Derivative Financial Instruments

3 Months Ended

Mar. 31, 2013

Derivative Financial Instruments [Abstract]

Derivative Financial Instruments

Note 7 — Derivative Financial Instruments

In the normal course of business, we use foreign exchange forward contracts to manage foreign currency exchange rate risk. The estimated fair value of the foreign exchange forward contracts considers the following items: discount rate, timing and amount of cash flow and counterparty credit risk. Derivatives may give rise to credit risks from the possible non-performance by counterparties. Credit risk is generally limited to the fair value of those contracts that are favorable to us. We have limited our credit risk by entering into derivative transactions only with highly-rated global financial institutions, limiting the amount of credit exposure with any one financial institution and conducting ongoing evaluation of the creditworthiness of the financial institutions with which we do business. In addition, all the assets and liabilities related to our foreign exchange forward contracts set forth in the below table are subject to master netting arrangements or other similar agreements with each individual counterparty. The master netting arrangements provide for conditional right of set-off upon certain conditions of default. We have presented all the assets and liabilities related to our foreign exchange forward contracts on a gross basis, with no offsets, in our unaudited condensed consolidated statements of financial position. There is no financial collateral (including cash collateral) posted or received by us related to our foreign exchange forward contracts.

The following table provides information on the location and fair values of derivative financial instruments included in our unaudited condensed consolidated statement of financial position as of:

		March 31, 2013				December 31, 2012
Designation of Derivatives	Location on Statement of Financial Position	Assets		Liabilities		Assets		Liabilities
Cash Flow Hedges – Designated as hedging instruments
Foreign exchange forward contracts	Other current assets	$	1,585	$	-	$	1,230	$	-
	Other noncurrent assets		5,065		-		3,436		-
	Accrued expenses and
	other current liabilities		-		103,883		-		125,633
	Other noncurrent liabilities		-		139,353		-		175,628
	Total		6,650		243,236		4,666		301,261
Other Derivatives – Not designated as hedging instruments
Foreign exchange forward contracts	Other current assets		225		-		114		-
	Accrued expenses and
	other current liabilities		-		8,621		-		5,290
	Total		225		8,621		114		5,290
Total		$	6,875	$	251,857	$	4,780	$	306,551

Cash Flow Hedges

We have entered into a series of foreign exchange forward contracts that are designated as cash flow hedges of Indian rupee denominated payments in India. These contracts are intended to partially offset the impact of movement of exchange rates on future operating costs and are scheduled to mature each month during 2013, 2014, 2015 and 2016. Under these contracts, we purchase Indian rupees and sell U.S. dollars. The changes in fair value of these contracts are initially reported in the caption “accumulated other comprehensive income (loss)” in our consolidated statements of financial position and are subsequently reclassified to earnings in the same period the hedge contract matures. As of March 31, 2013, we estimate that $87,196 of the net losses related to derivatives designated as cash flow hedges recorded in accumulated other comprehensive income (loss) is expected to be reclassified into earnings within the next 12 months.

The notional value of our outstanding contracts by year of maturity and the net unrealized (loss) gain included in accumulated other comprehensive income (loss) for such contracts were as follows as of:

	March 31, 2013		December 31, 2012
2013	$	938,000	$	1,253,000
2014		1,200,000		1,200,000
2015		780,000		780,000
2016		120,000		120,000
Total notional value of contracts outstanding	$	3,038,000	$	3,353,000
Net unrealized (loss) included in accumulated other comprehensive income (loss), net of taxes	$	(201,660)	$	(252,810)

Upon settlement or maturity of the cash flow hedge contracts, we record the related gain or loss, based on our designation at the commencement of the contract, with the hedged Indian rupee denominated expense reported within cost of revenues and selling, general and administrative expenses. Hedge ineffectiveness was immaterial for all periods presented.

The following table provides information on the location and amounts of pre-tax gains (losses) on our cash flow hedges for the three months ended March 31:

	(Increase) Decrease in Derivative Losses Recognized in Accumulated Other Comprehensive Income (Loss) (effective portion)				Location of Net Derivative (Losses) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (effective portion)	Net (Loss) Reclassified from Accumulated Other Comprehensive Income  (Loss) into Income (effective portion)
	2013		2012			2013		2012
Cash Flow Hedges – Designated
as hedging instruments
Foreign exchange forward contracts
contracts	$	38,598	$	135,015	Cost of revenues	$	(17,552)	$	(6,621)
					Selling, general and administrative expenses		(3,792)		(1,198)
					Total	$	(21,344)	$	(7,819)

The activity related to the change in net unrealized (losses) on cash flow hedges in accumulated other comprehensive income (loss) is presented in Note 9.

Other Derivatives

We use foreign exchange forward contracts, which have not been designated as hedges, to hedge balance sheet exposure to certain monetary assets and liabilities denominated in currencies other than the functional currency of our foreign subsidiaries. We entered into a series of foreign exchange forward contracts scheduled to mature in 2013 which are primarily to purchase U.S. dollars and sell Indian rupees. Realized gains or losses and changes in the estimated fair value of these derivative financial instruments are recorded in Other, net in our consolidated statements of operations.

Additional information related to our outstanding contracts is as follows:

	March 31, 2013		December 31, 2012
Notional value of contracts outstanding	$	204,571	$	208,571

The following table provides information on the location and amounts of realized and unrealized pre-tax (losses) on our other derivative financial instruments for the three months ended March 31, 2013 and 2012:

	Location of Net Gains / (Losses) on Derivative Instruments	Amount of Net (Losses) on Derivative Instruments
		2013		2012
Other Derivatives – Not designated as hedging instruments
Foreign exchange forward contracts	Other, net	$	(2,326)	$	(13,168)

The related cash flow impacts of all of our derivative activities are reflected as cash flows from operating activities.