Derivatives and Hedging Instruments

9 Months Ended

Sep. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Hedging Instruments

Derivatives and Hedging Instruments

The Company may periodically enter into derivative financial instruments to manage risks related to interest rates and foreign currency. Most of the Company’s derivative financial instruments qualify for hedge accounting treatment under the authoritative guidance for derivatives and hedging. The Company’s Cabot subsidiary also holds interest rate cap contracts with an aggregated notional amount of £125.0 million that are used to manage its risk related to interest rate fluctuations. The Company does not apply hedge accounting on the interest rate cap contracts. The impact of the interest rate cap contracts to the Company’s consolidated financial statements for the three and nine months endedSeptember 30, 2014, was immaterial.

Interest Rate Swaps

As of September 30, 2014, the Company had no outstanding interest rate swap agreements. During the three and nine months endedSeptember 30, 2013, the Company utilized interest rate swap contracts to manage risks related to interest rate fluctuation. These derivatives were designated as cash flow hedges in accordance with authoritative accounting guidance. The hedging instruments had been highly effective since the inception of the hedge program, therefore no gains or losses were reclassified from other comprehensive income (“OCI”) into earnings as a result of hedge ineffectiveness.

Foreign Currency Exchange Contracts

The Company has operations in foreign countries, which exposes the Company to foreign currency exchange rate fluctuations due to transactions denominated in foreign currencies, including Indian rupees. To mitigate this risk, the Company enters into derivative financial instruments, principally forward contracts, which are designated as cash flow hedges, to mitigate fluctuations in the cash payments of future forecasted transactions in Indian rupees for up to 36 months. The Company adjusts the level and use of derivatives as soon as practicable after learning that an exposure has changed and reviews all exposures and derivative positions on an ongoing basis.

Gains and losses on cash flow hedges are recorded in OCI until the hedged transaction is recorded in the consolidated financial statements. Once the underlying transaction is recorded in the consolidated financial statements, the Company reclassifies the OCI on the derivative into earnings. If all or a portion of the forecasted transaction is cancelled, this would render all or a portion of the cash flow hedge ineffective and the Company would reclassify the ineffective portion of the hedge into earnings. The Company generally does not experience ineffectiveness of the hedge relationship and the accompanying consolidated financial statements do not include any such gains or losses.

As of September 30, 2014, the total notional amount of the forward contracts to buy Indian rupees in exchange for United States dollars was $51.8 million. As of September 30, 2014, all outstanding contracts qualified for hedge accounting treatment. The Company estimates that approximately $1.1 million of net derivative loss included in OCI will be reclassified into earnings within the next 12 months. No gains or losses were reclassified from OCI into earnings as a result of forecasted transactions that failed to occur during the nine months endedSeptember 30, 2014, and 2013.

The Company does not enter into derivative instruments for trading or speculative purposes.

The following table summarizes the fair value of derivative instruments as recorded in the Company’s condensed consolidated statements of financial condition (in thousands):

	September 30, 2014				December 31, 2013
	Balance Sheet Location	Fair Value			Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Foreign currency exchange contracts	Other liabilities	$	(1,449	)	Other liabilities	$	(4,123	)
Foreign currency exchange contracts	Other assets	791			Other assets	46
Derivatives not designated as hedging instruments:
Interest rate cap	Other assets	4			Other assets	202

The following table summarizes the effects of derivatives in cash flow hedging relationships on the Company’s condensed consolidated statements of income for the three and nine months endedSeptember 30, 2014 and 2013(in thousands):

	Gain or (Loss) Recognized in OCI- Effective Portion						Location of Gain or (Loss) Reclassified from OCI into Income - Effective Portion	Gain or (Loss) Reclassified from OCI into Income -  Effective Portion						Location of Gain or (Loss) Recognized - Ineffective Portion and Amount Excluded from Effectiveness Testing	Amount of Gain or (Loss) Recognized - Ineffective Portion and Amount Excluded from Effectiveness Testing
	Three Months Ended   September 30,							Three Months Ended   September 30,							Three Months Ended   September 30,
	2014			2013				2014			2013				2014		2013
Interest rate swaps	$	—		$	132		Interest expense	$	—		$	—		Other (expense) income	$	—	$	—
Foreign currency exchange contracts	(429		)	(1,871		)	Salaries and employee benefits	(243		)	(622		)	Other (expense) income	—		—
Foreign currency exchange contracts	(79		)	(381		)	General and administrative expenses	(46		)	(119		)	Other (expense) income	—		—

	Gain or (Loss) Recognized in OCI- Effective Portion					Location of Gain or (Loss) Reclassified from OCI into Income - Effective Portion	Gain or (Loss) Reclassified from OCI into Income -  Effective Portion						Location of Gain or (Loss) Recognized - Ineffective Portion and Amount Excluded from Effectiveness Testing	Amount of Gain or (Loss) Recognized - Ineffective Portion and Amount Excluded from Effectiveness Testing
	Nine Months Ended   September 30,						Nine Months Ended   September 30,							Nine Months Ended   September 30,
	2014		2013				2014			2013				2014		2013
Interest rate swaps	$	—	$	506		Interest expense	$	—		$	—		Other (expense) income	$	—	$	—
Foreign currency exchange contracts	2,215		(3,809		)	Salaries and employee benefits	(818		)	(890		)	Other (expense) income	—		—
Foreign currency exchange contracts	242		(809		)	General and administrative expenses	(143		)	(171		)	Other (expense) income	—		—