The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity and credit risk primarily by managing the amount, sources and duration of its assets and liabilities and the use of derivatives. Specifically, the Company enters into derivatives to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s interest rate derivatives are used to manage differences in the amount, timing and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings. Certain of the Company’s foreign operations also expose it to fluctuations of foreign exchange rates. These fluctuations may impact the value of the Company’s cash receipts and payments in terms of its functional currency. The Company enters into foreign currency derivatives to protect the value or fix the amount of certain liabilities in terms of its functional currency, the U.S. dollar.

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps and caps as part of its interest rate risk management strategy. Interest rate swaps involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium.

Prior to March 5, 2020, the Company’s interest rate derivatives were designated and qualified as cash flow hedges of interest rate risk, where the gains or losses for changes in the fair values of these derivatives were recorded in accumulated other comprehensive income or loss and subsequently reclassified into interest expense in the same period that the hedged transactions affected earnings. Gains or losses for changes in the fair values of these derivatives that represented hedge components excluded from the assessment of effectiveness were recognized over the life of the hedge on a systematic and rational basis, as documented at hedge inception in accordance with the Company’s accounting policy election. The earnings recognition of excluded components, if any, were presented in interest expense. Amounts reported in accumulated other comprehensive income or loss related to derivatives were reclassified to interest expense as interest payments were made on the Company’s variable-rate debt.

On March 5, 2020, given the potential for changes in the Company’s future expected interest payments that are hedged by these interest rate derivatives as a result of the Merger Agreement, such derivatives no longer qualified as cash flow hedges of interest rate risk and were dedesignated as such. Following this dedesignation, all gains or losses for changes in the fair values of the Company’s interest rate derivatives are recognized in interest expense. The cumulative remaining unrealized losses at the dedesignation date that were previously recognized in accumulated other comprehensive loss were amortized to interest expense over the remaining contractual terms for the Company’s interest rate derivatives from March 5, 2020 to June 30, 2020. On June 30, 2020, the Company updated its probability assessment for the potential changes in its future expected interest payments that are hedged by these interest rate derivatives due to the progression of the Merger, and all cumulative remaining unrealized losses, net of tax, that were previously recognized in accumulated other comprehensive loss were reclassified to interest expense. Interest expense for the three and six months ended June 30, 2020 includes unrealized losses of $0.1 million and $0.3 million for changes in the fair values of the Company’s interest rate derivatives, respectively, and $0.4 million of cumulative remaining unrealized losses were reclassified from accumulated other comprehensive loss to interest expense on June 30, 2020.

The Company uses foreign currency derivatives, including cross-currency swaps, to manage its exposure to fluctuations in the U.S. dollar-to-euro exchange rate. Cross-currency swaps involve exchanging fixed-rate interest payments for fixed-rate interest receipts, both of which will occur at the U.S. dollar-to-euro forward exchange rates in effect upon entering into the instrument. The Company designates these derivatives as cash flow hedges of foreign exchange risks.

For derivatives that were designated and qualified as cash flow hedges of foreign exchange risk, the gains or losses for changes in the fair values of these derivatives were recorded in accumulated other comprehensive income or loss and subsequently reclassified in the period that the hedged transaction affected earnings within the same income statement line item as the earnings effect of the hedged transaction. On June 30, 2020, given the potential for changes in the Company’s future expected foreign currency exchanges that are hedged by the cross-currency swap due to the progression of the Merger, this derivative no longer qualified as a cash flow hedge of foreign exchange risk and was dedesignated as such. Following this dedesignation, all gains or losses for changes in the fair value of the Company’s cross-currency swap will be recognized in interest expense. In addition, $0.1 million of cumulative remaining unrealized gains, net of tax, that were previously recognized in accumulated other comprehensive loss were reclassified to interest expense on June 30, 2020.



