Derivative Instruments and Hedging Activities

The following table presents the balance sheet location and fair value of the portions of our derivative instruments that was designated as hedging instruments (in thousands):



	December 31,
	2017			2016
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Asset Derivative Instruments:
Interest rate swaps	Other current assets	$	311	Other current assets	$	—
Interest rate swaps	Other assets, net	655		Other assets, net	451
		$	966		$	451

Liability Derivative Instruments:
Foreign exchange contracts	Accrued liabilities	$	7,492	Accrued liabilities	$	14,056
Interest rate swaps	Accrued liabilities	—		Accrued liabilities	751
Foreign exchange contracts	Other non-current liabilities	4,975		Other non-current liabilities	13,383
		$	12,467		$	28,190

The following table presents the balance sheet location and fair value of the portions of our derivative instruments that was not designated as hedging instruments (in thousands):



	December 31,
	2017			2016
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Liability Derivative Instruments:
Foreign exchange contracts	Accrued liabilities	$	3,133	Accrued liabilities	$	3,923
Foreign exchange contracts	Other non-current liabilities	3,175		Other non-current liabilities	6,808
		$	6,308		$	10,731

In January 2013, we entered into foreign currency exchange contracts to hedge through September 2017 our foreign currency exposure associated with the Grand Canyon charter payments denominated in Norwegian kroner. In February 2013, we entered into similar foreign currency exchange contracts to hedge our foreign currency exposure associated with the Grand Canyon II and Grand Canyon III charter payments denominated in Norwegian kroner through July 2019 and February 2020, respectively. In December 2015, we de-designated the foreign currency exchange contracts associated with the charter payment obligations for the Grand Canyon II and Grand Canyon III vessels that no longer qualified for cash flow hedge accounting treatment and we re-designated the hedging relationship between a portion of these contracts and our forecasted Grand Canyon II and Grand Canyon III charter payments of NOK434.1 million and NOK185.2 million, respectively, that were expected to remain highly probable of occurring. As a result, we recognized unrealized losses of $18.0 million related to the foreign currency exchange contracts associated with the portion of previously forecasted charter payments that would no longer be made. Reflected in “Other income (expense), net” in the accompanying consolidated statements of operations are these unrealized losses, as well as subsequent changes in unrealized losses associated with the portions of the foreign currency exchange contracts that are no longer designated as cash flow hedges.

Hedge ineffectiveness also is reflected in “Other income (expense), net” in the accompanying consolidated statements of operations. For the year ended December 31, 2017, there were no gains or losses associated with hedge ineffectiveness. For the years ended December 31, 2016 and 2015, we recorded gains (losses) of $0.1 million and $(5.1) million, respectively, related to hedge ineffectiveness.

In September 2013, we entered into various interest rate swap contracts to fix the interest rate on $148.1 million of our term loan borrowings. The term of these swap contracts, which were settled monthly, expired in October 2016. Additionally, in June 2015 we entered into various interest rate swap contracts to fix the interest rate on $187.5 million of our Nordea Q5000 Loan borrowings (Note 6). These swap contracts, which are settled monthly, began in June 2015 and extend through April 2020. Our interest rate swap contracts qualify for cash flow hedge accounting treatment. The amount of ineffectiveness associated with our interest rate swap contracts was immaterial for all periods presented.

The following tables present the impact that derivative instruments designated as hedging instruments had on our Accumulated OCI (net of tax) and our consolidated statements of operations (in thousands). We estimate that as of December 31, 2017, $4.7 million of net losses in Accumulated OCI associated with our derivative instruments is expected to be reclassified into earnings within the next 12 months.



	Gain (Loss) Recognized in OCI on Derivative Instruments, Net of Tax (Effective Portion)
	Year Ended December 31,
	2017		2016		2015

Foreign exchange contracts	$	9,732	$	9,397	$	4,734
Interest rate swaps	782		473		(534		)
	$	10,514	$	9,870	$	4,200



	Location of Loss Reclassified from Accumulated OCI into Earnings	Loss Reclassified from Accumulated OCI into Earnings (Effective Portion)
		Year Ended December 31,
		2017			2016			2015

Foreign exchange contracts	Cost of sales	$	(12,300	)	$	(10,827	)	$	(11,516	)
Interest rate swaps	Net interest expense	(615		)	(2,024		)	(2,143		)
		$	(12,915	)	$	(12,851	)	$	(13,659	)

The following table presents the impact that derivative instruments not designated as hedging instruments had on our consolidated statements of operations (in thousands):



	Location of Gain (Loss) Recognized in Earnings on Derivative Instruments	Gain (Loss) Recognized in Earnings on Derivative Instruments
		Year Ended December 31,
		2017		2016		2015

Foreign exchange contracts	Other income (expense), net	$	818	$	1,198	$	(18,014	)
		$	818	$	1,198	$	(18,014	)