the Company is exposed to credit risk to the extent that a counterparty fails to meet the terms of a contract. The Company's credit risk exposure is limited to the current value of the contract at the time the counterparty fails to perform.

If a derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded in accumulated other comprehensive income (loss) and are recognized in the results of operations when the hedged item affects earnings. Ineffective portions of changes in the fair value of cash flow hedges are recognized immediately in the results of operations. For derivative instruments not designated as hedging instruments, changes in fair value are recognized in the results of operations in the period in which the change occurs.

The Company has entered into the following interest rate swap agreements to manage its exposure to variability in interest rates on debt in South Africa that accrues interest based on JIBAR: (i) on January 16, 2012, the Company entered into three interest rate swap agreements with an aggregate notional value of 350.0 million ZAR (ii) on August 29, 2012, the Company entered into three additional interest rate swap agreements with an aggregate notional value of 61.5 million ZAR and (iii) on September 28, 2012, the Company entered into three additional interest rate swap agreements with an aggregate notional value of 12.1 million ZAR. The Company's South African interest rate swap agreements have been designated as cash flow hedges, have fixed interest rates ranging from 6.09% to 7.25% and expire on March 31, 2020.

In addition, on December 5, 2012, the Company entered into an interest rate swap agreement with a notional value of 101.3 billion COP to manage its exposure to variability in interest rates on debt in Colombia that accrues interest based onIBR. The Company's Colombian interest rate swap agreement has been designated as a cash flow hedge, has a fixed interest rate of 5.78%, and expires on November 30, 2020.

No interest rate swap agreements were outstanding at December 31, 2011. As of December 31, 2012, the carrying amounts of the Company's derivative financial instruments, along with the estimated fair values of the related liabilities were as follows (in thousands):

		Balance Sheet Location	Notional Amount (1)	Carrying Amount and Fair Value (1)
Liabilities:
	Interest rate swap agreements	Other non-current liabilities	ZAR 423,634	ZAR 20,441
	Interest rate swap agreements	Other non-current liabilities	COP 101,250,000	COP 5,356,377
(1)	The interest rate swap agreements are denominated in ZAR and COP and have an aggregate notional amount and fair value of $107.3 million and $5.4 million, respectively, as of December 31, 2012.

During the yearsended December 31, 2012, 2011 and 2010, the interest rate swap agreements held by the Company had the following impact on other comprehensive income (“OCI”) included in the consolidated balance sheets and in the consolidated statements of operations (in thousands):

	Year Ended December 31, 2012
Amount of Gain/(Loss) Recognized in OCI on Derivatives (Effective Portion)		Location of Gain/(Loss) Reclassified from Accumulated OCI into Income (Effective Portion)		Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Location of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
$	(6,220)	Interest expense	$	(1,340)	N/A	N/A
	Year Ended December 31, 2011
Amount of Gain/(Loss) Recognized in OCI on Derivatives (Effective Portion)		Location of Gain/(Loss) Reclassified from Accumulated OCI into Income (Effective Portion)		Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Location of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
$	(228)	Interest expense	$	(2,205)	N/A	N/A
	Year Ended December 31, 2010
Amount of Gain/(Loss) Recognized in OCI on Derivatives (Effective Portion)		Location of Gain/(Loss) Reclassified from Accumulated OCI into Income (Effective Portion)		Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Location of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
$	(8,798)	Interest expense	$	(18,294)	N/A	N/A

As of December 31, 2012, 2011 and 2010, accumulated other comprehensive (loss) income included the following items related to derivative financial instruments (in thousands):

	2012		2011		2010
Deferred loss on the settlement of the treasury rate lock, net of tax	$	(3,827)	$	(4,625)	$	(3,354)
Deferred gain on the settlement of interest rate swap agreements entered into in connection with the Securitization, net of tax		-		202		497
Unrealized losses related to interest rate swap agreements, net of tax		(4,815)		-		(2,083)

As of December 31, 2012, $1.8million of the amount related to derivatives designated as cash flow hedges and recorded in accumulated other comprehensive (loss) incomeis expected to be reclassified into earnings in the next twelve months.

During the years ended December 31, 2012, 2011 and 2010, the Company recorded aggregate net unrealized (losses) gains of approximately $(4.8) million, $1.9 million, and $9.5 million, respectively (net of tax benefits (provisions) of approximately $0.7 million, $(1.3) million, and $(6.0) million, respectively) in accumulated other comprehensive (loss) income for the change in fair value of interest rate swaps designated as cash flow hedges.

The Company is amortizing the deferred loss on the settlement of the treasury rate lock as additional interest expense over the term of the 7.00% Notes, and is amortizing the deferred gain on the settlement of interest rate swap agreements entered into in connection with the Securitization as a reduction in interest expense over the five-year period for which the interest rate swaps were designated as hedges. For the year ended December 31, 2012, the Company reclassified $0.6 million into results of operations. The Company reclassified an aggregate of $0.1 million (net of income tax provisions of $0.1 million) into results of operations during the years ended December 31, 2011and 2010.

As a result of the REIT Conversion described in note 1, effective December 31, 2011, the Company reversed the deferred tax assets and liabilities related to the entities operating its REIT activities. Accordingly, approximately $1.8 million of deferred tax assets associated with the deferred loss on the settlement of the treasury rate lock and the deferred gain on the settlement of the interest rate swap agreement entered into in connection with the Securitization were reclassified to other comprehensive income.