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Derivative Instruments And Hedging Activities | 9 Months Ended
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Sep. 30, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments And Hedging Activities | Derivative Instruments and Hedging Activities Our business is exposed to market risks associated with interest rates and foreign currency exchange rates. Our risk management activities involve the use of derivative financial instruments to hedge the impact of market risk exposure related to variable interest rates and foreign currency exchange rates. To reduce the impact of these risks on earnings and increase the predictability of our cash flows, from time to time we enter into certain derivative contracts, including interest rate swaps and foreign currency exchange contracts. All derivative instruments are reflected in the accompanying condensed consolidated balance sheets at fair value. We engage solely in cash flow hedges. Hedges of cash flow exposure are entered into to hedge a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability. Changes in the fair value of derivative instruments that are designated as cash flow hedges are reported in Accumulated OCI to the extent that the hedges are effective. These changes are subsequently reclassified into earnings when the hedged transactions settle. The ineffective portion of changes in the fair value of cash flow hedges is recognized immediately in earnings. In addition, any change in the fair value of a derivative instrument that does not qualify for hedge accounting is recorded in earnings in the period in which the change occurs. For additional information regarding our accounting for derivative instruments and hedging activities, see Notes 2 and 17 to our 2017 Form 10-K. Interest Rate Risk From time to time, we enter into interest rate swaps to stabilize cash flows related to our long-term variable interest rate debt. In June 2015 we entered into various interest rate swap contracts to fix the interest rate on $187.5 million of our Nordea Q5000 Loan borrowings (Note 6). These swap contracts, which are settled monthly, began in June 2015 and extend through April 2020. Our interest rate swap contracts qualify for cash flow hedge accounting treatment. Changes in the fair value of interest rate swaps are reported in Accumulated OCI to the extent the swaps are effective. These changes are subsequently reclassified into earnings when the anticipated interest is recognized as interest expense. The ineffective portion of the interest rate swaps, if any, is recognized immediately in earnings within the line titled “Net interest expense.” The amount of ineffectiveness associated with our interest rate swap contracts was immaterial for all periods presented. Foreign Currency Exchange Rate Risk Because we operate in various regions around the world, we conduct a portion of our business in currencies other than the U.S. dollar. We enter into foreign currency exchange contracts from time to time to stabilize expected cash outflows related to our vessel charters that are denominated in foreign currencies. In February 2013, we entered into similar foreign currency exchange contracts to hedge our foreign currency exposure associated with the Grand Canyon II and Grand Canyon III charter payments denominated in Norwegian kroner through July 2019 and February 2020, respectively. Unrealized losses associated with the effective portion of our foreign currency exchange contracts that qualify for hedge accounting treatment are included in our Accumulated OCI (net of tax). Changes in unrealized losses associated with the foreign currency exchange contracts that are not designated as cash flow hedges are reflected in “Other income (expense), net” in the accompanying condensed consolidated statements of operations. Hedge ineffectiveness also is reflected in “Other income (expense), net” in the accompanying condensed consolidated statements of operations. There were no gains or losses associated with hedge ineffectiveness for the three- and nine-month periods ended September 30, 2018 and 2017. Quantitative Disclosures Relating to Derivative Instruments The following table presents the balance sheet location and fair value of our derivative instruments that were designated as hedging instruments (in thousands):
| September 30, 2018 |  | December 31, 2017
| Balance Sheet Location |  | Fair Value |  | Balance Sheet Location |  | Fair Value
Asset Derivative Instruments: |  |  |  |  |  |  |
Interest rate swaps | Other current assets |  | $ | 972 |  |  | Other current assets |  | $ | 311 |
Interest rate swaps | Other assets, net |  | 563 |  |  | Other assets, net |  | 655 |
|  |  | $ | 1,535 |  |  |  |  | $ | 966 |
Liability Derivative Instruments: |  |  |  |  |  |  |
Foreign exchange contracts | Accrued liabilities |  | $ | 6,235 |  |  | Accrued liabilities |  | $ | 7,492 |
Foreign exchange contracts | Other non-current liabilities |  | 729 |  |  | Other non-current liabilities |  | 4,975 |
|  |  | $ | 6,964 |  |  |  |  | $ | 12,467 |
The following table presents the balance sheet location and fair value of our derivative instruments that were not designated as hedging instruments (in thousands):
| September 30, 2018 |  | December 31, 2017
| Balance Sheet Location |  | Fair Value |  | Balance Sheet Location |  | Fair Value
Liability Derivative Instruments: |  |  |  |  |  |  |
Foreign exchange contracts | Accrued liabilities |  | $ | 2,925 |  |  | Accrued liabilities |  | $ | 3,133 |
Foreign exchange contracts | Other non-current liabilities |  | 1,093 |  |  | Other non-current liabilities |  | 3,175 |
|  |  | $ | 4,018 |  |  |  |  | $ | 6,308 |
The following tables present the impact that derivative instruments designated as hedging instruments had on our Accumulated OCI (net of tax) and our condensed consolidated statements of operations (in thousands). We estimate that as of September 30, 2018, $4.2 million of losses in Accumulated OCI associated with our derivative instruments is expected to be reclassified into earnings within the next 12 months.
| Unrealized Gain (Loss) Recognized in OCI (Effective Portion)
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2018 |  | 2017 |  | 2018 |  | 2017
Foreign exchange contracts | $ | (164 | ) |  | $ | 2,282 |  |  | $ | (35 | ) |  | $ | 4,091 |
Interest rate swaps | 76 |  |  | 15 |  |  | 874 |  |  | 50 |
| $ | (88 | ) |  | $ | 2,297 |  |  | $ | 839 |  |  | $ | 4,141 |
| Location of Gain (Loss) Reclassified from Accumulated OCI into Earnings |  | Gain (Loss) Reclassified from Accumulated OCI into Earnings (Effective Portion)
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2018 |  | 2017 |  | 2018 |  | 2017
Foreign exchange contracts | Cost of sales |  | $ | (1,957 | ) |  | $ | (3,288 | ) |  | $ | (5,538 | ) |  | $ | (10,280 | )
Interest rate swaps | Net interest expense |  | 158 |  |  | (95 | ) |  | 305 |  |  | (542 | )
|  |  | $ | (1,799 | ) |  | $ | (3,383 | ) |  | $ | (5,233 | ) |  | $ | (10,822 | )
The following table presents the impact that derivative instruments not designated as hedging instruments had on our condensed consolidated statements of operations (in thousands):
| Location of Gain (Loss) Recognized in Earnings |  | Gain (Loss) Recognized in Earnings
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2018 |  | 2017 |  | 2018 |  | 2017
Foreign exchange contracts | Other income (expense), net |  | $ | (83 | ) |  | $ | 1,050 |  |  | $ | (26 | ) |  | $ | 1,531 |
|  |  | $ | (83 | ) |  | $ | 1,050 |  |  | $ | (26 | ) |  | $ | 1,531 |

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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