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DERIVATIVES
3 Months Ended
Mar. 31, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVES
6. DERIVATIVES

 

Foreign Currency Contracts

 

We have foreign currency contracts to mitigate the risk of a portion of our Canadian compensation expense. These contracts will hedge foreign exchange variations between the United States and Canadian dollar and commit us to purchase a total of $6.0 million Canadian dollars at an exchange rate of 1.268 through June 2016 and $12.0 million Canadian dollars at an exchange rate of 1.2855 through June 2017. As of March 31, 2016 and December 31, 2015, the fair value of our foreign currency contracts was $0.1 million and $0.7 million, respectively, included in “Other current liabilities,” and less than $0.1 million and $0.3 million, respectively, included in “Other long-term liabilities,” in the accompanying consolidated balance sheets.

 

During the three months ended March 31, 2016 and 2015, the activity of the foreign currency contracts was as follows (in thousands):

 

   

Three Months Ended
March 31,

 
    2016     2015  
Unrealized gain (loss), net of less than $0.1 million and $0.1 million income tax, respectively, included in “Accumulated items of other comprehensive loss” in the accompanying consolidated balance sheets   $ 638     $ (355 )
Realized loss on effective portion, included as compensation expense in “Direct costs of customer support” and “Sales, general and administrative” in the accompanying consolidated statements of operations and comprehensive loss     (179 )     (107 )

 

Interest Rate Swap

 

We have an interest rate swap to manage exposure to interest rate movements of our credit agreement. Our interest rate swap involves the receipt of variable rate amounts from a counterparty in exchange for us making fixed-rate payments, over 1.5%, over the life of the agreement without exchange of the underlying notional amount. The cash flow hedge has a notional amount starting at $150.0 million through December 31, 2016.

 

As of March 31, 2016 and December 31, 2015, the fair value of our interest rate swap was $0.6 million and $0.7 million, respectively, and is included in “Other current liabilities” in the accompanying consolidated balance sheets. We record the effective portion of the change in fair value of our interest rate swap in “Accumulated items of other comprehensive loss” in the accompanying consolidated balance sheets. We did not recognize any hedge ineffectiveness during either of the three months ended March 31, 2016 and 2015.

 

We will reclassify amounts reported in “Accumulated items of other comprehensive loss” related to our interest rate swaps to “Interest expense” in our accompanying consolidated statements of operations and comprehensive loss as we accrue interest payments on our variable-rate debt. Through December 31, 2016, we estimate that we will reclassify an additional $0.6 million as an increase to interest expense since the hedge interest rate currently exceeds the variable interest rate on our debt.

 

The activity of our interest rate swap is summarized as follows (in thousands):

 

    Three Months Ended March 31,  
    2016     2015  
Gain (loss) recorded as the effective portion of the change in fair value   $ 147     $ (216 )
Interest payments reclassified as an increase to interest expense     198       198