Financial Instruments: Derivatives and Hedging

12 Months Ended

Dec. 31, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Financial Instruments: Derivatives and Hedging

Financial Instruments: Derivatives and Hedging

In the normal course of business, we use a variety of commonly used derivative instruments, such as interest rate swaps, caps, collar and floors, to manage, or hedge interest rate risk. We hedge our exposure to variability in future cash flows for forecasted transactions in addition to anticipated future interest payments on existing debt. We recognize all derivatives on the balance sheets at fair value. Derivatives that are not hedges are adjusted to fair value through earnings. If a derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedge asset, liability, or firm commitment through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. Reported net income and capital may increase or decrease prospectively, depending on future levels of interest rates and other variables affecting the fair values of derivative instruments and hedged items, but will have no effect on cash flows. Currently, all of our designated derivative instruments are effective hedging instruments.

As of December 31, 2015, the Company had designated an interest swap agreement on $30.0 million of the 2012 credit facility. The following table summarizes the notional and fair value of our derivative financial instrument at December 31, 2015 based on Level 2 inputs. The notional value is an indication of the extent of our involvement in that instrument at that time, but does not represent exposure to credit, interest rate or market risks.

	Notional Value	Strike Rate	Effective Date	Expiration Date	Balance Sheet Location	Fair Value
Interest Rate Swap	$30,000	2.295%	July 2010	June 2016	Other Liabilities	$	(241	)

Gains and losses on terminated hedges are included in the accumulated other comprehensive loss, and are recognized into earnings over the term of the related senior unsecured notes. As of December 31, 2015 and 2014, the deferred net losses from these terminated hedges, which are included in accumulated other comprehensive loss relating to net unrealized loss on derivative instrument, was approximately $2.0 million and $2.3 million, respectively.

Over time, the realized and unrealized gains and losses held in accumulated other comprehensive loss will be reclassified into earnings as an adjustment to interest expense in the same periods in which the hedged interest payments affect earnings. We estimate that approximately $0.6 million of the current balance held in accumulated other comprehensive loss will be reclassified into interest expense within the next 12 months.

The following table presents the effect of our derivative financial instrument that is designated and qualifies as a hedging instrument on the consolidated statements of operations for the years ended December 31, 2015, 2014 and 2013 respectively (in thousands):

	Amount of Loss Recognized in Other Comprehensive Loss (Effective Portion)								Location of Loss Reclassified from Accumulated Other Comprehensive Loss into Income	Amount of Gain  Reclassified from Accumulated Other Comprehensive Loss  into Income (Effective Portion)						Location of Gain Recognized in Income on Derivative	Amount of Gain  Recognized into Income (Ineffective Portion)
	Year Ended December 31,									Year Ended December 31,							Year Ended December 31,
Derivative	2015			2014			2013			2015		2014		2013			2015		2014		2013
				(as adjusted)			(as adjusted)					(as adjusted)		(as adjusted)					(as adjusted)		(as adjusted)
Interest Rate Swap	$	(109	)	$	(135	)	$	—	Interest expense	$	999	$	970	$	914	Interest expense	$	3	$	4	$	3