Quarterly report pursuant to Section 13 or 15(d)

Derivative Financial Instruments

v3.8.0.1
Derivative Financial Instruments
3 Months Ended
Mar. 31, 2018
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 $0.9 million will be reclassified as a decrease of interest expense during the twelve-month period ending March 31, 2019.
As of March 31, 2018, the Swap Agreements were still outstanding. The table below presents the notional and fair value of the Swap Agreements as well as their classification in the Condensed Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017:
 
Balance Sheet Location
 
Notional
 
Fair Value
 
 
 
(in thousands)
Derivatives designated as cash flow hedging instruments:
 
 
 
 
 
Swap agreements as of March 31, 2018
Other assets
 
$
75,000

 
$
1,529

Swap agreements as of December 31, 2017
Other assets
 
$
75,000

 
$
1,329


As of March 31, 2018, 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 March 31, 2018, it could have been required to settle its obligations under the Swap Agreements at their termination value of $1.5 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 in the Condensed Consolidated Statements of Operations and the Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2018 and 2017, 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 March 31, 2018:
 
 
 
 
 
 
 
 
Swap agreements, net of tax
 
$
258

 
Interest expense and other
 
$
99

 
Interest expense and other
 
$
(16
)
Three months ended March 31, 2017:
 
 
 
 
 
 
 
 
Swap agreements, net of tax
 
$
93

 
Interest expense and other
 
$
(21
)
 
Interest expense and other
 
$
(18
)