

11.	FINANCIAL INSTRUMENTS

Derivatives

Interest Rate Derivative—On December 5, 2019, the Company entered into a three year interest rate swap agreement with Bank of America in order to mitigate exposure to the market risk associated with the variable interest on the $400,000 term loan. The Company has designated its interest rate swap agreement as a cash flow hedging derivative. To the extent the derivative instrument is effective and the documentation requirements have been met, changes in fair value are recognized in other comprehensive income until the underlying hedged item is recognized in earnings. As of March 31, 2020, the notional value of the swap contract was $350,000 and the fair value of the swap contract was a loss of $9,524. We utilized Level 2 inputs in the fair value hierarchy of valuation techniques to determine the fair value of the swap contract.

Financial Instruments Disclosures

Fair Value—Financial instruments are required to be categorized within a valuation hierarchy based upon the lowest level of input that is significant to the fair value measurement. The three levels of the valuation hierarchy are as follows:

• Level 1—Fair value is based on quoted prices in active markets.

•

Level 2—Fair value is based on internally developed models that use, as their basis, readily observable market parameters. Our derivative positions are classified within level 2 of the valuation hierarchy as they are valued using quoted market prices for similar assets and liabilities in active markets. These level 2 derivatives are valued utilizing an income approach, which discounts future cash flow based on current market expectations and adjusts for credit risk.


•	Level 3—Fair value is based on internally developed models that use, as their basis, significant unobservable market parameters. The Company did not have any level 3 classifications at March 31, 2020 or December 31, 2019.

The following table presents the fair value of the interest rate derivative by valuation hierarchy and balance sheet classification:



	March 31, 2020										December 31, 2019
	Level 1		Level 2			Level 3		Total			Level 1		Level 2			Level 3		Total
Derivative Assets
Other current assets	$	—	$	—		$	—	$	—		$	—	$	216		$	—	$	216
Other non-current assets	—		—			—		—			—		—			—		—
Total assets at fair value	$	—	$	—		$	—	$	—		$	—	$	216		$	—	$	216
Derivative Liabilities
Other current liabilities	$	—	$	(4,086	)	$	—	$	(4,086	)	$	—	$	(61	)	$	—	$	(61	)
Other non-current liabilities	—		(5,438		)	—		(5,438		)	—		(398		)	—		(398		)
Total liabilities at fair value	$	—	$	(9,524	)	$	—	$	(9,524	)	$	—	$	(459	)	$	—	$	(459	)

The carrying values of the Company's cash and cash equivalents (primarily consisting of bank deposits), accounts receivable and accounts payable approximate their fair values because of the short-term nature of these instruments. At March 31, 2020, the fair value of the term loan, based upon the current market rates for debt with similar credit risk and maturities, approximated its carrying value as interest is based on LIBOR plus an applicable margin.

Derivatives Disclosures

AOCI/Other—The following table presents the change in other comprehensive income (“OCI”) during the three months ended March 31, 2020 for derivatives designated as cash flow hedges:



	Before Tax Amount			Tax Amount			Net of Tax Amount
Net gain (loss) recognized in OCI	$	(9,174	)	$	2,064		$	(7,110	)
Net amount reclassified from AOCI into earnings⁽¹⁾	63			(14		)	49
Change in OCI	$	(9,111	)	$	2,050		$	(7,061	)

⁽¹⁾Net unrealized losses totaling $3,946 are anticipated to be reclassified from AOCI into interest expense during the next 12 months due to settlement of the associated underlying obligations.