Derivative Instruments and Hedging Activities

6 Months Ended

Jun. 30, 2020

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

(7)          Derivative Instruments and Hedging Activities

The Company records all derivatives on its consolidated balance sheet at fair value. As of June 30, 2020 and December 31, 2019, the Company had outstanding interest rate derivatives with third parties in which the Company pays a fixed interest rate and receives a rate equal to the one-month LIBOR. The notional associated with the swap agreements was $250 million as of June 30, 2020 and December 31, 2019 and have maturity dates at certain dates through March 2024. Prior to August 22, 2019, the interest rate swap agreements were not designated as cash flow hedging instruments for accounting purposes and accordingly changes in fair value of the interest rate swap agreements were recorded in earnings. On August 22, 2019, the Company designated its swaps as effective cash flow hedges of interest rate risk. Accordingly, subsequent to August 22, 2019, changes in the fair value of the interest rate swaps are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings.

The table below presents the fair value of the Company’s derivatives designated as hedging instruments as well as their classification in the consolidated balance sheets at June 30, 2020 and December 31, 2019 (in thousands):

			June 30, 2020		December 31, 2019
	Balance Sheet Location	Asset (Liability)
Interest rate swap agreements	Other current liabilities	$	(5,872)	$	(2,157)
Interest rate swap agreements	Other long-term liabilities		(13,535)		(6,182)
Total		$	(19,407)	$	(8,339)

During the three and six months ended June 30, 2020, as a result of the effect of cash flow hedge accounting, the Company recognized a loss of $0.4 million and $11.1 million, respectively, in other comprehensive income (loss). In addition, during the three and six months ended June 30, 2020, $0.7 million and $1.4 million, respectively, was reclassified from other comprehensive income (loss) and recognized as a reduction to interest expense, net, in the accompanying consolidated statements of operations. During the three and six months ended June 30, 2019, as a result of the effect of the Company’s derivative financial instruments that were not designated as hedging instruments, the

Company recognized $6.7 million and $9.4 million, respectively, in interest expense, net in the accompanying consolidated statements of operations.