Financial Derivatives

12 Months Ended

Dec. 31, 2019

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Financial Derivatives

Note 12. Financial Derivatives

Cash Flow Hedges – The Company has 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 and Costa Rican Colon contracts. These contracts are entered into to hedge the exposure to variability in the cash flows of a specific asset or liability, or of a forecasted transaction that is attributable to changes in exchange rates.

The deferred gains (losses) and related taxes on the Company’s cash flow hedges recorded in “Accumulated other comprehensive income (loss)” (“AOCI”) in the accompanying Consolidated Balance Sheets were as follows (in thousands):

	December 31,
	2019		2018
Deferred gains (losses) in AOCI	$	2,221	$	(1,825	)
Tax on deferred gains (losses) in AOCI		69		(39	)
Deferred gains (losses) in AOCI, net of taxes	$	2,290	$	(1,864	)
Deferred gains (losses) expected to be reclassified to    "Revenues" from AOCI during the next twelve months	$	2,221

Deferred gains (losses) and other future reclassifications from AOCI will fluctuate with movements in the underlying market price of the forward contracts and options as well as the related settlement of forecasted transactions.

Non-Designated Hedges

Foreign Currency Forward Contracts – 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 the Company’s interests against adverse foreign currency moves relating primarily to intercompany receivables and payables, and other assets and liabilities that are denominated in currencies other than the Company’s subsidiaries’ functional currencies. See Note 1, Overview 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.

Embedded Derivatives – The Company enters into certain lease agreements which require payments not denominated in the functional currency of any substantial party to the agreements. Prior to the adoption of ASC 842 on January 1, 2019, the foreign currency component of these contracts met the criteria under ASC 815 as embedded derivatives. The Company determined that the embedded derivatives were not clearly and closely related to the economic characteristics and risks of the host contracts (lease agreements), and separate, stand-alone instruments with the same terms as the embedded derivative instruments would otherwise qualify as derivative instruments, thereby requiring separation from the lease agreements and recognition at fair value. Such instruments do not qualify for hedge accounting under ASC 815. The Company’s embedded derivatives were derecognized on January 1, 2019.

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

	December 31, 2019				December 31, 2018
Contract Type	Notional Amount in USD		Settle Through Date		Notional Amount in USD		Settle Through Date
Cash flow hedges:
Options:
US Dollars/Philippine Pesos	$	74,000	December 2020		$	26,250	December 2019
Forwards:
US Dollars/Philippine Pesos		—		—		39,000	September 2019
US Dollars/Costa Rican Colones		42,000	December 2020			67,000	December 2019
Non-designated hedges:
Forwards		19,295	November 2021			19,261	November 2021
Embedded derivatives		—		—		14,069	April 2030

Master netting agreements exist with each respective counterparty to reduce credit risk by permitting net settlement of derivative positions. In the event of default by the Company or one of its counterparties, these agreements include a set-off clause that provides the non-defaulting party the right to net settle all derivative transactions, regardless of the currency and settlement date. The maximum amount of loss due to credit risk that, based on gross fair value, the Company would incur if parties to the derivative transactions that make up the concentration failed to perform according to the terms of the contracts was $3.6 million and $1.1 million as of December 31, 2019 and 2018, respectively. After consideration of these netting arrangements and offsetting positions by counterparty, the total net settlement amount as it relates to these positions are asset positions of $3.4 million and $1.1 million, and liability positions of $0 and $2.9 million as of December 31, 2019 and 2018, respectively.

Although legally enforceable master netting arrangements exist between the Company and each counterparty, the Company has elected to present the derivative assets and derivative liabilities on a gross basis in the accompanying Consolidated Balance Sheets.  Additionally, the Company is not required to pledge, nor is it entitled to receive, cash collateral related to these derivative transactions.

The following tables present the fair value of the Company’s derivative instruments included in the accompanying Consolidated Balance Sheets (in thousands):

		Derivative Assets
	Balance Sheet Location	December 31, 2019		December 31, 2018
Derivatives designated as cash    flow hedging instruments:
Foreign currency contracts	Other current assets	$	3,051	$	1,038
Derivatives not designated as    hedging instruments:
Foreign currency contracts	Other current assets		322		30
Foreign currency contracts	Deferred charges and other assets		234		—
Embedded derivatives	Other current assets		—		10
Total derivative assets		$	3,607	$	1,078

		Derivative Liabilities
	Balance Sheet Location	December 31, 2019		December 31, 2018
Derivatives designated as cash    flow hedging instruments:
Foreign currency contracts	Other accrued expenses and current liabilities	$	138	$	2,604
Derivatives not designated as    hedging instruments:
Foreign currency contracts	Other accrued expenses and current liabilities		113		247
Foreign currency contracts	Other long-term liabilities		—		44
Embedded derivatives	Other accrued expenses and current liabilities		—		8
Embedded derivatives	Other long-term liabilities		—		361
Total derivative liabilities		$	251	$	3,264

The following table presents the effect of the Company’s derivative instruments included in the accompanying Consolidated Financial Statements (in thousands):

	Location of Gains	Years Ended December 31,
	(Losses) in Net Income	2019			2018			2017
Revenues		$	1,614,762		$	1,625,687		$	1,586,008
Derivatives designated as cash    flow hedging instruments:
Gains (losses) recognized in AOCI:
Foreign currency contracts		$	6,978		$	(4,259	)	$	2,277
Gains (losses) reclassified from AOCI:
Foreign currency contracts	Revenues		2,808			(54	)		(2,537	)
Derivatives designated as net investment    hedging instruments:
Gains (losses) reclassified from AOCI:
Foreign currency contracts	Revenues		—			—			(8,352	)
Derivatives not designated as    hedging instruments:
Gains (losses) recognized from foreign       currency contracts	Other income (expense), net	$	(674	)	$	(1,744	)	$	282
Gains (losses) recognized from embedded       derivatives	Other income (expense), net		—			(7	)		(139	)
		$	(674	)	$	(1,751	)	$	143