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Derivative Instruments And Hedging Activities | 9 Months Ended
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Sep. 30, 2020
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 mitigate 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 derivative contracts, including interest rate swaps and foreign currency exchange contracts. Interest rate and foreign currency derivative instruments are reflected in the accompanying condensed consolidated balance sheets at fair value. The 2026 Capped Calls are recorded in shareholders’ equity and are not accounted for as derivatives. We engage solely in cash flow hedges. Cash flow hedges are entered into to hedge the variability of cash flows related to a forecasted transaction or 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 OCI. These changes are subsequently reclassified into earnings when the hedged transactions affect earnings. Changes in the fair value of a derivative instrument that does not qualify for hedge accounting are 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 21 to our 2019 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 interest rate swap contracts to fix the interest rate on $187.5 million of the Nordea Q5000 Loan. These swap contracts expired in April 2020. Our interest rate swap contracts qualified for cash flow hedge accounting treatment. Changes in the fair value of interest rate swaps were reported in accumulated OCI (net of tax). These changes were subsequently reclassified into earnings when the anticipated interest was recognized as interest expense. 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 forecasted transactions that are denominated in foreign currencies. In February 2013, we entered into 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. Changes in the fair value of foreign currency exchange contracts that qualify for hedge accounting treatment were reported in accumulated OCI (net of tax). These changes were subsequently reclassified into earnings when the forecasted payments were made. Changes in the fair value of foreign currency exchange contracts that did not qualify as cash flow hedges were recognized immediately in earnings within “Other expense, net” in the accompanying condensed consolidated statements of operations. Quantitative Disclosures Relating to Derivative Instruments We had no derivative instruments that were designated as hedging instruments as of September 30, 2020. The following table presents the balance sheet location and fair value of our hedging instruments as of December 31, 2019 (in thousands):
|  |  |  |  | December 31, 2019 |  |
|  |  |  |  | Balance Sheet Location |  | Fair Value
Asset Derivative Instruments: |  |  |  |  |  |  |
Interest rate swaps |  |  |  |  | Other current assets |  | $ | 44 |
|  |  |  |  |  |  | $ | 44 |
Liability Derivative Instruments: |  |  |  |  |  |  |
Foreign exchange contracts |  |  |  |  | Accrued liabilities |  | $ | 401 |
|  |  |  |  |  |  | $ | 401 |
We had no derivative instruments that were not designated as hedging instruments as of September 30, 2020. The following table presents the balance sheet location and fair value of our non-hedging instruments as of December 31, 2019 (in thousands):
|  |  |  |  | December 31, 2019 |  |
|  |  |  |  | Balance Sheet Location |  | Fair Value
Liability Derivative Instruments: |  |  |  |  |  |  |
Foreign exchange contracts |  |  |  |  | Accrued liabilities |  | $ | 601 |
|  |  |  |  |  |  | $ | 601 |
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):
|  | Unrealized Gain (Loss) Recognized in OCI |  |  |  |  |  |
|  | Three Months Ended September 30, |  |  |  | Nine Months Ended September 30, |  |
|  | 2020 |  | 2019 |  | 2020 |  | 2019
Foreign exchange contracts |  | $ | — |  |  | $ | (280) |  |  | $ | (54) |  |  | $ | (338) |
Interest rate swaps |  | — |  |  | 6 |  |  | (41) |  |  | (363) |
|  | $ | — |  |  | $ | (274) |  |  | $ | (95) |  |  | $ | (701) |
| Location of Gain (Loss) Reclassified from Accumulated OCI into Earnings |  | Gain (Loss) Reclassified from Accumulated OCI into Earnings |  |  |  |  |  |
|  |  | Three Months Ended September 30, |  |  |  | Nine Months Ended September 30, |  |
|  |  | 2020 |  | 2019 |  | 2020 |  | 2019
Foreign exchange contracts | Cost of sales |  | $ | — |  |  | $ | (1,197) |  |  | $ | (455) |  |  | $ | (5,460) |
Interest rate swaps | Net interest expense |  | — |  |  | 151 |  |  | 3 |  |  | 593 |
|  |  | $ | — |  |  | $ | (1,046) |  |  | $ | (452) |  |  | $ | (4,867) |
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 Loss Recognized in Earnings |  | Loss Recognized in Earnings |  |  |  |  |  |
|  |  | Three Months Ended September 30, |  |  |  | Nine Months Ended September 30, |  |
|  |  | 2020 |  | 2019 |  | 2020 |  | 2019
Foreign exchange contracts | Other expense, net |  | $ | — |  |  | $ | (371) |  |  | $ | (81) |  |  | $ | (413) |
|  |  | $ | — |  |  | $ | (371) |  |  | $ | (81) |  |  | $ | (413) |

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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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