DERIVATIVE INSTRUMENTS

6 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The Company is exposed to interest rate risks related to its business operations. To reduce the interest rate risk the Company uses an interest rate swap contract. 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 June 30, 2019, the Company’s interest rate swap agreement, which hedges long-term debt obligations, has a notional amount of $300.0 million, which decreases over time by $50 million increments. The contract has a fixed rate of 2.63%.

The following table summarizes the fair value of the Company’s derivative instruments, as well as the location of these instruments on the Condensed Consolidated Balance Sheets as of the dates presented (in millions):



Derivatives designated as hedging instruments	Balance Sheet Location	June 30, 2019		December 31, 2018
Derivative liabilities:
Interest rate swap	Other current liabilities	$	2.1	$	0.3
Interest rate swap	Other noncurrent liabilities	5.4		1.4
Total derivative liabilities		$	7.5	$	1.7

The interest rate swap is included at its estimated fair value as an asset or a liability in the Condensed Consolidated Balance Sheet based on a discounted cash flow model using applicable market swap rates and certain assumptions. The fair value of the swap recorded in Accumulated Other Comprehensive Income (Loss) may be recognized in the Condensed Consolidated Statement of Operations if certain terms of the agreement change, are modified or if the loan is extinguished. As of June 30, 2019 there was no hedge ineffectiveness associated with the Company’s interest rate swap and no portion of the cash flow hedge is excluded from the assessment of effectiveness. The Company reclassified $0.1 million and $0.2 million from other comprehensive loss to interest expense within the Condensed Consolidated Statement of Operations during the three and six months ended June 30, 2019, respectively. The Company expects to reclassify in the next 12 months a loss of approximately $2.1 million from accumulated other comprehensive income into earnings, as a component of interest expense, related to the Company’s interest rate swap based on the borrowing rates at June 30, 2019.