DERIVATIVES

The Company elected to early adopt ASU 2017-12, Derivatives and Hedging, as of January 1, 2018. The adoption eliminated the requirement to separately measure and report hedge ineffectiveness. The Company is now required to present the earnings effect of its hedging instruments in the same income statement line item in which it reports the earnings effect of the hedged items. Disclosures related to periods prior to January 1, 2018 are not impacted by the adoption.

The Company’s objective in using interest rate derivatives is to manage its exposure to interest rate movements and add stability to interest expense. To accomplish this objective, the Company uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable rate amounts from a counterparty in exchange for the Company making fixed rate payments over the life of the agreement without exchange of the underlying notional amount.

As of June 30, 2018, the Company used five interest rate swaps to hedge the variable cash flows associated with variable rate debt. Changes in fair value of the derivatives that are designated and that qualify as cash flow hedges are recorded in “Accumulated other comprehensive income” and are reclassified to interest expense as interest payments are made on the Company’s variable rate debt. Over the next 12 months, the Company estimates that an additional $1,690 will be reclassified as a decrease to interest expense. Prior to January 1, 2018, only the effective portion of changes in fair value of the derivatives that were designated and that qualified as cash flow hedges was recorded in “Accumulated other comprehensive income” and the ineffective portion of the change in fair value of the derivatives was recognized directly in earnings.

The following table summarizes the Company’s interest rate swaps as of June 30, 2018, which effectively convert one-month floating rate LIBOR to a fixed rate:



Effective Date	Notional		Fixed Interest Rate		Maturity Date
January 3, 2017	$	100,000	1.26	%	November 22, 2018
January 3, 2017	$	100,000	1.26	%	November 22, 2018
December 29, 2017	$	100,000	2.00	%	January 5, 2021
December 29, 2017	$	100,000	2.00	%	January 5, 2021
December 29, 2017	$	50,000	2.00	%	January 5, 2021

The following table summarizes the Company’s interest rate swaps that were designated as cash flow hedges of interest rate risk:



	Number of Instruments		Notional
Interest Rate Derivatives	June 30, 2018	December 31, 2017	June 30, 2018		December 31, 2017
Interest rate swaps	5	5	$	450,000	$	450,000

The table below presents the estimated fair value of the Company’s derivative financial instruments, which are presented within “Other assets, net” in the condensed consolidated balance sheets. The valuation techniques used are described in Note 13 to the condensed consolidated financial statements.



	Fair Value
	June 30, 2018		December 31, 2017
Derivatives designated as cash flow hedges:
Interest rate swaps	$	4,699	$	1,086

The following table presents the effect of the Company’s derivative financial instruments on the accompanying condensed consolidated statements of operations and other comprehensive income (loss) for the three and six months ended June 30, 2018:



Derivatives in Cash Flow Hedging Relationships	Amount of Gain Recognized in Other Comprehensive Income on Derivative						Location of Gain Reclassified from Accumulated Other Comprehensive Income (AOCI) into Income	Amount of Gain Reclassified from AOCI into Income						Total Interest Expense Presented in the Results of Operations in which the Effects of Cash Flow Hedges are Recorded
	Three Months Ended June 30, 2018			Six Months Ended June 30, 2018				Three Months Ended June 30, 2018			Six Months Ended June 30, 2018			Three Months Ended June 30, 2018		Six Months Ended June 30, 2018
Interest rate swaps	$	(1,138	)	$	(3,805	)	Interest expense	$	(279	)	$	(192	)	$	16,817	$	35,582



Derivatives in Cash Flow Hedging Relationships	Amount of Loss (Gain) Recognized in Other Comprehensive Income on Derivative (Effective Portion)					Location of (Gain) Loss Reclassified from AOCI into Income (Effective Portion)	Amount of (Gain) Loss Reclassified from AOCI into Income (Effective Portion)					Location of Loss Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Loss Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
	Three Months Ended June 30, 2017		Six Months Ended June 30, 2017				Three Months Ended June 30, 2017			Six Months Ended June 30, 2017			Three Months Ended June 30, 2017		Six Months Ended June 30, 2017
Interest rate swaps	$	59	$	(413	)	Interest expense	$	(86	)	$	74	Other income, net	$	5	$	11