(8)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 December 31, 2016, the Company had 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 years ended December 31, 2016, 2015 and 2014 (in thousands and net of tax):


	Year Ended December 31,
	2016		2015		2014

Aggregate unrealized net gain/(loss) at beginning of period	$	(26,885)	$	(18,345)	$	(8,352)
Add: Net gain/(loss) from change in fair value of cash flow hedges		11,242		(16,349)		(12,121)
Less: Net (gain)/loss reclassified to earnings from effective hedges		(16,750)		7,809		2,128
Aggregate unrealized net gain/(loss) at end of period	$	(32,393)	$	(26,885)	$	(18,345)

The Company’s foreign exchange cash flow hedging instruments as of December 31, 2016 and 2015 are summarized as follows (in thousands). All hedging instruments are forward contracts.

Local

Currency

U.S. Dollar

% Maturing

Contracts

Notional

in the next

Maturing

As of December 31, 2016

Amount

12 months

Through

Philippine Peso

14,315,000

301,134

(1)

42.3

August 2021

Mexican Peso

2,089,000

129,375

23.7

May 2021

430,509


	Local
	Currency	U.S. Dollar
	Notional	Notional
As of December 31, 2015	Amount	Amount
Philippine Peso	16,362,000		361,571	(1)
Mexican Peso	2,637,000		173,124
		$	534,695

(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 December 31, 2016 and December 31, 2015.

The Company’s interest rate swap arrangements as of December 31, 2016 and 2015 were as follows:

Contract

Notional

Variable Rate

Fixed Rate

Commencement

Maturity

As of December 31, 2016:

Amount

Received

Paid

Date

Swap 2

15 million

1 - month LIBOR

3.14

May 2012

May 2017

15 million

As of December 31, 2015:

Swap 1

25 million

1 - month LIBOR

2.55

April 2012

April 2016

Swap 2

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 December 31, 2016 and 2015, the total notional amount of the Company’s forward contracts used as fair value hedges was $227.8 million and $241.0 million, respectively.

Derivative Valuation and Settlements

The Company’s derivatives as of December 31, 2016 and 2015 were as follows (in thousands):


	December 31, 2016
	Designated				Not Designated
	as Hedging				as Hedging
Designation:	Instruments				Instruments
	Foreign		Interest		Foreign
Derivative contract type:	Exchange		Rate		Exchange
Derivative classification:	Cash Flow		Cash Flow		Fair Value

Fair value and location of derivative in the Consolidated Balance Sheet:
Prepaids and other current assets	$	1,178	$	—	$	1,606
Other long-term assets		—		—		—
Other current liabilities		(23,503)		(147)		(866)
Other long-term liabilities		(31,714)		—		—
Total fair value of derivatives, net	$	(54,039)	$	(147)	$	740


	December 31, 2015
	Designated				Not Designated
	as Hedging				as Hedging
Designation:	Instruments				Instruments
	Foreign		Interest		Foreign
Derivative contract type:	Exchange		Rate		Exchange
Derivative classification:	Cash Flow		Cash Flow		Fair Value

Fair value and location of derivative in the Consolidated Balance Sheet:
Prepaids and other current assets	$	39	$	—	$	2,489
Other long-term assets		66		—		—
Other current liabilities		(20,088)		(549)		(116)
Other long-term liabilities		(25,739)		(102)		—
Total fair value of derivatives, net	$	(45,722)	$	(651)	$	2,373

The effect of derivative instruments on the Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2016 and 2015 were as follows (in thousands):


	Year Ended December 31,
	2016				2015
	Designated as Hedging				Designated as Hedging
Designation:	Instruments				Instruments
	Foreign		Interest		Foreign		Interest
Derivative contract type:	Exchange		Rate		Exchange		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	$	(16,438)	$	(312)	$	(7,198)	$	(611)

Amount and location of net gain or (loss) reclassified from Accumulated OCI to income - effective portion:
Revenue	$	(28,025)	$	—	$	(12,410)	$	—
Interest expense		—		(534)		—		(1,053)


	Year Ended December 31,
	2016				2015
Designation:	Not Designated as Hedging Instruments				Not Designated as Hedging Instruments
Derivative contract type:	Foreign Exchange				Foreign Exchange
	Forward				Forward
Derivative classification:	Contracts		Fair Value		Contracts		Fair Value

Amount and location of net gain or (loss) recognized in the Consolidated Statement of Comprehensive Income (Loss):
Cost of services	$	—	$	—	$	—	$	—
Other income (expense), net		—		(5,826)		—		(6,127)