Derivative Instruments

9 Months Ended

Sep. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Interest Rate Swap Agreements

Effective March 31, 2017, the Company entered into interest rate swap arrangements with counterparties to reduce its exposure to variability in cash flows relating to interest payments on $300,000 of its outstanding Term Loan arrangements. Additionally, effective February 28, 2018, the Company entered into another interest rate swap relating to interest payments on $50,000 of its outstanding Term Loan arrangements. These hedging instruments mature on March 31, 2021. The Company applies hedge accounting by designating the interest rate swaps as a hedge on applicable future quarterly interest payments.

In April 2019, the Company entered into interest rate swap arrangements with counterparties to reduce its exposure to variability in cash flows relating to interest payments on $50,000 of its term loans, effective April 30, 2021. Additionally, in May 2019, the Company entered into additional interest rate swap arrangements with counterparties to reduce its exposure to variability in cash flows relating to interest payments on $100,000 of its term loan, effective March 2021. Both of these derivatives have notional amounts that amortize downward, and both have a maturity of September 2023. The Company will apply hedge accounting by designating the interest rate swaps as a hedge in applicable future quarterly interest payments.

Changes in the fair value are recorded in Accumulated other comprehensive loss ("AOCI") and the amounts reclassified out of AOCI are recorded to Interest expense, net. The fair value of the interest rate swaps is recorded in Other current assets or Accrued expenses and other current liabilities and Other non-current assets or liabilities, according to the duration of related cash flows. The total fair value of the interest rate swaps was a liability of $6,667 as of September 30, 2020 and a liability of $2,778 as of December 31, 2019.

In March 2020, the Company amended all of its interest rate derivatives to reduce the 1% LIBOR floor to a 0% LIBOR floor. For the current derivatives, all other terms and conditions remain unchanged. The Company collected $1,737 in the nine months ended September 30, 2020 for the amendments of these derivatives. For the two forward starting swaps, an adjustment was made to reduce the weighted average fixed rate from 2.183% at December 31, 2019 to 1.695% at the amendment date.

The Company had a period of ineffectiveness related to the cash flow hedges in the three months ended March 31, 2020. The ineffectiveness was due to a drop in LIBOR rates below the LIBOR floor defined per the credit facilities, which were amended on March 31, 2020 resulting in a highly effective hedge. As a result of the ineffectiveness, the Company recognized a loss of $0 and $979 for the three and nine months ended September 30, 2020, respectively, which was recorded to Interest expense, net on the Condensed Consolidated Statement of Operations. As of September 30, 2020, there was no hedge ineffectiveness associated with the Company’s interest rate swaps.

The following table summarizes the changes in AOCI (net of tax) related to cash flow hedges for the three and nine months ended September 30, 2020:


AOCI balance at December 31, 2019	$	(2,778)
Derivative losses recognized in Other comprehensive loss	(3,160)
Amount reclassified out of Other comprehensive loss to Net loss	270
AOCI balance at March 31, 2020	(5,668)
Derivative losses recognized in Other comprehensive loss	(1,109)
Amount reclassified out of Other comprehensive loss to Net loss	855
AOCI Balance at June 30, 2020	(5,922)
Derivative losses recognized in Other comprehensive loss	(66)
Amount reclassified out of Other comprehensive loss to Net loss	1,158
AOCI Balance at September 30, 2020	$	(4,830)

The following table summarizes the changes in AOCI (net of tax) related to cash flow hedges for the three and nine months ended September 30, 2019:


AOCI balance at December 31, 2018	$	3,644
Derivative losses recognized in Other comprehensive loss	(2,376)
Amount reclassified out of Other comprehensive loss to Net loss	430
AOCI balance at March 31, 2019	1,698
Derivative losses recognized in Other comprehensive loss	(4,247)
Amount reclassified out of Other comprehensive loss to Net loss	402
AOCI Balance at June 30, 2019	(2,147)
Derivative losses recognized in Other comprehensive loss	(1,271)
Amount reclassified out of Other comprehensive loss to Net loss	210
AOCI Balance at September 30, 2019	$	(3,208)

Foreign Currency Forward Contracts

In September 2020, the Company entered into two foreign exchange forward contracts to reduce its exposure to variability in cash flows relating to funding of the repayment of CPA Global's parent company outstanding debt on October 1, 2020. The nominal amount of outstanding foreign currency contracts was $1,075,837 and $0 as of September 30, 2020 and December 31, 2019, respectively.

The Company accounts for these forward contracts at fair value and recognizes the associated realized and unrealized gains and losses in Other operating income, net in the Condensed Consolidated Statements of Operations, as the contracts are not designated as accounting hedges under the applicable sections of ASC Topic 815. The total fair value of the forward contracts represented an asset balance of $2,903 as of September 30, 2020, which was classified within Other current assets. The Company recognized a gain from the mark to market adjustment of $2,903, in Other operating income, net on the Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2020.

See Note 11 — "Fair Value Measurements" for additional information on derivative instruments.