Derivative Instruments |
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Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments | DERIVATIVE INSTRUMENTS Interest Rate Derivative Instruments We are exposed to the risk that our earnings and cash flows could be adversely impacted due to fluctuations in interest rates. We will periodically enter into interest rate swaps to manage interest costs in which we agree to exchange, at specified intervals, the difference between variable and fixed interest amounts calculated by reference to an agreed-upon notional amount. Derivative instruments are not used for trading purposes or to manage exposure to changes in interest rates for investment securities, and our outstanding derivative instrument does not contain credit risk related contingent features. Collateral is generally not required. On December 20, 2017, we terminated the derivative instruments entered into on May 5, 2016 and May 5, 2015, to hedge a portion of our exposure to interest rate risk under the variable-rate portion of the Credit Agreement. We received $0.4 million in cash for the fair value of the derivative instruments, reduced other current and other non-current assets by $0.4 million, and reduced accumulated other comprehensive loss by $0.4 million on the Consolidated Balance Sheet. In addition, we decreased interest expense on the Consolidated Statements of Income by $0.4 million. On December 20, 2017, we entered into a derivative instrument to hedge a portion of our exposure to interest rate risk under the variable-rate portion of the Amended Term Loan (the amended interest rate swap). The amended interest rate swap is designated and qualifies as an effective cash flow hedge. The contract, with a notional amount totaling $31.6 million at December 31, 2017, is recorded at fair value. The amended interest rate swap is measured at fair value on a recurring basis and is determined using the income approach based on a discounted cash flow model to determine the present value of future cash flows over the remaining term of the contract incorporating observable market inputs such as prevailing interest rates as of the reporting date (Level 2). Changes in fair value of the interest rate swap are recorded, net of tax, as a component of accumulated other comprehensive loss in the accompanying Consolidated Balance Sheets. We reclassify the effective gain or loss from accumulated other comprehensive loss, net of tax, to interest expense on the Consolidated Statements of Income as the interest expense is recognized on the related debt. The ineffective portion of the change in fair value of the interest rate swap, if any, is recognized directly in earnings in interest expense. The following table summarizes the amount at fair value and location of the derivative instrument in the Consolidated Balance Sheet as of December 31, 2017:
The following table summarizes the amount at fair value and location of the terminated derivative instruments in the Consolidated Balance Sheet as of December 31, 2016:
By utilizing interest rate swaps, we are exposed to credit-related losses in the event that the counterparty fails to perform under the terms of the derivative contract. To mitigate this risk, we entered into the interest rate swap with a major financial institution based upon credit ratings and other factors. We regularly assess the creditworthiness of the counterparty. As of December 31, 2017, the counterparty to the interest rate swap had performed in accordance with its contractual obligations. Both the counterparty credit risk and our credit risk were considered in the fair value determination. Foreign Currency Derivative Instrument We transact business in various foreign countries and are therefore exposed to foreign currency exchange rate risk that impacts the reported U.S. dollar amounts of revenues, costs, and certain foreign currency monetary assets and liabilities. In order to manage exposure to fluctuations in foreign currency and to reduce the volatility in cash flows and earnings caused by fluctuations in foreign exchange rates, we entered into forward contracts to buy and sell foreign currency. By policy, we do not enter into these contracts for trading purposes or speculation. Counterparty default risk is considered low because the forward contracts that we entered into are over-the-counter instruments transacted with highly-rated financial institutions. We were not required to, and did not, post collateral as of December 31, 2017. Our foreign currency derivative instruments are recorded at fair value as a derivative asset or liability in the Consolidated Balance Sheet. The foreign currency forward contracts are measured at fair value on a recurring basis and are determined using the income approach based on a discounted cash flow model to determine the present value of future cash flows over the remaining term of the contract incorporating observable market inputs such as prevailing foreign currency exchange rates as of the reporting date (Level 2). Changes in fair value are recognized within selling, general and administrative expense in the Consolidated Statement of Income. In the Consolidated Statements Cash Flows, we classify cash flows from foreign currency derivative instruments at settlement in the same category as the cash flows from the related hedged item, generally within cash provided by operating activities. We reported $0.1 million realized gain from foreign currency derivative instruments within selling, general and administrative expense in the Consolidated Statement of Income for the year ended December 31, 2017 and $0.1 million in other current assets on the Consolidated Balance Sheet as of December 31, 2017. The notional amounts of outstanding foreign currency forward exchange contracts shown below report the total U.S. dollar equivalent position of all contracts for each foreign currency position.
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