Note 4 - Derivative Instruments and Hedging Activities

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

4.   Derivative Instruments and Hedging Activities

The Company records all derivatives in accordance with ASC 815, Derivatives and Hedging, which requires derivative instruments to be reported on the condensed consolidated balance sheets at fair value and establishes criteria for designation and effectiveness of hedging relationships. The Company is exposed to market risk such as changes in commodity prices, foreign currencies and interest rates. The Company does not hold or issue derivative financial instruments for trading purposes.

The Company periodically utilizes commodity derivatives and foreign currency forward purchase and sales contracts in the normal course of business. Because these contracts do not qualify for hedge accounting, the related gains and losses are recorded in the Company’s condensed consolidated statements of comprehensive income. These gains and losses are not material to the Company’s condensed consolidated financial statements.

Interest Rate Swaps

In 2017, the Company entered into twenty interest rate swap agreements, sixteen of which were still outstanding as of March 31, 2020. In December 2019, in conjunction with the amendment to its term loan, the Company amended those interest rate swaps to remove the LIBOR floor, which also resulted in minor reductions to the future dated swap fixed rates. In March 2020, the Company entered into three interest rate swap agreements, bringing the total outstanding interest rate swaps to nineteen as of March 31, 2020. The Company formally documented all relationships between interest rate hedging instruments and the related hedged items, as well as its risk-management objectives and strategies for undertaking various hedge transactions. These interest rate swap agreements qualify as cash flow hedges and therefore, the effective portions of the gains or losses are reported as a component of accumulated other comprehensive loss (AOCL) in the condensed consolidated balance sheets. The amount of losses, net of tax, recognized for the three months ended March 31, 2020 and 2019 were $(15,813) and $(5,124) respectively. The cash flows of the swaps are recognized as adjustments to interest expense each period. The ineffective portions of the derivatives’ changes in fair value, if any, are immediately recognized in earnings.

Fair Value 

The following table presents the fair value of all of the Company’s derivatives:

	March 31, 2020			December 31, 2019
Commodity contracts	$	(1,810	)	$	6
Foreign currency contracts		210			31
Interest rate swaps		(31,579	)		(10,425	)

The fair value of the foreign currency contracts is included in prepaid expenses and other current assets, and the fair values of the commodity and interest rate swaps are included in other accrued liabilities and other long-term liabilities in the condensed consolidated balance sheets as of March 31, 2020. The fair values of the commodity and foreign currency contracts are included in prepaid expenses and other current assets, and the fair value of the interest rate swaps is included in other accrued liabilities and other long-term liabilities in the consolidated balance sheets as of December 31, 2019. Excluding the impact of credit risk, the fair value of the derivative contracts as of March 31, 2020 and December 31, 2019 is a liability of $34,226 and $10,588, respectively, which represent the amount the Company would pay upon exit of the agreements on those dates.