The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity and credit risk primarily by managing the amount, sources and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings. The Company does not speculate using derivative instruments.

As of March 31, 2020 and December 31, 2019, the Company did not have any derivatives outstanding that were not designated in hedge accounting relationships.

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. During the three months ended March 31, 2020 and 2019, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.

As of March 31, 2020, the Company has five Interest Rate Swap Agreements, which effectively fix the interest rate on LIBOR-indexed interest payments associated with $1.0 billion of SEA’s outstanding long-term debt until the swaps mature on May 14, 2020.

The interest rate swap agreements are designated as cash flow hedges of interest rate risk. The changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive loss and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Amounts reported in accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. Through the expiration date of May 14, 2020, the Company estimates that an additional $1.2 million will be reclassified as an increase to interest expense.

Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the unaudited condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019:

Liability Derivatives

As of March 31, 2020

As of December 31, 2019

Balance Sheet

Location

Fair Value

Balance Sheet

Location

Fair Value

Derivatives designated as hedging instruments:

(In thousands)

Interest rate swap agreements

Other liabilities

1,198

Other liabilities

2,156

Total derivatives designated as hedging instruments

1,198

2,156

Tabular Disclosure of the Effect of Derivative Instruments on the Statements of Comprehensive Loss

The table below presents the pretax effect of the Company’s derivative financial instruments in the unaudited condensed consolidated statements of comprehensive loss for the three months ended March 31, 2020 and 2019:

	Three Months Ended March 31,
	2020			2019
Derivatives in Cash Flow Hedging Relationships:	(In thousands)
Loss recognized in accumulated other comprehensive loss	$	(344	)	$	(1,953	)
Gain (loss) reclassified from accumulated other comprehensive loss to interest expense	$	1,302		$	(855	)

The Company has agreements with each of its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations. As of March 31, 2020, the termination value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $1.2 million. As of March 31, 2020, the Company has posted no collateral related to these agreements. If the Company had breached any of these provisions at March 31, 2020, it could have been required to settle its obligations under the agreements at their termination value of $1.2 million.

The following table reflects the changes in accumulated other comprehensive loss for the three months ended March 31, 2020, net of tax:

Accumulated other comprehensive loss (In thousands):			(Losses) Gains on Cash Flow Hedges
Accumulated other comprehensive loss at December 31, 2019			$	(1,559	)
Other comprehensive loss before reclassifications	(253	)
Amounts reclassified from accumulated other comprehensive loss to interest expense	957
Unrealized gain on derivatives, net of tax				704
Accumulated other comprehensive loss at March 31, 2020			$	(855	)