DERIVATIVE INSTRUMENTS

The Company is exposed to interest rate risks related to its business operations. To reduce the interest rate risk the Company uses derivative instruments, including interest rate swap contracts. The Company does not use derivatives for speculative trading purposes.

Cash flow hedge

To offset the variability of cash flows in interest payments associated with a portion of the Company’s variable rate debt, the Company entered into an interest rate swap contract in January 2018 which is designated as a cash flow hedge. The interest rate swap hedges one month LIBOR which effectively converts a portion of the variable-rate debt to a fixed interest rate. The interest rate swap effective date is December 31, 2018 and the maturity date is January 23, 2023. As of September 30, 2018, the Company’s interest rate swap agreement had a notional amount of $300.0 million that hedges certain long-term debt obligations. The contract has a fixed rate of 2.63%.

The following table illustrates the location and fair value of the Company’s interest rate swap at September 30, 2018 and December 31, 2017 (in thousands):



	Derivatives
	September 30, 2018			December 31, 2017
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments
Interest rate swap	Other assets	$	2,655	n/a	$	—
Total derivatives designated as hedging instruments		$	2,655		$	—

As of September 30, 2018, there was no hedge ineffectiveness associated with the Company’s interest rate swap and no portion of the cash flow hedge was excluded from the assessment of effectiveness. The Company will defer any effective portion of the cash flow hedge to accumulated other comprehensive income and will reclassify into earnings when the transaction occurs. The interest rate swap had no effect on the Consolidated Statement of Operations for the three and nine months ended September 30, 2018. The Company does not expect any material reclassifications from accumulated other comprehensive income into earnings over the next 12 months.