The Company uses derivative instruments, including foreign currency exchange forward contracts, interest rate swaps and cross-currency interest rate swaps ("CCIRs"), to manage certain foreign currency and interest rate exposures. Derivative instruments are viewed as risk management tools by the Company and are not used for trading or speculative purposes. All derivative instruments are recorded on the Condensed Consolidated Balance Sheets at fair value.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The Company utilizes market data or assumptions that the Company believes market participants would use in valuing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique.

The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs), and (2) an entity’s own assumptions about market participant assumptions based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which give the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

In instances in which multiple levels of inputs are used to measure fair value, hierarchy classification is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

The Company primarily applies the market approach for recurring fair value measurements and endeavors to utilize the best available information. Accordingly, the Company utilizes valuation techniques that maximize the use of observable inputs, such as forward rates, interest rates, the Company’s credit risk and counterparties’ credit risks, and which minimize the use of unobservable inputs. The Company is able to classify fair value balances based on the ability to observe those inputs. Foreign currency exchange forward contracts, interest rate swaps and CCIRs are based upon pricing models using market-based inputs (Level 2). Model inputs can be verified, and valuation techniques do not involve significant management judgment.

The fair value of outstanding derivative contracts recorded as assets and liabilities on the Condensed Consolidated Balance Sheets was as follows:



(In thousands)	Balance Sheet Location	Fair Value of Derivatives Designated as Hedging Instruments		Fair Value of Derivatives Not Designated as Hedging Instruments		Total Fair Value
September 30, 2018
Asset derivatives (Level 2):
Foreign currency exchange forward contracts	Other current assets	$	2,209	$	7,742	$	9,951
Interest rate swaps	Other current assets	1,900		—		1,900
Interest rate swaps	Other assets	3,453		—		3,453
Total		$	7,562	$	7,742	$	15,304
Liability derivatives (Level 2):
Foreign currency exchange forward contracts	Other current liabilities	$	109	$	1,583	$	1,692
Interest rate swaps	Other liabilities	31		—		31
Total		$	140	$	1,583	$	1,723



(In thousands)	Balance Sheet Location	Fair Value of Derivatives Designated as Hedging Instruments		Fair Value of Derivatives Not Designated as Hedging Instruments		Total Fair Value
December 31, 2017
Asset derivatives (Level 2):
Foreign currency exchange forward contracts	Other current assets	$	2,329	$	2,915	$	5,244
Interest rate swaps	Other current assets	464		—		464
Interest rate swaps	Other assets	170		—		$	170
Total		$	2,963	$	2,915	$	5,878
Liability derivatives (Level 2):
Foreign currency exchange forward contracts	Other current liabilities	$	153	$	6,970	$	7,123
Interest rate swaps	Other liabilities	1,368		—		1,368
Total		$	1,521	$	6,970	$	8,491

All of the Company's derivatives are recorded in the Condensed Consolidated Balance Sheets at gross amounts and not offset. All of the Company's interest rate swaps, CCIRs and certain foreign currency exchange forward contracts are transacted under International Swaps and Derivatives Association ("ISDA") documentation. Each ISDA master agreement permits the net settlement of amounts owed in the event of default. The Company's derivative assets and liabilities subject to enforceable master netting arrangements resulted in a net asset of $1.3 million and a net liability of $0.2 million at September 30, 2018 and December 31, 2017, respectively.

Derivatives Designated as Hedging Instruments



(In thousands)	Amount Recognized in Other Comprehensive Income (“OCI”) on Derivative - Effective Portion				Location of Amount Reclassified from Accumulated OCI into Income - Effective Portion	Amount Reclassified from Accumulated OCI into Income - Effective Portion or Equity			Location of Amount Recognized in Income on Derivative - Ineffective Portion and Amount Excluded from Effectiveness Testing	Amount Recognized in Income on Derivative - Ineffective Portion and Amount Excluded from Effectiveness Testing
Three Months Ended September 30, 2018:
Foreign currency exchange forward contracts	$	(410	)		Product revenues	$	(3	)		$	—
Interest rate swaps	1,276				Interest expense	(367		)		—
Cross-currency interest rate swaps	—			(a)	Interest expense	312				—
	$	866				$	(58	)		$	—
Three Months Ended September 30, 2017:
Foreign currency exchange forward contracts	$	2,333				$	—			$	—
Interest rate swaps	(335		)			—				—
Cross-currency interest rate swaps	(72		)	(a)	Interest Expense	252			Cost of services and products sold	(103		)
	$	1,926				$	252			$	(103	)



