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DERIVATIVES | 6 Months Ended
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Jun. 30, 2018
DERIVATIVES | NOTE G- DERIVATIVES The Company is a party to interest rate swap agreements, with an aggregate notional value of $125.0 million at June 30, 2018. The Company designated the interest rate swaps as cash flow hedges of the Company’s exposure to the variability of the payment of interest on a portion of its Term Loan borrowings. The hedge periods of these agreements commenced in April 2018 and will expire in March 2023. The notional amounts are reduced over these periods. The Company has also entered into certain foreign exchange contracts, primarily to offset the earnings impact related to fluctuations in foreign currency exchange rates associated with inventory purchases denominated in foreign currencies. The aggregate gross notional values of foreign exchange contracts at June 30, 2018 and December 31, 2017 were $21.5 million and $34.9 million, respectively. These foreign exchange contracts have not been designated as hedges as required in order to apply hedge accounting. The changes in the fair values of these contracts are recorded in earnings immediately. The fair values of the Company’s derivative financial instruments included in the condensed consolidated balance sheets are presented as follows (in thousands):
Derivatives designated as hedging instruments |  | Balance Sheet Location |  | June 30, 2018 |  |  | December 31, 2017 |
Interest rate swaps |  | Prepaid Expenses |  | $ | — |  |  | $ | 11 |
|  | Accrued Expenses |  |  | 66 |  |  |  | — |
|  | Deferred rent & other long-term liabilities |  |  | 286 |  |  |  | — |
Derivatives not designated as hedging instruments |  | Balance Sheet Location |  | June 30, 2018 |  |  | December 31, 2017 |
Foreign exchange contracts |  | Accrued expenses |  | $ | 196 |  |  | $ | 1,951 |
The fair values of the derivative financial instruments have been obtained from the counterparties to the agreements and were based on Level 2 observable inputs using proprietary models and estimates about relevant future market conditions. The counterparties to the derivative financial instruments are major international financial institutions. The Company is exposed to credit risk for the net exchanges under these agreements, but not for the notional amounts. The Company does not anticipate non-performance by any of its counterparties. The amounts of gains and losses related to the Company’s derivative financial instruments designated as hedging instruments are recognized in other comprehensive income (loss) as follows (in thousands):
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
Derivatives designated as hedging instruments |  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |
Interest rate swaps |  | $ | (263 | ) |  | $ | 1 |  |  | $ | (277 | ) |  | $ | 14 |
During the three and six months ended June 30, 2018 the Company recognized $0.2 million of interest expense related to the interest rate swaps. Gains or losses on the interest rate swaps will be reclassified into earnings as interest expense as the interest expense on the debt is recognized in earnings. In connection with the financing transaction described in Note F– Debt to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, in March 2018 the Company settled its outstanding interest rate swaps, which had been accounted for as hedges and had an aggregate notional value of $5.3 million. The net gain at such time in accumulated other comprehensive income at December 31, 2017 related to the interest rate swaps was reclassified into interest expense during the three months ended March 31, 2018. The amounts of the gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments are recognized in earnings as follows (in thousands):
|  |  |  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
Derivatives not designated as hedging instruments |  | Location of gain (loss) |  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |
Foreign exchange contracts |  | Selling, general and administrative expense |  | $ | 1,468 |  |  | $ | (1,377 | ) |  | $ | (47 | ) |  | $ | (1,566 | )

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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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