DERIVATIVE FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2013

Derivative Instruments And Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

NOTE 5—DERIVATIVE FINANCIAL INSTRUMENTS

We enter into derivative financial instruments primarily to hedge certain firm purchase commitments and forecasted transactions denominated in foreign currencies. We record these contracts at fair value on our consolidated balance sheets. Depending on the hedge designation at the inception of the contract, the related gains and losses on these contracts are either: (1) deferred as a component of AOCI until the hedged item is recognized in earnings; (2) offset against the change in fair value of the hedged firm commitment through earnings; or (3) recognized immediately in earnings. At the inception and on an ongoing basis, we assess the hedging relationship to determine its effectiveness in offsetting changes in cash flows or fair value attributable to the hedged risk. We exclude from our assessment of effectiveness the portion of the fair value of the forward contracts attributable to the difference between spot exchange rates and forward exchange rates. The ineffective portion of a derivative’s change in fair value and any portion excluded from the assessment of effectiveness are immediately recognized in earnings. Gains and losses on derivative financial instruments that are immediately recognized in earnings are included as a component of gain (loss) on foreign currency—net in our condensed consolidated statements of income.

At September 30, 2013, the majority of our foreign currency forward contracts were designated as cash flow hedging instruments. In addition, we deferred approximately $33.2 million of net losses on these derivative financial instruments in AOCI, and we expect to reclassify approximately $10.2 million of deferred losses out of AOCI by September 30, 2014, as hedged items are recognized in earnings.

The notional value of our outstanding derivative contracts totaled $1.3 billion at September 30, 2013, with maturities extending through 2017. Of this amount, approximately $721.6 million is associated with various foreign currency expenditures we expect to incur on one of our Asia Pacific segment EPCI projects. These instruments consist of contracts to purchase or sell foreign-denominated currencies. At September 30, 2013, the fair value of these contracts was in a net liability position totaling $17.6 million.

The following tables summarize our derivative financial instruments:

Asset and Liability Derivatives

	September 30, 2013		December 31, 2012
	(Unaudited)
	(In thousands)
Derivatives Designated as Hedges:
Location
Accounts receivable—other	$	11,270	$	12,311
Other assets		1,349		13,770
Total asset derivatives	$	12,619	$	26,081
Accounts payable	$	13,145	$	3,604
Other liabilities		17,043		1,043
Total liability derivatives	$	30,188	$	4,647

The Effects of Derivative Instruments on our Financial Statements

	Three Months Ended September 30,					Nine Months Ended September 30,
	2013			2012		2013			2012
	(Unaudited)
	(In thousands)
Derivatives Designated as Hedges:
Amount of loss recognized in other comprehensive income (loss)	$	24,743		$	19,324	$	(46,270	)	$	(4,880	)
Income (loss) reclassified from AOCI into income: effective portion
Location
Cost of operations	$	(270	)	$	2,867	$	(1,101	)	$	4,837
Loss recognized in income: ineffective portion and amount excluded from effectiveness testing
Location
Gain on foreign currency—net	$	3,136		$	3,546	$	7,578		$	15,011