DERIVATIVES

9 Months Ended

Sep. 30, 2013

DERIVATIVES [ABSTRACT]

DERIVATIVES

(6)       DERIVATIVES

Cash Flow Hedges

The Company enters into foreign exchange and interest rate related derivatives. Foreign exchange derivatives entered into consist of forward and option contracts to reduce the Company's exposure to foreign currency exchange rate fluctuations that are associated with forecasted revenue earned in foreign locations. Interest rate derivatives consist of interest rate swaps to reduce the Company's exposure to interest rate fluctuations associated with its variable rate debt. Upon proper qualification, these contracts are designated as cash flow hedges. It is the Company's policy to only enter into derivative contracts with investment grade counterparty financial institutions, and correspondingly, the fair value of derivative assets consider, among other factors, the creditworthiness of these counterparties. Conversely, the fair value of derivative liabilities reflects the Company's creditworthiness. As of September 30, 2013, the Company has not experienced, nor does it anticipate, any issues related to derivative counterparty defaults. The following table summarizes the aggregate unrealized net gain or loss in Accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2013 and 2012 (amounts in thousands and net of tax):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Aggregate unrealized net gain (loss) at beginning of period	$	(2,644)	$	2,964	$	9,559	$	(5,852)
Add: Net gain/(loss) from change in fair value of cash flow hedges		(630)		4,945		(9,332)		14,040
Less: Net (gain)/loss reclassified to earnings from effective hedges		(398)		(591)		(3,899)		(870)
Aggregate unrealized net gain (loss) at end of period	$	(3,672)	$	7,318	$	(3,672)	$	7,318

The Company's foreign exchange cash flow hedging instruments as of September 30, 2013 and December 31, 2012 are summarized as follows (amounts in thousands). All hedging instruments are forward contracts unless noted otherwise.

As of September 30, 2013	Local Currency Notional Amount	U.S. Dollar Notional Amount			% Maturing in the Next 12 Months			Contracts Maturing Through
Canadian Dollar	12,750	$	12,415			70.6	%	June 2015
Philippine Peso	15,835,000		372,909	(1)		37.8	%	December 2017
Mexican Peso	2,056,000		147,144			34.5	%	December 2017
British Pound Sterling	2,508		4,217	(2)		100.0	%	June 2014
New Zealand Dollar	300		235			100.0	%	March 2014
		$	536,920

As of December 31, 2012	Local Currency Notional Amount	U.S. Dollar Notional Amount
Canadian Dollar	7,750	$	7,407
Philippine Peso	11,710,000		271,970	(1)
Mexican Peso	1,320,500		94,530
British Pound Sterling	3,518		5,575	(2)
New Zealand Dollar	398		300
		$	379,782

(1)       Includes contracts to purchase Philippine pesos in exchange for New Zealand dollars and Australian dollars, which are translated into equivalent U.S. dollars on September 30, 2013 and December 31, 2012.

(2)Includes contracts to purchase British pound sterling in exchange for Euros, which are translated into equivalent U.S. dollars on September 30, 2013 and December 31, 2012.

The Company's interest rate swap arrangements as of September 30, 2013 and December 31, 2012 were as follows:

	Notional Amount		Variable Rate Received	Fixed Rate Paid			Contract Commencement Date	Contract Maturity Date
As of September 30, 2013	$	25 million	1 - month LIBOR		2.55	%	April 2012	April 2016
		15 million	1 - month LIBOR		3.14	%	May 2012	May 2017
	$	40 million
As of December 31, 2012	$	25 million	1 - month LIBOR		2.55	%	April 2012	April 2016
		15 million	1 - month LIBOR		3.14	%	May 2012	May 2017
	$	40 million

Fair Value Hedges

The Company enters into foreign exchange forward contracts to economically hedge against foreign currency exchange gains and losses on certain receivables and payables of the Company's foreign operations. Changes in the fair value of derivative instruments designated as fair value hedges are recognized in earnings in Other income (expense), net. As of September 30, 2013 and December 31, 2012 the total notional amount of the Company's forward contracts used as fair value hedges were $247.2million and $189.3 million, respectively.

Embedded Derivatives

In addition to hedging activities, the Company's foreign subsidiary in Argentina was party to U.S. dollar denominated lease contracts which the Company determined contain embedded derivatives. As such, the Company bifurcated the embedded derivative features of the lease contracts and valued these features as foreign currency derivatives. As of September 30, 2013 and December 31, 2012, the fair value of the embedded derivative was $0.1 million and $0.3 million, respectively, and was included in Other current liabilities and Other long-term liabilities in the accompanying Consolidated Balance Sheets as shown in the table below.

