|12 Months Ended|
Dec. 31, 2016
|Derivative Instruments and Hedging Activities Disclosure [Abstract]|
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 10, Fair Value Measurements, for additional information about the credit valuation adjustments.
At December 31, 2016, derivative financial instruments included one interest rate swap with a fair value of $8,521,000 that constituted an asset of the Company and seven interest rate swaps with an aggregate fair value of $16,948,000, that constituted a liability to the Company. At December 31, 2015, there were seven interest rate swaps with an aggregate fair value of $13,470,000 that constituted a liability to the Company. The Swaps are included in Other assets, net and Derivative financial instruments on the consolidated balance sheets. As of December 31, 2016 and 2015 no amounts were offset for certain derivatives' fair value that were recognized under a master netting agreement with the same counterparty.
The objective of the swap derivative instruments was to reduce the risk associated with the Company's term loan variable interest rates. In effect, the swap derivative instruments convert variable interest rates into fixed interest rates on the Company’s term loan borrowings.
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 $5,521,000.
The Swaps' outstanding notional balance as of December 31, 2016 and terms are noted below:
The impact of the derivatives designated as cash flow hedges on the consolidated financial statements is depicted below (amounts in thousands):
(a) Amounts are included in Interest expense in the consolidated statements of operations and comprehensive income (loss).
The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts.
Reference 1: http://www.xbrl.org/2003/role/presentationRef