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Derivative Instruments | 9 Months Ended
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Sep. 30, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments | Derivative Instruments Currently, we use interest rate swaps to manage our interest rate risk. 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. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. To comply with the provisions of fair value accounting guidance, we incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. However, as of September 30, 2018, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. We do not have any fair value measurements on a recurring basis using significant unobservable inputs (Level 3) as of September 30, 2018 or December 31, 2017. The Company presents its interest rate derivatives in its condensed consolidated balance sheets on a gross basis as interest rate swap assets (recorded in other assets) and interest rate swap liabilities (recorded in accounts payable and other accrued liabilities). As of September 30, 2018, there was no impact from netting arrangements as the Company did not have any derivatives in liability positions. Cash Flow Hedges of Interest Rate Risk Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements related to certain floating rate debt obligations. To accomplish this objective, we primarily use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. We record all our interest rate swaps on the condensed consolidated balance sheet at fair value. In determining the fair value of our interest rate swaps, we consider the credit risk of our counterparties. These counterparties are generally larger financial institutions engaged in providing a variety of financial services. These institutions generally face similar risks regarding adverse changes in market and economic conditions, including, but not limited to, fluctuations in interest rates, exchange rates, equity and commodity prices and credit spreads. The recent and pervasive disruptions in the financial markets have heightened the risks to these institutions. As of September 30, 2018 and December 31, 2017, we had the following outstanding interest rate derivatives that were designated as effective cash flow hedges of interest rate risk (in thousands):
Notional Amount |  |  |  |  |  |  |  |  |  | Fair Value at Significant Other Observable Inputs (Level 2) |
As of September 30, 2018 |  | As of December 31, 2017 |  | Type of Derivative |  | Strike Rate |  | Effective Date |  | Expiration Date |  | As of September 30, 2018 (5) |  | As of December 31, 2017 (5) |
Currently-paying contracts |  |  |  |  |  |  |  |  |  |  |
$ | 206,000 |  | (1) | $ | 206,000 |  | (1) | Swap |  | 1.611 |  |  | Jun 15, 2017 |  | Jan 15, 2020 |  | $ | 2,856 |  |  | $ | 1,409 |  |
54,905 |  | (1) | 54,905 |  | (1) | Swap |  | 1.605 |  |  | Jun 6, 2017 |  | Jan 6, 2020 |  | 747 |  |  | 374 |  |
75,000 |  | (1) | 75,000 |  | (1) | Swap |  | 1.016 |  |  | Apr 6, 2016 |  | Jan 6, 2021 |  | 3,023 |  |  | 2,260 |  |
75,000 |  | (1) | 75,000 |  | (1) | Swap |  | 1.164 |  |  | Jan 15, 2016 |  | Jan 15, 2021 |  | 2,808 |  |  | 1,947 |  |
300,000 |  | (2) | 300,000 |  | (2) | Swap |  | 1.435 |  |  | Jan 15, 2016 |  | Jan 15, 2023 |  | 17,829 |  |  | 9,978 |  |
220,843 |  | (3) | 229,012 |  | (3) | Swap |  | 0.792 |  |  | Jan 15, 2016 |  | Jan 15, 2019 |  | (24 | ) |  | (430 | ) |
76,298 |  | (4) | 78,357 |  | (4) | Swap |  | 0.779 |  |  | Jan 15, 2016 |  | Jan 15, 2021 |  | 2,960 |  |  | 3,034 |  |
$ | 1,008,046 |  |  | $ | 1,018,274 |  |  |  |  |  |  |  |  |  |  | $ | 30,199 |  |  | $ | 18,572 |  |
(1) | Represents portions of the U.S. dollar tranche of the 5-Year Term Loan.
(2) | Represents the U.S. dollar tranche of the 7-Year Term Loan.
(3) | Represents the British pound sterling tranche of the 5-Year Term Loan. Translation to U.S. dollars is based on exchange rates of $1.30 to £1.00 as of September 30, 2018 and $1.35 to £1.00 as of December 31, 2017.
(4) | Represents the Canadian dollar tranche of the 5-Year Term Loan. Translation to U.S. dollars is based on exchange rates of $0.77 to 1.00 CAD as of September 30, 2018 and $0.80 to 1.00 CAD as of December 31, 2017.
(5) | Balance recorded in other assets in the consolidated balance sheets if positive and recorded in accounts payable and other accrued liabilities in the consolidated balance sheets if negative.
As of September 30, 2018, we estimate that an additional $8.5 million will be reclassified as a decrease to interest expense during the twelve months ended September 30, 2019, when the hedged forecasted transactions impact earnings. Foreign Currency Net Investment Hedges During the three months ended June 30, 2016, we entered into a series of forward contracts pursuant to which we agreed to sell an amount of foreign currency for an agreed upon amount of U.S. dollars. These forward contracts were executed to manage foreign currency exposures associated with certain transactions. As of June 30, 2016, the forward contracts did not meet the criteria for hedge accounting under GAAP and had a fair value of approximately $37.8 million. On July 1, 2016, the four forward contracts still in place met the criteria for net investment hedge accounting. During the year ended December 31, 2017, we terminated the four forward contracts with a notional amount of GBP 357.3 million. In connection with the settlement, we received approximately $64.0 million in proceeds and the related amount of approximately $26.2 million of accumulated other comprehensive income (AOCI) will remain in AOCI until the Company sells or liquidates its GBP-denominated investments, which has not occurred as of September 30, 2018. Credit-risk-related Contingent Features We have agreements with each of our derivative counterparties that contain a provision where we could be declared in default on our derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to our default on the indebtedness. As of September 30, 2018, we did not have any derivatives in a net liability position, and have not posted any collateral related to these agreements.

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- Definition 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. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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