Derivative Instruments

12 Months Ended

Dec. 31, 2018

DERIVATIVE INSTRUMENTS

In September 2016, ESH REIT entered into a floating-to-fixed interest rate swap, as amended and supplemented from time to time, at a fixed rate of 1.175% and a floating rate of one-month LIBOR to manage its exposure to interest rate risk on a portion of the 2016 Term Facility. The notional amount of the interest rate swap as of December 31, 2018 was $300.0 million. The notional amount decreases by an additional $50.0 million every six months until the swap’s maturity in September 2021.

On January 1, 2018, the Company adopted ASU 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities, which changed the designation and measurement guidance for qualifying hedging relationships as well as the presentation of hedging results, and as a result recorded a cumulative-effect adjustment to reclassify a previously recorded loss of $0.7 million from retained earnings to accumulated other comprehensive income (loss) and noncontrolling interests. For the year ended December 31, 2018, the Company received proceeds of $2.8 million that offset interest expense and recorded interest expense of $0.7 million and $0.2 million for the years ended December 31, 2017 and 2016, respectively. As of December 31, 2018, $3.5 million is expected to be recognized through earnings over the following twelve months.

The table below presents the amounts and classification on the Company’s financial statements related to the interest rate swap (in thousands):



	Other assets		Accumulated other comprehensive income, net of tax			Other non-operating (income) expense		Interest (income) expense, net
As of December 31, 2018	$	5,789	$	4,934	⁽¹⁾
As of December 31, 2017	$	6,387	$	5,992	⁽²⁾
For the year ended December 31, 2018						$	—	$	(2,765	)
For the year ended December 31, 2017						$	314	$	707
For the year ended December 31, 2016						$	—	$	183

_______________________________


(1)	Changes during the year ended December 31, 2018, on a pre-tax basis, consisted of changes in fair value of $(0.6) million and the cumulative effect adjustment of $(0.7) million.


(2)	Changes during the year ended December 31, 2017, on a pre-tax basis, consisted of changes in fair value of $1.4 million (effective portion) and amortization of accumulated other comprehensive income prior to hedge de-designation of $0.7 million and removal of a previous LIBOR floor of $(0.3) million.

ESH REIT

Derivative [Line Items]

Derivative Instruments

DERIVATIVE INSTRUMENTS

In September 2016, ESH REIT entered into a floating-to-fixed interest rate swap, as amended and supplemented from time to time, at a fixed rate of 1.175% and a floating rate of one-month LIBOR to manage its exposure to interest rate risk on a portion of its 2016 Term Facility. The notional amount of the interest rate swap as of December 31, 2018 was $300.0 million. The notional amount decreases by an additional $50.0 million every six months until the swap’s maturity in September 2021.

On January 1, 2018, ESH REIT adopted ASU 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities, which changed the designation and measurement guidance for qualifying hedging relationships as well as the presentation of hedging results, and as a result recorded a cumulative-effect adjustment to reclassify a previously recorded loss of $0.7 million from retained earnings to accumulated other comprehensive income (loss). For the year ended December 31, 2018, ESH REIT received proceeds of $2.8 million that offset interest expense and recorded interest expense of $0.7 million and $0.2 million for the years ended December 31, 2017 and 2016, respectively. As of December 31, 2018, approximately $3.5 million is expected to be recognized through earnings over the following twelve months.

The table below presents the amounts and classification on ESH REIT’s financial statements related to the interest rate swap (in thousands):



	Other Assets		Accumulated other comprehensive income, net of tax			Other non-operating (income) expense		Interest (income) expense, net
As of December 31, 2018	$	5,789	$	5,789	⁽¹⁾
As of December 31, 2017	$	6,387	$	7,038	⁽²⁾
For the year ended December 31, 2018						$	—	$	(2,765	)
For the year ended December 31, 2017						$	314	$	707
For the year ended December 31, 2016						$	—	$	183

_______________________________


(1)	Changes during the year ended December 31, 2018, on a pre-tax basis, consisted of changes in fair value of $(0.6) million and the cumulative effect adjustment of $(0.7) million.


(2)	Changes during the year ended December 31, 2017, on a pre-tax basis, consisted of changes in fair value of $1.4 million (effective portion) and amortization of accumulated other comprehensive income prior to hedge de-designation of $0.7 million and removal of a previous LIBOR floor of $(0.3) million.