Derivative Instruments

9 Months Ended

Sep. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

The Company's objective in using derivative instruments is to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company uses interest rate swaps as a primary part of its cash flow hedging strategy. The Company does not use derivative financial instruments for trading or speculative purposes. The Company carries derivative instruments on the Condensed Consolidated Balance Sheets at fair value, which incorporates adjustments for the nonperformance risk of the Company and the counterparties.

At September 30, 2015, the Company had one outstanding interest rate swap with a notional amount of $1.0 billion, under which it received variable-rate payments in exchange for fixed-rate payments over the life of the agreement without exchange of the underlying notional amount. In July 2015, one of the Company's interest rate swaps with a notional amount of approximately $0.7 billion matured, and the notional amount of the Company's remaining interest rate swap, which matures in 2017, increased by the same amount.

The table below presents the fair value of the Company's derivative financial instruments, exclusive of any accrued interest, as well as their classification on the Condensed Consolidated Balance Sheets (amounts in thousands):

	Balance Sheet Classification	Fair Value
		September 30, 2015		December 31, 2014
Derivatives designated as hedging instruments:
Interest rate swap	Other accrued liabilities	$	—	$	4,149
Interest rate swap	Interest rate swap and other  long–term liabilities, net	10,284		6,105

The Company recognizes changes in the fair value of derivative instruments each period as described in the Cash Flow Hedge section below.

As of September 30, 2015, the Company had not posted any collateral related to its interest rate swap agreement; however, the Company's obligation under the swap agreement is subject to the security and guarantee arrangements applicable to the related credit agreement. The swap agreement contains a cross-default provision under which the Company could be declared in default on its obligation under such agreement if certain conditions of default exist on the Credit Facility. As of September 30, 2015, the termination value of the interest rate swap, including accrued interest, was a net liability of $11.0 million. Had the Company been in breach of the provisions of the swap arrangement, it could have been required to pay the termination value to settle the obligation.

Cash Flow Hedge

As of September 30, 2015, the Company's outstanding interest rate swap effectively converted $1.0 billion of its variable interest rate debt to a fixed rate of approximately 5.02%. In accordance with the accounting guidance for derivatives and hedging, the Company has designated the full notional amount of the interest rate swap as a cash flow hedge of interest rate risk. Under the terms of the swap agreement, the Company pays a fixed rate of 1.77% and receives a variable rate based on one-month LIBOR (subject to a minimum of 1.00%).

For derivative instruments that are designated and qualify as cash flow hedges of forecasted interest payments, the effective portion of the gain or loss is reported as a component of other comprehensive income (loss) until the interest payments being hedged are recorded as interest expense, at which time the amounts in other comprehensive income (loss) are reclassified as an adjustment to interest expense. Gains or losses on any ineffective portion of derivative instruments in cash flow hedging relationships are recorded in the period in which they occur as a component of change in fair value of derivative instruments in the Condensed Consolidated Statements of Operations. The Company's interest rate swap had a fair value other than zero at the time it was designated in a hedging relationship, resulting in ineffectiveness.

The table below presents the gains (losses) on derivative financial instruments included in the Company's condensed consolidated financial statements (amounts in thousands):

Derivatives in Cash Flow Hedging Relationships	Amount of (Loss) Gain on Derivatives Recognized in Other Comprehensive Income (Loss)(Effective Portion)					Location of Loss Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)	Amount of Loss Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)						Location of Gain on Derivatives Recognized in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain on Derivatives Recognized in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing)
	Three Months Ended September 30,						Three Months Ended September 30,							Three Months Ended September 30,
	2015			2014			2015			2014				2015		2014
Interest rate swaps	$	(2,157	)	$	1,076	Interest expense, net	$	(1,057	)	$	(3,213	)	Change in fair value of derivative instruments	$	—	$	71

Derivatives in Cash Flow Hedging Relationships	Amount of Loss on Derivatives Recognized in Other Comprehensive Income (Effective Portion)						Location of Loss Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)	Amount of Loss Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)						Location of Loss on Derivatives Recognized in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Loss on Derivatives Recognized in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing)
	Nine Months Ended September 30,							Nine Months Ended September 30,							Nine Months Ended September 30,
	2015			2014				2015			2014				2015			2014
Interest rate swaps	$	(6,945	)	$	(5,181	)	Interest expense, net	$	(7,222	)	$	(9,720	)	Change in fair value of derivative instruments	$	(4	)	$	(2	)

Losses reclassified from accumulated other comprehensive loss into interest expense, net included deferred losses on discontinued cash flow hedging relationships that were being amortized as an increase to interest expense as the previously hedged interest payments continued to occur. These deferred losses became fully amortized in June 2015.

Approximately $5.4 million of deferred losses on the Company's designated interest rate swap is expected to be reclassified from accumulated other comprehensive loss into earnings during the next twelve months.