Note 4 – Debt

The table below details the Company’s debt balance at June 30, 2018 and December 31, 2017 (in thousands):

	June 30, 2018			December 31, 2017
Term loan- secured	$	125,000		$	125,000
Revolving credit facility- secured		140,000			91,200
Unamortized deferred financing costs		(594	)		(677	)
	$	264,406		$	215,523

The Company’s second amended and restated credit agreement (the “credit agreement”) provides for a $300 million revolving credit facility that matures in February 2021 and a $125 million term loan that matures in February 2022. The revolving credit facility has one 12-month extension option, subject to certain conditions, including the payment of a 0.15% extension fee.

At June 30, 2018 and 2017, the weighted-average interest rate under the credit agreement was 4.0% and 3.4%, respectively.

Total costs related to the revolving credit facility at June 30, 2018 were $3.4 million, gross ($2.3 million, net). These costs are included in Other assets, net on the consolidated balance sheet at June 30, 2018 and will be amortized to interest expense through February 2021, the maturity date of the revolving credit facility. The total amount of deferred financing costs associated with the term loan at June 30, 2018 was $0.8 million, gross ($0.6 million, net). These costs are netted against the balance outstanding under the term loan on the Company’s consolidated balance sheet and will be amortized to interest expense through February 2022, the maturity date of the term loan.

The Company recognized amortization expense of deferred financing costs, included in interest expense on the consolidated statements of income, of $0.3 million and $0.5 million for the three and six months ended June 30, 2018, respectively. Amortization expense of deferred financing costs was $0.2 million and $0.6 million for the three and six months ended June 30, 2017, respectively.

The maximum available capacity under the credit facility was $288.5 million at June 30, 2018. At August 8, 2018, the Company had $271.0 million in borrowings outstanding, of which $146.0 million was outstanding under the revolving credit facility with a weighted-average interest rate of 4.08% and $125.0 million was outstanding on the term loan. As of August 8, 2018, the Company had approximately $29.2 million in additional borrowing capacity under the revolving credit facility, based on its current borrowing base assets.

Interest Rate Swap Agreements

To mitigate exposure to interest rate risk, on February 10, 2017, the Company entered into four interest rate swap agreements, effective April 10, 2017, on the full $125 million term loan to fix the variable LIBOR interest rate at 1.84%, plus the LIBOR spread under the credit agreement, which was 2.00% at June 30, 2018 and August 8, 2018.

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily 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 agreements without exchange of the underlying notional amount.

The changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive income. Those amounts reported in accumulated other comprehensive income related to these interest rate swaps will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next 12 months, the Company estimates that an additional $0.7 million will be reclassified from other comprehensive income as a decrease to interest expense.

The fair value of the Company’s derivative financial instruments at June 30, 2018 and December 31, 2017 was an asset of $3.8 million and $1.2 million, respectively, and was included in Other assets, net on the consolidated balance sheets.

The table below details the location in the consolidated financial statements of the gain (loss) recognized on interest rate derivatives designated as cash flow hedges for the three and six months ended June 30, 2018 and 2017 (dollars in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2018		2017			2018			2017
Amount of gain (loss) recognized in other comprehensive income (loss)	$	761	$	(726	)	$	2,470		$	(356	)
Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense		26		(233	)		(52	)		(233	)
Total change in accumulated other comprehensive income (loss)	$	735	$	(493	)	$	2,522		$	(123	)

As of June 30, 2018, the Company did not have any derivatives in a net liability position including accrued interest but excluding any adjustments for nonperformance risk.

Covenants

The credit agreement contains customary financial and operating covenants, including covenants relating to the Company’s total leverage ratio, fixed charge coverage ratio, tangible net worth, maximum distribution/payout ratio and restrictions on recourse debt, secured debt and certain investments. The credit agreement also contains customary events of default, in certain cases subject to customary cure periods, including among others, nonpayment of principal or interest, material breach of representations and warranties, and failure to comply with covenants. Any event of default, if not cured or waived, could result in the acceleration of any outstanding indebtedness under the credit agreement. The Company was in compliance with all financial covenants as of June 30, 2018.