Financial Derivatives

6 Months Ended

Jun. 30, 2011

Financial Derivatives [Abstract]

Financial Derivatives

Note 7. Financial Derivatives

Cash Flow Hedges — The Company had derivative assets and liabilities relating to outstanding forward contracts and options, designated as cash flow hedges, as defined under ASC 815, consisting of Philippine peso contracts and Canadian Dollar contracts. These contracts are entered into to protect against the risk that the eventual cash flows resulting from such transactions will be adversely affected by changes in exchange rates.

The deferred gains and related taxes on the Company’s derivative instruments recorded in “Accumulated other comprehensive income (loss)” in the accompanying Condensed Consolidated Balance Sheets are as follows (in thousands):

	As of			As of
	June 30, 2011			December 31, 2010
Deferred gains (losses) in AOCI	$	718		$	2,674
Tax on deferred gains (losses) in AOCI		(152	)		(528	)
Deferred gains (losses), net of taxes in AOCI	$	566		$	2,146
Deferred gains expected to be reclassified to “Revenues” from AOCI during the next twelve months	$	718

Deferred gains (losses) and other future reclassifications from AOCI will fluctuate with movements in the underlying market price of the forward contracts.

Other Hedges — The Company also periodically enters into foreign currency hedge contracts that are not designated as hedges as defined under ASC 815. The purpose of these derivative instruments is to protect our interests against adverse foreign currency moves pertaining to intercompany receivables and payables, and other assets and liabilities that are denominated in currencies other than our subsidiaries functional currencies. These contracts generally do not exceed 90 days in duration.

The Company had the following outstanding foreign currency forward contracts and options (in thousands):

	As of June 30, 2011			As of December 31, 2010
	Notional			Notional
	Amount in		Settle Through	Amount in		Settle Through
Contract Type	USD		Date	USD		Date
Cash flow hedge: (1)
Options:
Philippine Pesos	$	74,800	December 2011	$	81,100	December 2011
Forwards:
Philippine Pesos	$	20,000	December 2011	$	28,000	September 2011
Canadian Dollars	$	3,600	December 2011	$	7,200	December 2011
Not designated as hedge: (2)
Forwards	$	49,781	November 2011	$	57,791	February 2011

(1)	Cash flow hedge as defined under ASC 815. Purpose is to protect against the risk that eventual cash flows resulting from such transactions will be adversely affected by changes in exchange rates.
(2)	Foreign currency hedge contract not designated as a hedge as defined under ASC 815. Purpose is to reduce the effects on the Company’s operating results and cash flows from fluctuations caused by volatility in currency exchange rates, primarily related to intercompany loan payments and cash held in non-functional currencies.

See Note 1, Business, Basis of Presentation and Summary of Significant Accounting Policies, for additional information on the Company’s purpose for entering into derivatives not designated as hedging instruments and its overall risk management strategies.

As of June 30, 2011, the maximum amount of loss due to credit risk that, based on the gross fair value of the financial instruments, the Company would incur if parties to the financial instruments that make up the concentration failed to perform according to the terms of the contracts is $2.9 million.

Net Investment Hedge — During 2010, the Company entered into foreign exchange forward contracts to hedge its net investment in a foreign operation, as defined under ASC 815, with an aggregate notional value of $26.1 million. These hedges settled in 2010 and the Company recorded deferred (losses) of $(2.6) million, net of taxes, for 2010 as a currency translation adjustment, a component of AOCI, offsetting foreign exchange losses attributable to the translation of the net investment. The Company did not hedge net investments in foreign operations during the six months ended June 30, 2011.

