Financial Instruments | 9. Financial Instruments The following financial instrument assets (liabilities) are presented at their respective carrying amount, fair value and classification within the fair value hierarchy: September 30, 2018 Carrying Fair Value Amount Total Level 1 Level 2 Level 3 (Dollars in thousands) Cash and cash equivalents $ 126,278 $ 126,278 $ 126,278 $ — $ — Term loan facility, maturing 2024 (1) (810,837) (813,897) — (813,897) — Revolving credit facility, maturing 2023 (111,933) (117,535) — (117,535) — Other long-term notes payable (6,325) (3,835) — (3,835) — Cross currency swaps 14,069 14,069 — 14,069 — Cross currency swaps (992) (992) — (992) — Interest rate swaps 1,714 1,714 — 1,714 — Interest rate swaps (689) (689) — (689) — Foreign currency forward contracts, net 3,004 3,004 — 3,004 — December 31, 2017 Carrying Fair Value Amount Total Level 1 Level 2 Level 3 (Dollars in thousands) Cash and cash equivalents $ 63,551 $ 63,551 $ 63,551 $ — $ — Loans payable (16,360) (16,360) — (16,360) — Term loan facility, maturing 2024 (1) (645,242) (646,979) — (646,979) — Revolving credit facility, maturing 2022 (78,000) (79,295) — (79,295) — Other long-term notes payable (7,112) (3,973) — (3,973) — Interest rate swaps 1,616 1,616 — 1,616 — Interest rate swaps (124) (124) — (124) — Foreign currency forward contracts, net (469) (469) — (469) — (1) The carrying values of the term loan facility are net of unamortized debt issuance costs of $5 . 1 m illion and $7.5 million for the period ended September 30, 2018, and December 31, 2017, respectively. The fair values of cash and cash equivalents are based on the fair values of identical assets. The fair values of loans payable are based on the present value of expected future cash flows and approximate their carrying amounts due to t he short periods to maturity. The fair value of the term loan fac ility is based on market price information and is measured using the last available bid price of the instrument on a secondary market. The revolving credit facility and other long-term notes payable are based on the present value of expected future cash flows and interest rates that would be currently available to the Company for issuance of similar types of debt instruments with similar terms and remaining maturities adjust ed for the Company's performance risk. The fair values of our interest rate swaps and cross currency swaps are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. The fair values of the foreign currency forward contracts are based on market prices for comparable contracts. Derivative Instruments The Company may use derivative instruments to partially offset its business exposure to foreign currency and interest rate risk on expected future cash flows, on net investment in certain foreign subsidiaries and on certain existing assets and liabilities. However, the Company may choose not to hedge in countries where it is not economically feasible to enter into hedging arrangements or where hedging inefficiencies exist, such as timing of transactions. Derivatives Designated as Hedging Instruments Cash Flow Hedges. For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is recorded in Accumulated other comprehensive loss (“AOCL”) and reclassified into earnings in the same period during which the hedged transaction affects earnings. The Company utilizes interest rate swaps to limit exposure to market fluctuations on floating-rate debt. During the second quarter of 2017, the Company entered into interest rate swap agreements that converted $150 million and €90 million of our term loans from variable interest rates to fixed interest rates. These swaps qualified for, and were designated as, cash flow hedges. This interest rate swap agreement was terminated in the second quarter of 2018 in connection with the refinancing of the Credit Facility. During the second quarter of 2018, the Company entered into variable to fixed interest rate swap s with a maturity date of February 28, 2024 . The notional amount is $318. 4 million at September 30, 2018 . These swaps are hedging risk associated with the Tranche B-1 Loans. These interest rate swaps are designated as cash flow hedge s . As of September 30 , 2018, the Company exp ects it will reclassify net losses of approximately $0. 7 million, currently recorded in AOCL, into earnings within the next twelve months. However, the actual amount reclassified could vary due to future changes in the fair value of these derivatives. The Company has converted a US dollar denominated, variable rate debt obligation into a euro fixed rate obligation using a receive-float, pay fixed cross currency swaps in the second quarter of 2018. These swaps are hedging risk associated with the Tranche B-3 Loans. These cross currency swap s are designated as cash flow hedge s . T he notional amount is $2 28.9 million at September 30, 2018, with a maturity date of February 28, 2024. As o f September 30 , 2018, the Company expects it will reclassify net gains of approximately $5. 