Quarterly report pursuant to Section 13 or 15(d)

Derivative Financial Instruments

v3.8.0.1
Derivative Financial Instruments
9 Months Ended
Sep. 30, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments
Derivative Financial Instruments
On March 31, 2016, the Company entered into two interest rate swap agreements (collectively the “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 the Swap Agreements is recorded in accumulated other comprehensive income 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. Amounts reported in accumulated other comprehensive income 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 $0.4 million will be reclassified as a decrease of interest expense during the twelve-month period ending September 30, 2018.
As of September 30, 2017, the Swap Agreements were still outstanding. The table below presents the notional and fair value of the Swap Agreements as well as their classification on the Condensed Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016:
 
Balance Sheet Location
 
Notional
 
Fair Value
 
 
 
(in thousands)
Derivatives designated as cash flow hedging instruments:
 
 
 
 
 
Swap agreements as of September 30, 2017
Other assets
 
$
75,000

 
$
1,073

Swap agreements as of December 31, 2016
Other assets
 
$
75,000

 
$
1,098


As of September 30, 2017, 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 September 30, 2017, it could have been required to settle its obligations under the Swap Agreements at their termination value of $1.1 million.
The tables below present the amount of gains and losses related to the effective and ineffective portions of the Swap Agreements and their location on the Condensed Consolidated Statements of Operations and the Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2017 and 2016, in thousands:
 
 
Effective Portion
 
Ineffective Portion
Derivatives Designated as Cash Flow Hedges
 
Gain (Loss) Recognized in OCI
 
Location of Gain (Loss) Recognized in Income
 
Gain (Loss) Recognized in Income
 
Location of Gain (Loss) Recognized in Income
 
Gain (Loss) Recognized in Income
Three months ended September 30, 2017:
 
 
 
 
 
 
 
 
Swap agreements, net of tax
 
$
29

 
Interest expense and other
 
$
39

 
Interest expense and other
 
$
(13
)
Three months ended September 30, 2016:
 
 
 
 
 
 
 
 
Swap agreements, net of tax
 
$
456

 
Interest expense and other
 
$
76

 
Interest expense and other
 
$


 
 
Effective Portion
 
Ineffective Portion
Derivatives Designated as Cash Flow Hedges
 
Gain (Loss) Recognized in OCI
 
Location of Gain (Loss) Recognized in Income
 
Gain (Loss) Recognized in Income
 
Location of Gain (Loss) Recognized in Income
 
Gain (Loss) Recognized in Income
Nine months ended September 30, 2017:
 
 
 
 
 
 
 
 
Swap agreements, net of tax
 
$
102

 
Interest expense and other
 
$
30

 
Interest expense and other
 
$
(41
)
Nine months ended September 30, 2016:
 
 
 
 
 
 
 
 
Swap agreements, net of tax
 
$
(86
)
 
Interest expense and other
 
$
163

 
Interest expense and other
 
$