Derivative Financial Instruments

3 Months Ended

Dec. 31, 2013

Derivative Financial Instruments

3. 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 receivable and cash balances from the effects of volatility in foreign exchange rates that might occur prior to conversion to their respective functional currencies. 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 exchange rates. We routinely enter into contracts to offset exposures denominated in the British pound, Euro and Canadian dollar.

Foreign-currency-denominated receivable and cash balances are remeasured at foreign exchange rates in effect on the balance sheet date with the effects of changes in foreign exchange rates reported in other expense, net. The forward contracts are not designated as hedges and are marked to market through other expense, net. Fair value changes in the forward contracts help mitigate the changes in the value of the remeasured receivable and cash balances attributable to changes in foreign 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 foreign currency forward contracts, by currency, at December 31, 2013 and September 30, 2013:

	December 31, 2013
	Contract Amount				Fair Value
	Foreign
	Currency		US$		US$
			(In thousands)
Sell foreign currency:
Canadian dollar (CAD)		CAD 4,700	$	4,398	$	—
Euro (EUR)		EUR 5,700	$	7,818	$	—
Buy foreign currency:
British pound (GBP)		GBP 3,633	$	6,000	$	—

	September 30, 2013
	Contract Amount				Fair Value
	Foreign
	Currency		US$		US$
			(In thousands)
Sell foreign currency:
Canadian dollar (CAD)		CAD 4,700	$	4,542	$	—
Euro (EUR)		EUR 5,400	$	7,307	$	—
Buy foreign currency:
British pound (GBP)		GBP 6,513	$	10,500	$	—

The foreign currency forward contracts were entered into on December 31, 2013 and September 30, 2013, respectively; therefore, their fair value was $0 on each of these dates.

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

	Quarter Ended December 31,
	2013		2012
	(In thousands)
Foreign currency forward contracts	$	338	$	(131	)