Derivatives

9 Months Ended

Sep. 30, 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 June 30, 2019, we terminated a $20.0 million interest rate swap with JPMorgan Chase Bank, N.A. The termination of this interest rate swap discontinued the cash flow hedging relationship for our line of credit and had unrealized gains. As of June 30, 2019, we reclassified $0.1 million, net of tax, of unrealized gains from accumulated other comprehensive losses to other income.

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 September 30, 2019, total outstanding contract notional amounts were $17.6 million. At September 30, 2019, these outstanding balance sheet hedging derivatives had maturities of 108 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
		September 30, 2019		December 31, 2018
Derivative instruments designated as cash flow hedges:
Interest rate swap contract	Prepaids and other current assets	$	—	$	291
	Other assets	—		72
		$	—	$	363
Derivative instruments not designated as cash flow hedges:
Foreign currency forward contracts	Prepaids and other current assets	$	—	$	240
	Accrued liabilities	218		—
		$	218	$	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 September 30,						Nine Months Ended September 30,
		2019			2018			2019			2018
Derivative instruments designated as cash flow hedges:
Income (loss) recognized in other comprehensive (loss) income before reclassifications	---	$	—		$	28		$	(128	)	$	242
Income reclassified from accumulated other comprehensive (loss) income to earnings for the effective portion	Interest expense	—			65			125			140
Income tax benefit	Income tax expense (benefit)	—			(19		)	(30		)	(36		)
Derivative instruments not designated as cash flow hedges:
Loss recognized in earnings	Other, net	$	(388	)	$	(601	)	$	(101	)	$	(2,525	)
Income tax expense	Income tax expense (benefit)	91			176			22			624

For additional information related to our derivatives, see Notes 4 and 12.