NOTE

— FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

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).

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 Canadian and New Zealand dollars, the Brazilian Real, South African Rand, Indian Rupee, 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.

The Company entered into interest rate cap agreements to hedge its exposure to interest rate movements and to manage its interest expense related to the Term Facility and designated these interest rate caps as a cash flow hedge. The Company receives payments on the cap for any period that the

one

-month USD-LIBOR rate increases beyond the strike rate. The termination date of the cap agreement is

May 31, 2023.

The detailed terms of the interest rate caps and the portion of the corporate Term Facility that they hedge are as follows:

	Interest Rate Caps	Corporate Debt
Trade date and borrowing date	May 29, 2018	March 27, 2018
Effective date	September 27, 2018	Not applicable
Termination date	May 31, 2023	March 31, 2025
Notional amount	$100,000,000	$100,000,000
Fixed interest rate (plus spread)	2.50% until November 30, 2018	Not applicable
	2.75% December 1, 2018 until April 30, 2019
	3.00% May 1, 2019 until maturity
Variable interest rate	1 month LIBOR	1 month LIBOR + 3.50%
Settlement	Monthly on last day of each month	Monthly on last day of each month
Interest payment dates	Monthly on last day of each month	Monthly on last day of each month
Reset dates	Last day of each month	Last day of each month

Changes in the fair value of this interest rate cap are recorded in accumulated other comprehensive income, pursuant to the guidelines of cash flow hedge accounting as outlined in ASC

815

and ASU

2017

12.

The Company does

not

expect any gains currently recorded in accumulated other comprehensive income to be recognized in earnings over the next

months. The cost of the interest rate cap will be amortized to interest expense over its life, from the effective date through termination date.

March 2019,

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

National Geographic Resolution

(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.

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 year ended

December 31, 2019.

The Company estimates that approximately

$1.2

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

months due to the 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. During the year ended

December 31, 2019,

$1.6

million loss, net of tax, was reclassified from other comprehensive income and recognized as a loss on foreign currency due to the maturity of a foreign exchange forward contract that was designated as a cash flow hedge.

The Company held the following derivative instruments with

absolute notional values a

s of

December 31, 2019:

(in thousands)	Absolute Notional Value
Interest rate caps	$	100,000
Foreign exchange contracts		127,488

Estimated fair values (Level

) of derivative instruments were as follows:

	As of December 31,
	2019				2018

(In thousands)	Fair Value, Asset Derivatives		Fair Value, Liability Derivatives		Fair Value, Asset Derivatives		Fair Value, Liability Derivatives
Derivative instruments designated as cash flow hedging instruments:
Foreign exchange forward (a)	$	-	$	4,459	$	-	$	-
Interest rate cap (b)		138		-		710		-
Total	$	138	$	4,459	$	710	$	-
Derivative instruments not designated as cash flow hedging instruments:
Foreign exchange forward (c)	$	459	$	70	$	-	$	1,328
Total	$	459	$	70	$	-	$	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 prepaid expenses and other current assets, and accounts payable and accrued expenses.

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

	For the years ended December 31,
(In thousands)	2019			2018			2017
Derivative instruments designated as cash flow hedging instruments:
Foreign exchange forward (a)	$	(5,062	)	$	-		$	-
Interest rate cap (b)		(572	)		(671	)		-

Derivative instruments not designated as cash flow hedging instruments:
Foreign exchange forward (c)		1,718			(2,175	)		1,144
Total	$	(3,916	)	$	(2,846	)	$	1,144

__________

	(a)	For the year ended December 31, 2019, $1.6 million was recognized as a loss on foreign currency in the condensed consolidated statements of income, and $3.4 million, was recognized, net of tax, as a component of other comprehensive income (loss) within stockholders’ equity.
	(b)	Recognized, net of tax, as a component of other comprehensive income (loss) within stockholders’ equity.
	(c)	Gains (losses) related to derivative instruments are expected to be largely offset by (losses) gains on the underlying exposures being hedged. During the years ended December 31, 2019, 2018 and 2017, a gain of $1.7 million, a loss of $2.2 million and a gain of $1.1 million, respectively, was recognized in gain (loss) on foreign currency.