Derivative Financial Instruments

3 Months Ended

Mar. 31, 2013

Derivative Financial Instruments

Derivative Financial Instruments

6.       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 interest rate swap agreements to manage its exposure to variability in interest rates on debt in South Africa and Colombia. As of March 31, 2013, the Company had nine interest rate swap agreements outstanding in South Africa with an aggregate notional value of 423.6 million ZAR ($45.9 million) and one interest rate swap agreement outstanding in Colombia with a notional value of 101.3 billion COP ($55.3 million). The Company's South African interest rate swap agreements accrue interest based on the Johannesburg Interbank Agreed Rate (“JIBAR”) and have been designated as cash flow hedges, have fixed interest rates ranging from 6.09% to 7.25% and expire on March 31, 2020. The Company's Colombian interest rate swap agreement accrues interest based on the Inter-bank Rate (“IBR”) and has been designated as a cash flow hedge, has a fixed interest rate of 5.78%, and expires on November 30, 2020.

As of March 31, 2013 and December 31, 2012, the notional amount and fair value of the Company's interest rate swap agreements, which were recorded as other non-current liabilities, were as follows (in thousands):

		March 31, 2013 (1)	December 31, 2012 (2)
ZAR
	Notional	423,634	423,634
	Carrying Amount/Fair Value	14,841	20,441
COP
	Notional	101,250,000	101,250,000
	Carrying Amount/Fair Value	7,398,809	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 $101.1 million and $5.6 million, respectively, as of March 31, 2013.
(2)	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 three months ended March 31, 2013 and 2012, the interest rate swap agreements held by the Company had the following impact on OCI included in the condensed consolidated balance sheets and in the condensed consolidated statements of operations (in thousands):

Three Months Ended March 31, 2013
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)
$	(933)	Interest expense	$	(608)	N/A	N/A
Three Months Ended March 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)
$	(535)	Interest expense	$	(152)	N/A	N/A

As of March 31, 2013,$1.6 million of the amounts related to derivatives designated as cash flow hedges and recorded in accumulated other comprehensive (loss) income is expected to be reclassified into earnings in the next twelve months.