Derivative Financial Instruments

The Company is subject to volatility in interest rates due to variable-rate debt. To manage this risk, the Company has entered into an interest rate swap agreement of $100 million of variable interest-rate debt, which hedges 21% of the Company's outstanding variable-rate debt as of June 30, 2019. The agreement converts the Company’s floating-rate debt to a fixed-rate basis for the next five years, thus reducing the impact of interest rate changes on future interest expense. This agreement involves the receipt of floating-rate amounts in exchange for fixed-rate interest payments over the life of the agreement without an exchange of the underlying notional amount. The Company's objective for utilizing this derivative instrument is to reduce its exposure to fluctuations in cash flows due to changes in interest rates.

The Company is subject to volatility in foreign exchange rates due to foreign-currency denominated intercompany loans between Australia and U.S. entities and the New Zealand and U.S. entities. The Company implemented cross-currency swaps to manage the foreign currency exchange rate risk on these intercompany loans. These agreements effectively mitigate the Company’s exposure to fluctuations in cash flows due to foreign exchange rate risk by converting the Company’s floating exchange rate to a fixed-rate basis for the life of the intercompany loans. These agreements involve the receipt of fixed USD amounts in exchange for payment of fixed AUD and NZD amounts over the life of the respective intercompany loan. The entirety of the Company’s outstanding intercompany loans receivable balances, $153.5 million AUD and $37.5 million NZD, were hedged under the cross-currency swap agreements at June 30, 2019.

In accordance with ASC 815, the Company designates the cross-currency swaps as cash flow hedges of future interest and principal repayments. The Company designates the interest rate swap as a cash flow hedge of variable-rate loans. The Company classifies cash inflow and outflows from derivatives within operating activities on the Condensed Consolidated Statements of Cash Flows.

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. Derivative asset balances are recorded on the Condensed Consolidated Balance Sheets within "Other assets" and derivative liability balances are recorded on the Condensed Consolidated Balance Sheets within "Accounts payable and accrued expenses". The following table illustrates the disclosure in tabular format of fair value amounts of derivative instruments at June 30, 2019 and December 31, 2018:



	Derivative Assets				Derivative Liabilities
	June 30, 2019		December 31, 2018		June 30, 2019		December 31, 2018
	(In thousands)
Derivatives formally designated as hedging instruments
Foreign exchange contracts	$	1,937	$	2,283	$	—	$	—
Interest rate contracts	—		—		3,638		—
Total derivatives formally designated as hedging instruments	$	1,937	$	2,283	$	3,638	$	—

The following tables present the amounts in the Condensed Consolidated Statements of Operations in which the effects of cash flow hedges are recorded and the effects of cash flow hedge activity on these line items for the three and six months ended June 30, 2019 and 2018, including the impacts to Accumulated Other Comprehensive Income (AOCI):



	Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivative						Location of Gain or (Loss) Reclassified from AOCI into Income	Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income

	Three Months Ended June 30,							Three Months Ended June 30,
	2019			2018				2019			2018
Derivatives in cash flow hedging relationships
Interest rate contracts	$	(2,230	)	$	(104	)	Interest expense	$	(2	)	$	308
Foreign exchange contracts	2,229			$	—		Foreign currency exchange (loss) gain, net	(1,760		)	—
Total designated cash flow hedges	$	(1	)	$	(104	)		$	(1,762	)	$	308



	Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivative						Location of Gain or (Loss) Reclassified from AOCI into Income	Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income

	Six Months Ended June 30,							Six Months Ended June 30,
	2019			2018				2019			2018
Derivatives in cash flow hedging relationships
Interest rate contracts	$	(3,638	)	$	(434	)	Interest expense	$	—		$	674
Foreign exchange contracts	(347		)	$	—		Foreign currency exchange gain, net	(492		)	—
Total designated cash flow hedges	$	(3,985	)	$	(434	)		$	(492	)	$	674

The amount of gains (losses), net of tax, related to the effective portion of derivative instruments designated as cash flow hedges included in accumulated other comprehensive loss for the three and six months ended June 30, 2019 and 2018, respectively.

The Company’s derivatives have been designated as cash flow hedges; therefore, the changes in the fair value of derivatives are recognized in AOCI and are reclassified into earnings in the same period or periods during which the hedged transaction affects earnings and is presented in the same income statement line item as the earnings effect of the hedged item. 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 the interest rate swap are recognized when payments or receipts occur related to the swap contracts, which correspond to when interest payments are made on the Company’s hedged debt. Amounts reclassified from AOCI into earnings related to realized gains and losses on foreign exchange rate swaps are recognized on each remeasurement date and the impact is recorded through foreign currency exchange gain (loss), net.

Refer to Note 19 for additional details regarding the impact of the Company’s derivatives on AOCI for the three and six months ended June 30, 2019 and 2018, respectively.