Derivatives

3 Months Ended

Mar. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

DERIVATIVES

From time to time, we enter into interest rate swaps to fix a portion of our interest expense, and foreign exchange forward contracts to offset the earnings impacts of exchange rate fluctuations on certain monetary assets and liabilities. We do not enter into derivative instruments for any purpose other than to manage interest rate or foreign currency exposure. That is, we do not engage in interest rate or currency exchange rate speculation using derivative instruments.

As of March 31, 2019, we had a $20.0 million interest rate swap outstanding with JPMorgan Chase Bank, N.A. This interest rate swap matures on June 30, 2020 and has a fixed rate of 1.42% per annum. The variable rate on the interest rate swap is the one-month LIBOR benchmark. At March 31, 2019, the one-month LIBOR rate was 2.49%.

We typically designate all interest rate swaps as cash flow hedges and, accordingly, record the change in fair value for the effective portion of these interest rate swaps in accumulated other comprehensive income rather than current period earnings until the underlying hedged transaction affects earnings. Gains and losses on the derivative representing hedge ineffectiveness are recognized in current earnings. For the three months ended March 31, 2019, there was no ineffectiveness. As of March 31, 2019, we expect to reclassify a gain of $0.2 million from accumulated other comprehensive loss to earnings within the next twelve months.

We may hedge our net recognized foreign currency assets and liabilities with forward foreign exchange contracts to reduce the risk that our earnings and cash flows will be adversely affected by changes in foreign currency exchange rates. These derivative instruments hedge assets and liabilities that are denominated in foreign currencies and are carried at fair value with changes in the fair value recorded as other income. These derivative instruments do not subject us to material balance sheet risk due to exchange rate movements because gains and losses on these derivatives are intended to offset gains and losses on the assets and liabilities being hedged. As of March 31, 2019, total outstanding contract notional amounts were $14.5 million. At March 31, 2019, these outstanding balance sheet hedging derivatives had maturities of 110 days or less.

The fair value of our derivative instruments was included in our condensed consolidated balance sheets as follows (in thousands):

	Balance Sheet Classification	As of
		March 31, 2019		December 31, 2018
Derivative instruments designated as cash flow hedges:
Interest rate swap contract	Prepaids and other current assets	$	225	$	291
	Other assets	5		72
		$	230	$	363
Derivative instruments not designated as cash flow hedges:
Foreign currency forward contracts	Prepaids and other current assets	$	116	$	240
		$	116	$	240

The effect of derivative instruments on our condensed consolidated statements of operations was as follows (in thousands):

	Statement of Operations Classification	Three Months Ended March 31,
		2019			2018
Derivative instruments designated as cash flow hedges:
Income (loss) recognized in other comprehensive income (loss) before reclassifications	---	$	(35	)	$	160
Loss reclassified from accumulated other comprehensive loss to earnings for the effective portion	Interest expense	81			21
Income tax expense	Income tax (benefit) expense	(16		)	(5		)
Derivative instruments not designated as cash flow hedges:
Loss recognized in earnings	Other, net	$	505		$	1,029
Income tax benefit	Income tax (benefit) expense	(101		)	(244		)

For additional information related to our derivatives, see Notes 3 and 11.