(in thousands)	Amount of Loss (Gain) Reclassified from Other Comprehensive Income into Income or Loss
Location of Loss (Gain) Reclassified from Other Comprehensive Income into Income or Loss
	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Interest expense	$	467		$	(31	)	$	481		$	(83	)
Interest expense on foreign currency transactions	(233		)	(200		)	(355		)	(403		)
Foreign currency transactions	806			569			44			(298		)
Total loss (gain) reclassified	$	1,040		$	338		$	170		$	(784	)



(in thousands)	Amount of (Loss) Gain Recognized in Other Comprehensive Income from Derivatives
Derivatives in Cash Flow Hedging Relationships	Three Months Ended June 30,						Six Months Ended June 30,
Derivatives in Cash Flow Hedging Relationships	2020			2019			2020			2019
Interest rate products	$	—		$	(70	)	$	(583	)	$	(130	)
Cross-currency swap	(584		)	(111		)	1,276			1,163
Total unrealized (loss) gain	$	(584	)	$	(181	)	$	693		$	1,033



	Interest Expense
	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2020			2019			2020			2019
Total amounts of interest expense presented in the consolidated statements of operations	$	(554	)	$	(328	)	$	(950	)	$	(731	)
Loss on derivatives not designated as a hedging instrument:
Amount of loss related to changes in fair values of interest rate derivatives not designated as a hedging instrument	$	(94	)	$	—		$	(263	)	$	—

Gain (loss) on cash flow hedging relationships:
Amount of gain reclassified from accumulated other comprehensive loss into income or loss	$	118		$	231		$	243		$	486
Amount of loss reclassified from accumulated other comprehensive loss into income or loss as a result of a forecasted transaction being no longer probable of occurring	$	(352	)	$	—		$	(369	)	$	—



	Foreign Currency Transactions
	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2020			2019			2020			2019
Total amounts of gain (loss) on foreign currency transactions presented in the consolidated statements of operations	$	3		$	(2	)	$	(4	)	$	(68	)
(Loss) gain on cash flow hedging relationships:
Amount of (loss) gain reclassified from accumulated other comprehensive loss into income or loss	$	(806	)	$	(569	)	$	(44	)	$	298



		Fair Value of Derivatives
		Asset Derivatives				Liability Derivatives
		June 30, 2020		December 31, 2019		June 30, 2020			December 31, 2019
(in thousands)	Balance Sheet Location	Fair Value		Fair Value		Fair Value			Fair Value
Derivatives not designated as hedging instruments:
Interest rate products	Accrued liabilities	$	—	$	—	$	(401	)	$	—
Interest rate products	Long-term derivative liabilities	—		—		(438		)	—
Cross-currency swap	Prepaid expenses and other current assets	566		—		—			—
Cross-currency swap	Long-term derivative liabilities	—		—		(475		)	—

Derivatives designated as hedging instruments:
Interest rate products	Prepaid expenses and other current assets	—		15		—			—
Interest rate products	Accrued liabilities	—		—		—			(12		)
Interest rate products	Long-term derivative liabilities	—		—		—			(9		)
Cross-currency swap	Prepaid expenses and other current assets	—		568		—			—
Cross-currency swap	Long-term derivative liabilities	—		—		—			(1,442		)
Total derivatives		$	566	$	583	$	(1,314	)	$	(1,463	)

The fair values of the Company’s derivatives are determined using widely-accepted valuation techniques, including a discounted cash flows analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the periods to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair values of the interest rate swaps and the cross-currency swap are determined using the market-standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.

The fair value of the interest rate cap is determined using the market-standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the cap. The variable interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities.

The Company incorporates credit valuation adjustments to appropriately reflect both its non-performance risk and the respective counterparty’s non-performance risk in the fair value measurements. In adjusting the fair value of the Company’s derivative contracts for the effect of non-performance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees. The Company made an accounting policy election to measure the credit risk of its derivatives that are subject to master netting agreements on a net basis by counterparty portfolio.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. The Company has determined the impact of the credit valuation adjustments made to its derivative contracts, which determination was based on the fair value of each individual contract, was not significant to the overall valuation. As a result, all of the Company’s derivatives held as of June 30, 2020 and 2019 were classified as Level 2 within the fair value hierarchy.

As of June 30, 2020, the fair values of the Company’s derivatives were in a net liability position of $0.7 million for the aggregate of its contracts, which included accrued interest but excluded any adjustment for non-performance risk. As of June 30, 2020, the Company had not posted any collateral related to these contracts. If the Company had breached any credit-risk related provisions as of June 30, 2020, it could have been required to settle its obligations under the contracts at their termination value of $0.7 million.