(In thousands)	Amount Recognized in Other Comprehensive Income (“OCI”) on Derivative - Effective Portion				Location of Amount Reclassified from Accumulated OCI into Income - Effective Portion	Amount Reclassified from Accumulated OCI into Income - Effective Portion or Equity			Location of Amount Recognized in Income on Derivative - Ineffective Portion and Amount Excluded from Effectiveness Testing	Amount Recognized in Income on Derivative - Ineffective Portion and Amount Excluded from Effectiveness Testing
Nine Months Ended September 30, 2018:
Foreign currency forward exchange contracts	$	1,369			Product revenues / Cost of services and products sold	$	(112	)		$	—
Foreign currency forward exchange contracts	—				Retained earnings (b)	(1,520		)		—
Interest rate swaps	6,657				Interest expense	(602		)		—
Cross currency interest rate swaps	—				Interest expense	960				—
	$	8,026				$	(1,274	)		$	—
Nine Months Ended September 30, 2017:
Foreign currency forward exchange contracts	$	3,096			Product revenues / Cost of services and products sold	$	(185	)		$	—
Interest rate swaps	(2,878		)			—				—
Cross currency interest rate swaps	(195		)	(a)	Interest expense	745			Cost of services and products sold	(420		)
	$	23				$	560			$	(420	)

(b) The Company has adopted the new revenue recognition standard utilizing the modified retrospective transition method, including use of practical expedients. See Note 2, Recently Adopted and Recently Issued Accounting Standards for additional information.



	Location of Gain (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized in Income on Derivative(c)
(In thousands)	Location of Gain (Loss) Recognized in Income on Derivative	2018		2017
Three Months Ended September 30:
Foreign currency exchange forward contracts	Cost of services and products sold	$	3,194	$	(7,025	)
Nine Months Ended September 30:
Foreign currency exchange forward contracts	Cost of services and products sold	$	13,459	$	(18,764	)

The Company conducts business in multiple currencies and, accordingly, is subject to the inherent risks associated with foreign exchange rate movements. Foreign currency-denominated assets and liabilities are translated into U.S. dollars at the exchange rates existing at the respective balance sheet dates, and income and expense items are translated at the average exchange rates during the respective periods.

The Company uses derivative instruments to hedge cash flows related to foreign currency fluctuations. Foreign currency exchange forward contracts outstanding are part of a worldwide program to minimize foreign currency exchange operating income and balance sheet exposure by offsetting foreign currency exposures of certain future payments between the Company and various subsidiaries, suppliers or customers. The unsecured contracts are with major financial institutions. The Company may be exposed to credit loss in the event of non-performance by the contract counterparties. The Company evaluates the creditworthiness of the counterparties and does not expect default by them. Foreign currency exchange forward contracts are used to hedge commitments, such as foreign currency debt, firm purchase commitments and foreign currency cash flows for certain export sales transactions.

Changes in the fair value of derivatives used to hedge foreign currency denominated balance sheet items are reported directly in earnings, along with offsetting transaction gains and losses on the items being hedged. Derivatives used to hedge forecasted cash flows associated with foreign currency commitments may be accounted for as cash flow hedges, as deemed appropriate, if the criteria for hedge accounting are met. Gains and losses on derivatives designated as cash flow hedges are deferred in Accumulated other comprehensive loss, a separate component of equity, and reclassified to earnings in a manner that matches the timing of the earnings impact of the hedged transactions. The ineffective portion of all hedges, if any, is recognized currently in earnings.

The recognized gains and losses offset amounts recognized in cost of services and products sold principally as a result of intercompany or third party foreign currency exposures. At September 30, 2018 and December 31, 2017, the notional amounts of foreign currency exchange forward contracts were $652.6 million and $671.9 million, respectively. These contracts are primarily denominated in British pounds sterling and Euros and mature through October 2021.

In addition to foreign currency exchange forward contracts, the Company designates certain loans as hedges of net investments in international subsidiaries. The Company recorded pre-tax net loss of $0.8 million and $7.5 million during the three and nine months ended September 30, 2018, respectively and pre-tax net gains of $7.6 million and $17.1 million for the three and nine months ended September 30, 2017, respectively, in Accumulated other comprehensive loss.

The Company uses interest rate swaps in conjunction with certain debt issuances in order to secure a fixed interest rate. Changes in the fair value attributed to the effect of the swaps’ interest spread and changes in the credit worthiness of the counter-parties are recorded in Accumulated other comprehensive loss.

In January 2017 and February 2018, the Company entered into a series of interest rate swaps that cover the period from 2018 through 2022 and had the effect of converting $300.0 million of the Term Loan Facility from floating-rate to fixed-rate beginning in 2018. The fixed rates provided by the swaps replace the adjusted LIBOR rate in the interest calculation, ranging from 1.65% for 2018 to 3.12% for 2022. The total notional of the Company's interest rate swaps was $300.0 million as of September 30, 2018.

The Company may use CCIRs in conjunction with certain debt issuances in order to secure a fixed local currency interest rate. Under these CCIRs, the Company receives interest based on a fixed or floating U.S. dollar rate and pays interest on a fixed local currency rate based on the contractual amounts in dollars and the local currency, respectively. At maturity, there is also the payment of principal amounts between currencies. Changes in the fair value attributed to the effect of the swaps' interest spread and changes in the credit worthiness of the counter-parties are recorded in Accumulated other comprehensive loss. Changes in value attributed to the effect of foreign currency fluctuations are recorded in the Condensed Consolidated Statements of Operations and offset currency fluctuation effects on the debt principal. The Company had no outstanding CCIRs at September 30, 2018.