Derivative Instruments

3 Months Ended

Mar. 31, 2017

Derivative Instrument Detail [Abstract]

Derivative Instruments

NOTE 5. DERIVATIVE INSTRUMENTS

From time to time, we enter into derivative financial instruments to manage certain cash flow and fair value risks.

Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset or liability to a particular risk, such as interest rate risk, are considered fair value hedges. We have five fair value interest rate swaps to convert interest payments on fixed-rate debt to variable-rate 3-month LIBOR plus a spread.

Derivatives designated and qualifying as a hedge of the exposure to variability in the cash flows of a specific asset or liability that is attributable to a particular risk, such as interest rate risk, are considered cash flow hedges. We have one interest rate swap to convert variable-rate debt, comprised of 3-month LIBOR plus a spread, to fixed-rate debt. Our cash flow hedge is expected to be highly effective in achieving offsetting cash flows attributable to the hedged interest rate risk through the term of the hedge. Therefore, changes in the fair value of the interest rate swap are recorded as a component of other comprehensive income and will be recognized in earnings when the hedged interest rate affects earnings. The amounts paid or received on this interest rate hedge will be recognized as adjustments to interest expense. As of March 31, 2017, the amount of net loss expected to be reclassified into earnings in the next 12 months is $0.1 million.

The following table presents the gross fair values of our interest rate contracts designated as hedging instruments on our Condensed Consolidated Balance Sheets:

(Dollars in thousands)	Asset Derivatives					Liability Derivatives
Location	March 31, 2017		December 31, 2016		Location	March 31, 2017		December 31, 2016
Other assets, current	$	158	$	32	Current liabilities	$	—	$	—
Other assets, non-current		1,227		1,363	Other long-term obligations		219		91
	$	1,385	$	1,395		$	219	$	91

The following table details the effect of derivatives on our Consolidated Statements of Income:

		Three Months Ended March 31,
(Dollars in thousands)	Location	2017			2016
Derivativesdesignatedinfairvaluehedging relationships:
Realized gain on interest rate contracts1	Interest expense	$	167		$	242
Derivativesdesignatedincashflowhedging relationships:
Gain (loss) recognized in other comprehensive income, net of tax (effective portion)		$	(2	)	$	(164	)
Loss reclassified from accumulated other comprehensive income into interest expense (effective portion)1	Interest expense		50			—
Net effect on other comprehensive income		$	48		$	(164	)

¹ Realized gain and losses on interest rate contracts consist of net cash received or paid and interest accruals on the interest rate swaps during the periods. Net cash received or paid is included in the supplemental cash flow information within interest, net of amounts capitalized in our Condensed Consolidated Statements of Cash Flows.