Accumulated Other Comprehensive Loss

Shareholders' equity includes certain items classified as accumulated other comprehensive loss ("AOCI") in the Consolidated Balance Sheets, including:

•

Unrealized gains (losses) on hedges relate to interest rate swaps to convert the revolving credit facility's variable rate of interest into a fixed rate and foreign currency forward contracts used to hedge our exposure to changes in exchange rates affecting certain revenues and costs denominated in foreign currencies. These hedges are designated as cash flow hedges, and we have deferred income statement recognition of gains and losses until the hedged transaction is settled. Amounts reclassified to income from AOCI for hedges are included in interest expense, cost of sales, or net sales. Further information related to our interest rate swaps and foreign currency hedges is included in Note 13, "Derivatives".


•	Unrealized gains (losses) on pension obligations are deferred from income statement recognition until the gains or losses are realized. Amounts reclassified to income from AOCI are included in net periodic pension expense. Further information related to our pension obligations is included in Note 6, "Retirement Plans".

•

Cumulative translation adjustment relates to our non-U.S. subsidiaries that have designated a functional currency other than the U.S. dollar. We are required to translate the subsidiary functional currency financial statements to dollars using a combination of historical, period-end, and average foreign exchange rates. This combination of rates creates the foreign currency translation adjustment component of other comprehensive income. Transfer of foreign currency translation gains and losses from AOCI to income are included in other income (expense) in our Consolidated Statements of Earnings.

In 2018, CTS adopted the provision of ASU No. 2018-02 "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income". This ASU allows for the reclassification from AOCI to retained earnings for the stranded tax effects resulting from the Tax Cuts and Jobs Act that was enacted in December 2017. The total impact due to adoption of this standard was an increase in retained earnings of $17,433.

The components of AOCI for 2018 are as follows:



	As of December 31, 2017			Gain (Loss) Recognized in OCI			Gain (Loss) reclassified from AOCI to income			Impact of ASU No. 2018-02			As of December 31, 2018
Changes in fair market value of hedges:
Gross	$	289		$	1,932		$	(905	)	$	—		$	1,316
Income tax (expense) benefit	(105		)	(437		)	205			39			(298		)
Net	184			1,495			(700		)	39			1,018
Changes in unrealized pension cost:
Gross	(130,096		)	—			(2,358		)	—			(132,454		)
Income tax benefit (expense)	52,837			—			528			(17,472		)	35,893
Net	(77,259		)	—			(1,830		)	(17,472		)	(96,561		)
Cumulative translation adjustment:
Gross	(1,985		)	(306		)	—			—			(2,291		)
Income tax benefit (expense)	100			(5		)	—			—			95
Net	(1,885		)	(311		)	—			—			(2,196		)
Total accumulated other comprehensive (loss) income	$	(78,960	)	$	1,184		$	(2,530	)	$	(17,433	)	$	(97,739	)

The components of AOCI for 2017 are as follows:



	As of December 31, 2016			(Loss) Gain recognized in OCI			Gain (Loss) reclassified from AOCI to income			As of December 31, 2017
Changes in fair market value of hedges:
Gross	$	116		$	264		$	(91	)	$	289
Income tax (expense) benefit	(42		)	(96		)	33			(105		)
Net	74			168			(58		)	184
Changes in unrealized pension cost:
Gross	(151,618		)	—			21,522			(130,096		)
Income tax benefit (expense)	60,672			—			(7,835		)	52,837
Net	(90,946		)	—			13,687			(77,259		)
Cumulative translation adjustment:
Gross	(2,414		)	429			—			(1,985		)
Income tax benefit	92			8			—			100
Net	(2,322		)	437			—			(1,885		)
Total accumulated other comprehensive (loss) income	$	(93,194	)	$	605		$	13,629		$	(78,960	)