The following tables present the fair value of the Company’s derivative instruments as of June 30, 2011 and December 31, 2010 included in the accompanying Condensed Consolidated Balance Sheets (in thousands):

	Derivative Assets
	June 30, 2011			December 31, 2010
	Balance Sheet			Balance Sheet
	Location	Fair Value		Location	Fair Value
Derivatives designated as cash flow hedging instruments under ASC 815:
Foreign currency forward contracts	Other current assets	$	1,192	Other current assets	$	1,009
Foreign currency options	Other current assets		1,616	Other current assets		4,951
			2,808			5,960
Derivatives not designated as hedging instruments under ASC 815:
Foreign currency forward contracts	Other current assets		69	Other current assets		274
Total derivative assets		$	2,877		$	6,234

	Derivative Liabilities
	June 30, 2011			December 31, 2010
	Balance Sheet			Balance Sheet
	Location	Fair Value		Location	Fair Value
Derivatives designated as cash flow hedging instruments under ASC 815:
Foreign currency forward contracts	Other accrued expenses and current liabilities	$	—	Other accrued expenses and current liabilities	$	27
			—			27
Derivatives not designated as hedging instruments under ASC 815:
Foreign currency forward contracts	Other accrued expenses and current liabilities		671	Other accrued expenses and current liabilities		708
Total derivative liabilities		$	671		$	735

The following tables present the effect of the Company’s derivative instruments for the three months ended June 30, 2011 and 2010 in the accompanying Condensed Consolidated Financial Statements (in thousands):

								Gain (Loss)
	Gain (Loss)							Reclassified From					Gain (Loss)
	Recognized in AOCI						Statement of	Accumulated AOCI					Recognized in Income
	on Derivatives						Operations	Into Income					on Derivatives
	(Effective Portion)						Location	(Effective Portion)					(Ineffective Portion)
	June 30,							June 30,					June 30,
	2011			2010				2011		2010			2011		2010
Derivatives designated as cash flow hedging instruments under ASC 815:
Foreign currency forward contracts	$	9		$	(884	)	Revenues	$	161	$	1,107		$	—	$	—
Foreign currency option contracts		(677	)		(1,879	)	Revenues		359		(142	)		—		—
		(668	)		(2,763	)			520		965			—		—
Derivatives designated as a net investment hedge under ASC 815:
Foreign currency forward contracts		—			1,432				—		—			—		—
	$	(668	)	$	(1,331	)		$	520	$	965		$	—	$	—

		Gain (Loss) Recognized
	Statement of	in Income on Derivatives
	Operations	June 30,
	Location	2011			2010
Derivatives not designated as hedging instruments under ASC 815:
Foreign currency forward contracts	Other income and (expense)	$	(1,443	)	$	(356	)
		$	(1,443	)	$	(356	)

The following tables present the effect of the Company’s derivative instruments for the six months ended June 30, 2011 and 2010 in the accompanying Condensed Consolidated Financial Statements (in thousands):

	Gain (Loss)							Gain (Loss)					Gain (Loss)
	Recognized in AOCI							Reclassified From					Recognized in Income
	on Derivatives							Accumulated AOCI					on Derivatives
	(Effective Portion)						Statement of	Into Income					(Ineffective Portion)
	June 30,						Operations	June 30,					June 30,
	2011			2010			Location	2011		2010			2011		2010
Derivatives designated as cash flow hedging instruments under ASC 815:
Foreign currency forward contracts	$	387		$	311		Revenues	$	195	$	1,999		$	-	$	-
Foreign currency option contracts		(1,327	)		(1,729	)	Revenues		857		(53	)		-		-
		(940	)		(1,418	)			1,052		1,946			-		-
Derivatives designated as a net investment hedge under ASC 815:
Foreign currency forward contracts		-			1,432				-		-			-		-
	$	(940	)	$	14			$	1,052	$	1,946		$	-	$	-

		Gain (Loss) Recognized
	Statement of	in Income on Derivatives
	Operations	June 30,
	Location	2011			2010
Derivatives not designated as hedging instruments under ASC 815:
Foreign currency forward contracts	Other income and (expense)	$	(3,732	)	$	(1,430	)
		$	(3,732	)	$	(1,430	)