9 million , currently recorded in AOCL, into earnings within the next twelve months. However, the actual amount reclassified could vary due to future changes in the fair value of these derivatives. The amount of gain recognized in AOCL and the amount of (loss) gain reclassified into earnings for the three months ended September 30, 2018 and 2017, follow: Amount of (Loss) Gain Amount of Gain Reclassified from Location of (Loss) Gain Recognized in AOCL AOCL into Income Reclassified from 2018 2017 2018 2017 AOCL into Income (Dollars in thousands) Interest rate swaps $ 2,135 $ 166 $ (186) $ — Interest expense Cross currency swaps 3,237 — 1,327 — Interest expense $ 1,141 $ Total Interest expense Cross currency swaps 1,549 — Foreign currency losses, net $ 1,549 $ — Total Foreign currency losses, net The amount of gain recognized in AOCL and the amount of (loss) gain reclassified into earnings for the nine months ended September 30, 2018 and 2017, follow: Amount of (Loss) Gain Amount of Gain Reclassified from Location of (Loss) Gain Recognized in AOCL AOCL into Income Reclassified from 2018 2017 2018 2017 AOCL into Income (Dollars in thousands) Interest rate swaps $ 1,761 $ 166 $ (197) $ — Interest expense Cross currency swaps 12,666 — 2,215 — Interest expense $ 2,018 $ — Total Interest expense Cross currency swap 11,864 — Foreign currency losses, net $ 11,864 $ — Total Foreign currency losses, net Net investment hedge. To help protect the value of the Company’s net investment in European operations against adverse changes in exchange rates, the Company uses non-derivative financial instruments, such as its foreign currency denominated debt, as economic hedges of its net investments in certain foreign subsidiaries. Net investment hedges that use foreign currency denominated debt to hedge net investments are not impacted by ASC Topic 820, Fair Value Measurements, as the debt used as a hedging instrument is marked to a value with respect to changes in spot foreign currency exchange rates and not with respect to other factors that may impact fair value. In the second quarter of 2017, the Company designated a portion of its Euro denominated debt as a net investment hedge for accounting purposes. This net investment hedge was terminated in the second quarter of 2018. In the second quarter of 2018, the Company entered into cross currency swap agreement s where we pay variable rate interest in Euros and receive variable rate interest in US dollars. The notional amount is $116.9 million at September 30, 2018. These swaps are hedging risk associated with the Tranche B-2 Loans. These cross currency swap s are designated as net investment hedge s with the spot method of accounting applied . The effective portions of net investment hedges are recorded in AOCL as a part of the cumulative translation adjustment. The amount of gain (loss) recognized in AOCL, the amount reclassified into earnings and the amount of gain recognized in income on derivative (amount excluded from effectiveness testing) for the three months ended September 30, 2018 and 2017, follow : Amount of Gain Amount of Gain Recognized in Amount of Gain (Loss) Reclassified from Income on Derivative (Amount Recognized in AOCL AOCL into Income Excluded from Effectiveness Testing) Location of Gain 2018 2017 2018 2017 2018 2017 (Loss) in Earnings (Dollars in thousands) Cross currency swaps $ 1,272 $ — $ — $ — $ 858 $ — Interest expense Net investment hedge — (8,020) — — — — Foreign currency losses, net The amount of gain (loss) recognized in AOCL, the amount reclassified into earnings and the amount of gain recognized in income on derivative (amount excluded from effectiveness testing) for the nine months ended September 30, 2018 and 2017, follow : Amount of Gain Amount of Gain Recognized in Amount of Gain (Loss) Reclassified from Income on Derivative (Amount Recognized in AOCL AOCL into Income Excluded from Effectiveness Testing) Location of Gain 2018 2017 2018 2017 2018 2017 (Loss) in Earnings (Dollars in thousands) Cross currency swaps $ 4,046 $ — $ — $ — $ 1,353 $ — Interest expense Net investment hedge — (14,848) — — — — Foreign currency losses, net Derivatives Not Designated as Hedging Instruments Foreign currency forward contracts. We manage foreign currency risks principally by entering into forward contracts to mitigate the impact of currency fluctuations on transactions. These forward contracts are not formally designated as hedges. Gains and losses on these foreign currency forward contracts are netted with gains and losses from currency fluctuations on transactions arising from international trade and reported as Foreign currency losses, net in the condensed consolidated statements of operations. We recognized net gains of $1.3 million and $2.7 million in the three and nine months ended September 30, 2018 , respectively, and net losses of $1.4 million and $4.1 million in the three and nine months ended September 30, 2017 , respectively, arising from the change in fair value of our financial instruments, which partially offset the related net gains and losses on international trade transactions. The notional amount of foreign currency forward contracts was $371.1 million at September 30, 2018 , and $238.5 million at December 31, 2017 . The following table presents the effect on our condensed consolidated statements of operations for the three and nine months ended September 30, 2018 and 2017 , respectively, of our foreign currency forward contracts: Amount of Gain (Loss) Recognized in Earnings Three Months Ended September 30, 2018 2017 Location of Gain (Loss) in Earnings (Dollars in thousands) Foreign currency forward contracts $ 1,339 $ (1,438) Foreign currency losses, net Amount of Gain (Loss) Recognized in Earnings Nine Months Ended September 30, 2018 2017 Location of Gain (Loss) in Earnings (Dollars in thousands) Foreign currency forward contracts $ 2,728 $ (4,149) Foreign currency losses, net Location and Fair Value Amount of Derivative Instruments The following table presents the fair values of our derivative instruments on our condense d consolidated balance sheets. All derivatives are reported on a gross basis. September 30, December 31, 2018 2017 Balance Sheet Location (Dollars in thousands) Asset derivatives: Interest rate swaps $ 1,714 $ 1,616 Other non-current assets Cross currency swaps 9,591 — Other current assets Cross currency swaps 4,478 — Other non-current assets Foreign currency forward contracts 3,664 661 Other current assets Liability derivatives: Interest rate swaps (689) (124) Accrued expenses and other current liabilities Cross currency swaps (992) — Other non-current liabilities Foreign currency forward contracts $ (660) $ (1,130) Accrued expenses and other current liabilities |