Derivative Valuation and Settlements

The Company's derivatives as of September 30, 2013 and December 31, 2012 were as follows (amounts in thousands):

		September 30, 2013
		Designated as Hedging Instruments				Not Designated as Hedging Instruments
Derivative contracts:		Foreign Exchange		Interest Rate		Foreign Exchange		Leases
Derivative classification:		Cash Flow		Cash Flow		Fair Value		Embedded Derivative
Fair value and location of derivative in the
	Consolidated Balance Sheet:
Prepaids and other current assets		$	4,607	$	-	$	20	$	-
Other long-term assets			2,971		-		-		-
Other current liabilities			(3,155)		(1,029)		(430)		(147)
Other long-term liabilities			(8,159)		(1,258)		-		-
	Total fair value of derivatives, net	$	(3,736)	$	(2,287)	$	(410)	$	(147)
		December 31, 2012
		Designated as Hedging Instruments				Not Designated as Hedging Instruments
Derivative contracts:		Foreign Exchange		Interest Rate		Foreign Exchange		Leases
Derivative classification:		Cash Flow		Cash Flow		Fair Value		Embedded Derivative
Fair value and location of derivative in
	the Consolidated Balance Sheet:
Prepaids and other current assets		$	11,421	$	-	$	11	$	-
Other long-term assets			7,619		-		-		-
Other current liabilities			(157)		(1,032)		(476)		(59)
Other long-term liabilities			(65)		(1,955)		-		(219)
	Total fair value of derivatives, net	$	18,818	$	(2,987)	$	(465)	$	(278)

The effects of derivative instruments on the Consolidated Statements of Comprehensive Incomefor the three months ended September 30, 2013 and 2012 were as follows (amounts in thousands):

		Three Months Ended September 30,
		2013				2012
		Designated as Hedging Instruments				Designated as Hedging Instruments
Derivative contracts:		Foreign Exchange		Interest Rate		Foreign Exchange		Interest Rate
Derivative classification:		Cash Flow		Cash Flow		Cash Flow		Cash Flow
Amount of gain or (loss) recognized in other comprehensive
	income (loss) - effective portion, net of tax	$	(476)	$	(154)	$	5,331	$	(386)
Amount and location of net gain or (loss) reclassified
	from accumulated OCI to income - effective portion:
Revenue		$	917	$	-	$	1,367	$	-
Interest Expense			-		(264)		-		(381)
Amount and location of net gain or (loss) reclassified
	from accumulated OCI to income - ineffective portion
	and amount excluded from effectiveness testing:
Other income (expense), net		$	-	$	-	$	-	$	-

		Three Months Ended September 30,
		2013						2012
		Not Designated as Hedging Instruments						Not Designated as Hedging Instruments
Derivative contracts:		Foreign Exchange				Leases		Foreign Exchange				Leases
Derivative classification:		Option and Forward Contracts		Fair Value		Embedded Derivative		Option and Forward Contracts		Fair Value		Embedded Derivative
Amount and location of net gain or (loss)
	recognized in the Consolidated Statement
	of Comprehensive Income (Loss):
Costs of services		$	-	$	-	$	18	$	-	$	-	$	7
Other income (expense), net		$	-	$	(2,373)	$	-	$	-	$	544	$	-

The effects of derivative instruments on the Consolidated Statements of Comprehensive Incomefor the nine months ended September 30, 2013 and 2012 were as follows (amounts in thousands):

		Nine Months Ended September 30,
		2013				2012
		Designated as Hedging Instruments				Designated as Hedging Instruments
Derivative contracts:		Foreign Exchange		Interest Rate		Foreign Exchange		Interest Rate
Derivative classification:		Cash Flow		Cash Flow		Cash Flow		Cash Flow
Amount of gain or (loss) recognized in other comprehensive
	income (loss) - effective portion, net of tax	$	(9,254)	$	(78)	$	14,902	$	(862)
Amount and location of net gain or (loss) reclassified
	from accumulated OCI to income - effective portion:
Revenue		$	7,227	$	-	$	2,016	$	-
Interest Expense			-		(778)		-		(564)
Amount and location of net gain or (loss) reclassified
	from accumulated OCI to income - ineffective portion
	and amount excluded from effectiveness testing:
Other income (expense), net		$	-	$	-	$	-	$	-

		Nine Months Ended September 30,
		2013						2012
		Not Designated as Hedging Instruments						Not Designated as Hedging Instruments
Derivative contracts:		Foreign Exchange				Leases		Foreign Exchange				Leases
Derivative classification:		Option and Forward Contracts		Fair Value		Embedded Derivative		Option and Forward Contracts		Fair Value		Embedded Derivative
Amount and location of net gain or (loss)
	recognized in the Consolidated Statement
	of Comprehensive Income (Loss):
Costs of services		$	-	$	-	$	131	$	-	$	-	$	259
Other income (expense), net		$	-	$	(3,620)	$	-	$	-	$	4,399	$	-