Derivative Instruments and Hedging Activities

9 Months Ended

Sep. 30, 2014

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

Cash Flow Hedges of Interest Rate Risk

In connection with our amended Term Loan, we entered into the 2014 Swap (see Note 7 in the the Notes to the Consolidated Financial Statements contained in this Form 10-Q for information about the Term Loan related to the 2014 Swap) allowing us to trade the variable interest rate for a fixed interest rate on the Term Loan. The 2014 Swap fixes the underlying LIBOR rate on the Term Loan at 1.04% per annum for the first three years and matures on August 1, 2017. Based on the leverage as of September 30, 2014, our spread over LIBOR will be 1.35% resulting in an initial estimated all-in interest rate of 2.39% per annum.

In connection with the original Term Loan in 2011, we entered into the 2011 Swap (see Note 7 in the Notes to the Consolidated Financial Statements contained in this Form 10-Q for information about the Term Loan related to the 2011 Swap) that fixed the underlying LIBOR rate on the Term Loan at 1.11% per annum for the first three years and matured on July 1, 2014.

We have designated the 2014 and 2011 Swap as cash flow hedges. No gain or loss was recognized in the Consolidated Statements of Income and Comprehensive Income related to hedge ineffectiveness or to amounts excluded from effectiveness testing on our cash flow hedge during the quarter and nine months endedSeptember 30, 2014.

Amounts reported in accumulated other comprehensive income (loss) on the Consolidated Balance Sheets related to derivatives are reclassified to interest expense as interest payments are made on our variable-rate debt. During the next twelve months, we estimate that an additional $1.6 million will be reclassified as an increase to interest expense. This estimate may be subject to change as the under underlying LIBOR rate changes.

Derivative Instruments and Hedging Activities

The table below presents the fair value of our derivative financial instrument as well as our classification on our Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013 (amounts in thousands).

	Balance Sheet Location	September 30, 2014		December 31, 2013
Interest Rate Swap	Escrow deposits, goodwill, and other assets, net	$	141	$	—
Interest Rate Swap	Accrued payroll and other operating expenses	$	—	$	927

Tabular Disclosure of the Effect of Derivative Instruments on the Income Statement

The tables below present the effect of our derivative financial instrument on the Consolidated Statements of Income and Comprehensive Income for the quarters endedSeptember 30, 2014 and 2013 (amounts in thousands).

Derivatives in Cash Flow Hedging Relationship	Amount of loss recognized in OCI on derivative (effective portion)				Location of loss reclassified from accumulated OCI into income (effective portion)	Amount of loss reclassified from accumulated OCI into income (effective portion)
	September 30, 2014		September 30, 2013			September 30, 2014		September 30, 2013
Interest Rate Swap	$	233	$	106	Interest Expense	$	374	$	467

The tables below present the effect of our derivative financial instrument on the Consolidated Statements of Income and Comprehensive Income for the nine months endedSeptember 30, 2014 and 2013 (amounts in thousands).

Derivatives in Cash Flow Hedging Relationship	Amount of loss recognized in OCI on derivative (effective portion)				Location of loss reclassified from accumulated OCI into income (effective portion)	Amount of loss reclassified from accumulated OCI into income (effective portion)
	September 30, 2014		September 30, 2013			September 30, 2014		September 30, 2013
Interest Rate Swap	$	256	$	141	Interest Expense	$	1,324	$	1,374

We determined that no adjustment was necessary for nonperformance risk on our derivative obligation. As of September 30, 2014, we have not posted any collateral related to this agreement.