XML 23 R13.htm IDEA: XBRL DOCUMENT v3.20.2
Derivative Financial Instruments
 9 Months Ended
Sep. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative financial instruments Derivative Financial Instruments
Risk Management Objective of Using Derivatives
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings.

Cash Flow Hedges of Interest Rate Risk
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 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. Such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.
For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in Accumulated Other Comprehensive Income (Loss) ("AOCI") and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt.
On February 24 and 25, 2020, the Company entered into two treasury rate locks totaling $75.0 million and $40.0 million, respectively. The treasury rate locks were settled for an aggregate amount of $4.3 million on March 4, 2020 concurrent with the Company's issuance of its Senior Notes due 2030. The settlement will be amortized over the 10-year term of the notes.
As of September 30, 2020, the Company had eight outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:
DERIVATIVE INSTRUMENTNUMBER OF INSTRUMENTSNOTIONAL AMOUNT
in millions
Interest rate swaps8 $175.0
Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet
The table below presents the fair value of the Company's derivative financial instruments, as well as their classification on the Condensed Consolidated Balance Sheet as of September 30, 2020.
BALANCE AT SEPTEMBER 30, 2020
In thousandsBALANCE SHEET LOCATIONFAIR VALUE
Derivatives designated as hedging instruments
Interest rate swapsOther liabilities$14,460 
Total derivatives designated as hedging instruments$14,460 

Tabular Disclosure of the Effect of Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income (Loss)
The table below presents the effect of cash flow hedge accounting on AOCI during the three and nine months ended September 30, 2020 and 2019 related to the Company's outstanding interest rate swaps.
LOSS RECOGNIZED IN
AOCI ON DERIVATIVE
three months ended September 30,		(GAIN) LOSS RECLASSIFIED FROM
AOCI INTO INCOME
three months ended September 30,
In thousands2020201920202019
Interest rate swaps$74 $2,341 Interest expense$952 $18 
Settled treasury hedges— — Interest expense107 — 
Settled interest rate swaps— — Interest expense42 42 
 $74 $2,341 Total interest expense$1,101 $60 
LOSS RECOGNIZED IN
AOCI ON DERIVATIVE
nine months ended September 30,		(GAIN) LOSS RECLASSIFIED FROM
AOCI INTO INCOME
nine months ended September 30,
In thousands2020201920202019
Interest rate swaps$11,192 $7,642 Interest expense$2,012 $(52)
Settled treasury hedges4,267 — Interest expense229 — 
Settled interest rate swaps— — Interest expense126 126 
 $15,459 $7,642 Total interest expense$2,367 $74 
The Company estimates that $4.4 million will be reclassified from AOCI to interest expense over the next 12 months.
Credit-risk-related Contingent Features
The Company's agreements with each of its derivative counterparties contain a cross-default provision under which the Company could be declared in default of its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company's default on the indebtedness.
As of September 30, 2020, the fair value of derivatives in a net liability position including accrued interest but excluding any adjustment for nonperformance risk related to these agreements was $15.1 million. As of September 30, 2020, the Company has not posted any collateral related to these agreements and was not in breach of any agreement.