Derivative Financial Instruments

The Company’s objective for utilizing derivative instruments is to reduce its exposure to fluctuations in cash flows due to changes in the variable interest rates related to certain indebtedness of its foreign subsidiaries. The Company’s strategy to achieve that objective involves entering into interest rate swap contracts. There have been no significant changes in the Company's policy or strategy for utilizing derivative instruments from what was disclosed in its consolidated financial statements contained in the Annual Report on Form 10-K for the year ended December 31, 2017.

As of March 31, 2018 and December 31, 2017, the aggregate fair values of these cash flow hedges were $2.4 million and $2.5 million, respectively, which are included in the "Accounts payable and accrued expenses" line of the accompanying condensed consolidated balance sheets. The Company determines the fair value of these derivative instruments using a present value calculation with significant observable inputs classified as Level 2 of the fair value hierarchy.

The following table summarizes the impact of the Company’s interest rate swaps designated as cash flow hedges on the results of operations and Other Comprehensive Income (OCI) during the three-month period ended March 31, 2018 and 2017:



	Three Months Ended March 31,
	2018			2017
	(In thousands)
(Gain) loss recognized as OCI, net of tax (effective portion)	$	(36	)	$	348
Loss reclassified from AOCI into interest expense, net of tax	365			376

The Company’s derivatives have been designated as cash flow hedges; therefore, the effective portion of the changes in the fair value of derivatives will be recognized in AOCI. As the critical terms of the interest rate swaps match the underlying debt being hedged, no ineffectiveness is recognized on these swaps and, therefore, all unrealized changes in fair value are recorded in AOCI. The Company classifies cash inflows and outflows from derivatives within operating activities on the statement of cash flows. Amounts reclassified from AOCI into earnings related to realized gains and losses on interest rate swaps are recognized when interest payments or receipts occur related to the swap contracts, which correspond to when interest payments are made on the Company’s hedged debt.

Refer to Note 14 for additional details regarding the impact of the Company's derivatives on AOCI for the three months ended March 31, 2018 and 2017.