XML 23 R11.htm IDEA: XBRL DOCUMENT v3.5.0.2
Derivative Financial Instruments
 6 Months Ended
Jun. 30, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments
Derivative Financial Instruments
In April 2014, we entered into three separate interest rate swap agreements (collectively, the "Interest Rate Swap Agreements") with an aggregate notional amount of $200.0 million to mitigate the risk of an increase in the LIBOR interest rate above the 0.75% minimum LIBOR rate in effect on the Term Loan B. The term of the Interest Rate Swap Agreements began in June 2014 and expires in December 2017. Upon execution, we designated and documented the Interest Rate Swap Agreements as cash flow hedges. The Interest Rate Swap Agreements will continue to mitigate risk in connection with the interest rate for the Amended and Restated Term Loan B (as defined in Note 4).
By utilizing a derivative instrument to hedge our exposure to LIBOR rate changes, we are exposed to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. To mitigate this risk, the hedging instrument is placed with counterparties that we believe pose minimal credit risk. Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates, commodity prices or currency exchange rates. We manage the market risk associated with the Interest Rate Swap Agreements by establishing and monitoring parameters that limit the types and degree of market risk that we may undertake. We hold and issue derivative instruments for risk management purposes only and do not utilize derivatives for trading or speculative purposes.
We record derivative instruments at fair value on our unaudited condensed consolidated balance sheets with the effective portion of all cash flow designated derivatives deferred in other comprehensive income and the ineffective portion, if any, recognized immediately in earnings. Our derivatives are measured on a recurring basis using Level 2 inputs. The fair value measurements of our derivatives are based on market prices that generally are observable for similar assets or liabilities at commonly quoted intervals. Derivative assets and derivative liabilities that have maturity dates equal to or less than twelve months from the balance sheet date are included in prepaid and other current assets and other accrued liabilities, respectively. Derivative assets and derivative liabilities that have maturity dates greater than twelve months from the balance sheet date are included in deposits and other assets and other long-term liabilities, respectively.
Derivative instruments recorded at fair value in our unaudited and audited condensed consolidated balance sheets as of June 30, 2016 and December 31, 2015, respectively, consisted of the following:
 
Derivative Liabilities
(Amounts in thousands)
June 30, 2016
 
December 31, 2015
Derivatives Designated as Cash Flow Hedges
 
 
 
Interest Rate Swap Agreements - Current
$
1,590

 
$
1,372

Interest Rate Swap Agreements - Noncurrent
655

 
226

 
$
2,245

 
$
1,598


As of June 30, 2016 and December 31, 2015, we held no derivatives other than derivatives designated as hedging instruments.
Effective changes in the fair value of derivatives that are designated as hedges are recorded in accumulated other comprehensive income ("AOCI") on the condensed consolidated balance sheet when in qualifying relationships and are reclassified to interest expense when the forecasted transaction takes place. Ineffective changes, if any, and changes in the fair value of derivatives that are not designated as hedges are recorded directly in interest expense and other (income) expense, net, respectively.
Gains and losses before taxes on derivatives designated as cash flow hedges included in our unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2016 and June 30, 2015 were as follows:
Three Months Ended June 30, 2016 and June 30, 2015
 
Loss Recognized in AOCI
(Effective Portion)
 
Loss Reclassified from
AOCI into Operations
(Effective Portion)
 
Loss Recognized in
Operations on Derivatives
(Ineffective Portion and Amount Excluded from Effectiveness Testing)
(Amounts in thousands)
2016
 
2015
 
2016
 
2015
 
2016
 
2015
Interest Rate Swap Agreements
(446
)
 
(107
)
 
(441
)
 
(442
)
 
—

 
—

Total
$
(446
)
 
$
(107
)
 
$
(441
)
 
$
(442
)
 
$
—

 
$
—

Six Months Ended June 30, 2016 and June 30, 2015

 
Loss Recognized in AOCI
(Effective Portion)
 
Loss Reclassified from
AOCI into Operations
(Effective Portion)
 
Loss Recognized in
Operations on Derivatives
(Ineffective Portion and Amount Excluded from Effectiveness Testing)
(Amounts in thousands)
2016
 
2015
 
2016
 
2015
 
2016
 
2015
Interest Rate Swap Agreements
(1,530
)
 
(1,672
)
 
(883
)
 
(883
)
 
—

 
—

Total
$
(1,530
)
 
$
(1,672
)
 
$
(883
)
 
$
(883
)
 
$
—

 
$
—


As of June 30, 2016, approximately $1.6 million of unrealized losses associated with the Interest Rate Swap Agreements are expected to be reclassified from AOCI to operations during the next twelve months. Transactions and events expected to occur over the next twelve months that will necessitate reclassifying these unrealized losses to operations are the periodic interest payments that are required to be made on the Amended and Restated Term Loan B. For the six months ended June 30, 2016, no hedge ineffectiveness was recorded for the Interest Rate Swap Agreements.