Derivative Instruments

In October 2018, the Company entered into cross-currency swap agreements to hedge its net investment in Euro-denominated assets against future volatility in the exchange rate between the U.S. dollar and the Euro. By doing so, the Company synthetically converted a portion of its U.S. dollar-based long-term debt into Euro-denominated long-term debt. The agreements have a five year tenor at notional amounts declining from $125.0 million to $75.0 million over the contract period. Under the terms of the swap agreements, the Company is to receive net interest payments at a fixed rate of approximately 2.9% of the notional amount. At inception, the cross-currency swaps were designated as net investment hedges.

In October 2018, immediately prior entering into the new cross-currency swap agreements, the Company terminated its existing cross-currency swap agreements, de-designating the swaps as net investment hedges and receiving approximately $1.1 million of cash. The cross-currency swap agreements were entered into in October 2017 and hedged the Company's net investment in Euro-denominated assets against future volatility in the exchange rate between the U.S. dollar and the Euro. The agreements had a five year tenor at notional amounts declining from $150.0 million to $75.0 million over the contract period. Under the terms of the swap agreements, the Company was to receive net interest payments at a fixed rate of approximately 2.1% of the notional amount.

The Company has historically utilized interest rate swap agreements to fix the LIBOR-based variable portion of the interest rate on its long-term debt. Prior to its debt refinancing in September 2017, the Company had interest rate swap agreements in place that hedged a declining notional value of debt ranging from approximately $238.4 million to approximately $192.7 million, amortizing consistent with future scheduled debt principal payments. The interest rate swap agreements required the Company to receive a variable interest rate and pay a fixed interest rate in a range of 0.74% to 2.68% with various expiration terms extending to June 30, 2020. At inception, the interest rate swaps were designated as cash flow hedges.

In September 2017, immediately following the debt refinancing, the Company determined the likelihood of the hedged transactions occurring was not probable and de-designated the interest rate swaps as cash flow hedges and terminated the interest rate swaps for a cash payment of approximately $4.7 million. There were no interest rate swaps outstanding as of December 31, 2017. The cash flows associated with the cash flow hedges are reported in net cash provided by operating activities in the accompanying consolidated statement of cash flows. Up to the date of the termination, the Company utilized hedge accounting, which allows for the effective portion of the interest rate swaps to be recorded in AOCI in the accompanying consolidated balance sheet. At the date the Company de-designated the swaps as effective hedges, there was approximately $2.9 million (net of tax of $1.8 million) of unrealized losses remaining in AOCI, which were reclassified into debt financing and related expenses in the accompanying consolidated statement of operations during 2017.

As of December 31, 2018 and 2017, the fair value carrying amount of the Company's derivatives designated as hedging instruments are recorded as follows (dollars in thousands):



		Asset / (Liability) Derivatives
Derivatives designated as hedging instruments	Balance Sheet Caption	December 31, 2018		December 31, 2017
Net Investment Hedges
Cross-currency swaps	Other assets	$	130	$	—
Cross-currency swaps	Other long-term liabilities	—		(4,110		)

The following table summarizes the income (loss) recognized in AOCI on derivative contracts designated as hedging instruments as of December 31, 2018 and 2017, and the amounts reclassified from AOCI into earnings for the years ended December 31, 2018, 2017 and 2016 (dollars in thousands):



	Amount of Income (Loss) Recognized in AOCI on Derivative (Effective Portion, net of tax)					Location of Loss Reclassified from AOCI into Earnings (Effective Portion)	Amount of Loss Reclassified from AOCI into Earnings
	As of December 31,						Year ended December 31,
	2018		2017				2018		2017			2016
Net Investment Hedges
Cross-currency swaps	$	940	$	(3,170	)	Other expense, net	$	—	$	—		$	—
Cash Flow Hedges
Interest rate swaps	$	—	$	—		Interest expense	$	—	$	(320	)	$	(670	)
						Debt financing and related expenses	$	—	$	(4,680	)	$	—

Over the next 12 months, the Company does not expect to reclassify any pre-tax deferred losses from AOCI into earnings.

The fair value of the Company's derivative instruments are estimated using an income approach based on valuation techniques to convert future amounts to a single, discounted amount. Estimates of the fair value of the Company's cross-currency swaps use observable inputs such as interest rate yield curves and forward currency exchange rates. Fair value measurements and the fair value hierarchy level for the Company's assets and liabilities measured at fair value on a recurring basis as of December 31, 2018 and 2017 are as follows (dollars in thousands):



	Description	Frequency	Asset / (Liability)			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
December 31, 2018	Cross-currency swaps	Recurring	$	130		$	—	$	130		$	—
December 31, 2017	Cross-currency swaps	Recurring	$	(4,110	)	$	—	$	(4,110	)	$	—