Derivative Financial Instruments

9 Months Ended

Jun. 30, 2013

Derivative Financial Instruments

4. Derivative Financial Instruments

We use derivative instruments to manage risks caused by fluctuations in foreign exchange rates. The primary objective of our derivative instruments is to protect the value of foreign currency denominated accounts receivable and cash balances from the effects of volatility in foreign exchange rates that might occur prior to conversion to their functional currency. We principally utilize foreign currency forward contracts, which enable us to buy and sell foreign currencies in the future at fixed exchange rates and economically offset changes in foreign currency exchange rates. We routinely enter into contracts to offset exposures denominated in the British pound, Euro and Canadian dollar.

Foreign currency denominated accounts receivable and cash balances are re-measured at foreign currency rates in effect on the balance sheet date with the effects of changes in foreign currency rates reported in other income (expense), net. The forward contracts are not designated as hedges and are marked to market through other income (expense), net. Fair value changes in the forward contracts help mitigate the changes in the value of the re-measured accounts receivable and cash balances attributable to changes in foreign currency exchange rates. The forward contracts are short-term in nature and typically have average maturities at inception of less than three months.

The following tables summarize our outstanding forward foreign currency contracts, by currency, at June 30, 2013 and September 30, 2012, respectively:

	June 30, 2013
	Contract Amount				Fair Value
	Foreign Currency		US$		US$
			(In thousands)
Sell foreign currency:
Canadian dollar (CAD)		CAD 6,550	$	6,253	$	—
Euro (EUR)		EUR 5,150	$	6,771	$	—
Buy foreign currency:
British pound (GBP)		GBP 7,068	$	10,800	$	—

	September 30, 2012
	Contract Amount				Fair Value
	Foreign Currency		US$		US$
			(In thousands)
Sell foreign currency:
Canadian dollar (CAD)		CAD 2,750	$	2,794	$	—
Euro (EUR)		EUR 4,060	$	5,255	$	—
Buy foreign currency:
British pound (GBP)		GBP 6,131	$	9,950	$	—

The forward foreign currency contracts were all entered into on June 30, 2013 and September 30, 2012, respectively; therefore, their fair value was $0.

Gains (losses) on derivative financial instruments are recorded in our condensed consolidated statements of income and comprehensive income as a component of other income (expense), net, and consisted of the following:

	Quarter Ended June 30,				Nine Months Ended June 30,
	2013		2012		2013			2012
	(In thousands)
Foreign currency forward contracts	$	131	$	116	$	(728	)	$	259