Quarterly report pursuant to Section 13 or 15(d)

Derivatives

v2.4.0.8
Derivatives
9 Months Ended
Sep. 30, 2014
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives
Derivatives
 
The Company utilizes interest rate swap agreements to reduce the interest rate risk inherent in the Company’s variable rate Credit Facility term loans.  The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatility. The Company incorporates credit valuation adjustments to appropriately reflect the respective counterparty’s nonperformance risk in the fair value measurements.  See note 7, Fair Value Measurements, for additional information about the credit valuation adjustments.
 
The Swaps’ outstanding notional balance as of September 30, 2014 and terms are noted below:
 
Notional
 
Effective Date
 
Fixed
Rate Paid
 
Variable Rate Received
$
536,250,000

 
March 28, 2013
 
1.884%
 
3 mo. USD-LIBOR-BBA, subject to a 1.00% floor (a)
142,100,000

 
March 28, 2013
 
1.384%
 
3 mo. USD-LIBOR-BBA, subject to a 1.00% floor (a)
111,086,683

 
September 30, 2013
 
1.959%
 
3 mo. USD-LIBOR-BBA, subject to a 1.00% floor
111,086,683

 
September 30, 2013
 
1.850%
 
3 mo. USD-LIBOR-BBA, subject to a 1.00% floor
                                  
(a) 
On March 25, 2013, the Company negotiated amendments to the terms of these interest rate swap agreements to coincide with the Repricing (the “Amended Swaps”).  The Amended Swaps are held with the same counterparties as the Existing Swap Agreements.  Upon entering into the Amended Swaps, the Company simultaneously dedesignated the Existing Swap Agreements and redesignated the Amended Swaps as cash flow hedges for the underlying change in the swap terms.  The amounts previously recognized in Accumulated other comprehensive income (loss) relating to the dedesignation will be recognized in Interest expense over the remaining life of the Amended Swaps.
 
All of the Swaps are designated and qualify as cash flow hedging instruments, with the effective portion of the Swaps' change in fair value recorded in Accumulated other comprehensive income (loss).  Any ineffective portions of the Swaps' change in fair value are recognized in current earnings in Interest expense.  Changes in the fair value of the Swaps recognized in Accumulated other comprehensive income (loss) are reclassified to Interest expense when the hedged interest payments on the underlying debt are recognized.  Amounts in Accumulated other comprehensive income (loss) expected to be recognized in Interest expense in the coming 12 months total approximately $7,315,000.
 
The impact of the derivatives designated as cash flow hedges on the condensed consolidated financial statements is depicted below (amounts in thousands):
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2014
 
2013
 
2014
 
2013
Effective portion of gain (loss) recognized in Accumulated other comprehensive income (loss)
$
1,988

 
(5,734
)
 
$
(7,617
)
 
3,830

Effective portion of loss reclassified from Accumulated other comprehensive income (loss) into Net loss (a)
$
(2,367
)
 
(1,208
)
 
$
(5,833
)
 
(3,574
)
Ineffective portion of amount of gain (loss) recognized into Net loss on interest rate swaps (a)
$
59

 
(50
)
 
$
56

 
30

                                  
(a) 
Amounts are included in Interest expense in the unaudited condensed consolidated statements of operations and comprehensive income (loss).