Annual report pursuant to Section 13 and 15(d)

Derivative Financial Instruments

v3.6.0.2
Derivative Financial Instruments
12 Months Ended
Dec. 31, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments
Derivative Financial Instruments
On March 31, 2016, the Company entered into two Swap Agreements, which are designed to mitigate our exposure to interest rate risk associated with a portion of our variable rate debt. The Swap Agreements cover an aggregate notional amount of $75.0 million from March 2016 to September 2019 by replacing the obligation’s variable rate with a blended fixed rate of 0.89%. The Company designated the Swap Agreements as cash flow hedges of interest rate risk.
The effective portion of changes in the fair value of Swap Agreements is recorded in accumulated other comprehensive income (loss) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in the fair value of the Swap Agreements is recognized directly in earnings. During the fiscal year ended December 31, 2016, we recognized a gain on the ineffective portion of the Swap Agreement of $0.2 million.
Amounts reported in accumulated other comprehensive loss related to the Swap Agreements will be reclassified to interest expense as interest payments are made on our variable-rate debt. The Company estimates that an additional $0.1 million will be reclassified as a decrease to interest expense during the twelve-month period ending December 31, 2017. The table below presents the notional and fair value of the Swap Agreements as well as their classification on the Consolidated Balance Sheet as of December 31, 2016:
 
Balance Sheet Location
 
Notional
 
Fair Value
 
 
 
(in thousands)
Derivatives designated as cash flow hedging instruments:
 
 
 
 
 
Swap Agreements
Other assets
 
$
75,000

 
$
1,098


The Company does not offset the fair value of the Swap Agreements in an asset position against the fair value of the Swap Agreements in a liability position on the Consolidated Balance Sheet. As of December 31, 2016, the Company has not posted any collateral related to the Swap Agreements. If the Company had breached any of the Swap Agreement’s default provisions at December 31, 2016, it could have been required to settle its obligations under the Swap Agreements at their termination value of $1.1 million.
The table below presents the amount of gains and/or losses related to the effective and ineffective portions of the Swap Agreements and their location on the Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Income (Loss) for the fiscal year ended December 31, 2016:
 
 
Effective Portion
 
Ineffective Portion
Derivatives Designated as Cash Flow Hedges
 
Gain Recognized in OCI
 
Location of Gain Recognized in Income
 
Gain Recognized in Income
 
Location of Gain Recognized in Income
 
Gain Recognized in Income
 
 
(in thousands)
Swap Agreements
 
$
946

 
Interest expense and other
 
$
226

 
Interest expense and other
 
$
152