NOTE

– FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Derivative Instruments and Hedging Activities

The Company’s derivative assets and liabilities consist principally of foreign exchange forward contracts and interest rate caps and are carried at fair value based on significant observable inputs (Level

inputs). Derivatives entered into by the Company are typically executed over-the-counter and are valued using internal valuation techniques, as quoted market prices are

not

readily available. The valuation technique and inputs depend on the type of derivative and the nature of the underlying exposure. The Company principally uses discounted cash flows along with fair value models that primarily use market observable inputs. These models take into account a variety of factors including, where applicable, maturity, currency exchange rates, interest rate yield curves and counterparty credit risks.

Currency Risk

. The Company uses currency exchange contracts to manage its exposure to changes in currency exchange rates associated with certain of its non-U.S.-dollar denominated receivables and payables. The Company primarily hedges a portion of its current-year currency exposure to the Australian, Canadian, New Zealand and Zimbabwe dollars, the Euro and the British pound sterling. The fluctuations in the value of these forward contracts largely offset the impact of changes in the value of the underlying risk they economically hedge.

March 2019,

the Company entered into foreign exchange forward contracts, designated as cash flow hedges, to hedge its exposure to Norwegian Kroner ("NOK"), related to the Company’s contract to purchase the new polar ice-class vessel (see Note

– Commitments and Contingencies). The cost of the foreign exchange forward contracts will be amortized to interest expense over their lives, from the effective date through settlement dates.

Interest Rate Risk

. The Company uses interest rate caps, designated as cash flow hedges, to manage the risk related to its floating rate corporate debt.

The Company records the effective portion of changes in the fair value of its cash flow hedges to other comprehensive income (loss), net of tax, and subsequently reclassifies these amounts into earnings in the period during which the hedged transaction is recognized. Any changes in fair values of hedges that are determined to be ineffective are immediately reclassified from accumulated other comprehensive income (loss) into earnings.

gains or losses of the Company’s cash flow hedges were considered to be ineffective and reclassified from other comprehensive income (loss) to earnings for the period ended

March 31, 2019.

The Company estimates that approximately

$0.3

million of losses currently recorded in accumulated other comprehensive income (loss) will be recognized in earnings over the next

months due to maturity of the cash flow hedge and the hedged item. The Company will continue to assess the effectiveness of the hedges on an ongoing basis.

The Company held the following derivative instruments with absolute notional values as of

March 31, 2019:

(in thousands)	Absolute Notional Value
Interest rate caps	$	100,000
Foreign exchange contracts		150,131

Estimated fair values (Level

) of derivative instruments were as follows:

	As of March 31, 2019				As of December 31, 2018
	(unaudited)
(in thousands)	Fair Value, Asset Derivatives		Fair Value, Liability Derivatives		Fair Value, Asset Derivatives		Fair Value, Asset Derivatives
Derivatives designated as hedging instruments
Foreign exchange forward (a)	$	-	$	1,629	$	-	$	-
Interest rate cap (b)		560		-		710		-
Total	$	560	$	1,629	$	710	$	-
Derivatives not designated as hedging instruments
Foreign exchange forward (c)	$	-	$	672	$	-	$	1,328
Total	$	-	$	672	$	-	$	1,328

_________

(a)

Recorded in accounts payable and accrued expenses and other long-term liabilities.

(b)

Recorded in prepaid expenses and other current assets and other long-term assets.

(c)

Recorded in accounts payable and accrued expenses.

Changes in the fair value of the Company’s hedging instruments are recorded in accumulated other comprehensive income, pursuant to the guidelines of cash flow hedge accounting as outlined in ASC

815.

The effects of derivatives recognized in the Company’s condensed consolidated financial statements were as follows:

	Three Months Ended March 31,
(In thousands)	2019		2018
	(unaudited)
Derivatives designated as hedging instruments (a) :
Foreign exchange forward contracts	$	1,488	$	-
Interest rate caps		149		-

Derivatives not designated as hedging instruments (b) :
Foreign exchange forward contracts		656		(451	)
Total	$	2,293	$	(451	)

__________

(a)

Recognized, net of tax, as a component of other comprehensive income (loss) within stockholders’ equity.

(b)

Gains (losses) related to derivative instruments are expected to be largely offset by (losses) gains on the underlying exposures being hedged. During the

three

months ended

March 31, 2019,

a gain of

$0.7

million was recognized in gain (loss) on foreign currency. During the

three

months ended

March 31, 2018,

a loss of

$0.5

million was recognized in gain (loss) on foreign currency.

Fair Value Measurements

The carrying amounts of cash and cash equivalents, accounts payable and accrued expenses, approximate fair value due to the short-term nature of these instruments. The carrying value of long-term debt approximates fair value given that the terms of the agreement were comparable to the market as of

March 31, 2019.

As of

March 31, 2019

and

December 31, 2018,

the Company had

other significant liabilities that were measured at fair value on a recurring basis.