XML 33 R18.htm IDEA: XBRL DOCUMENT

10. DERIVATIVE INSTRUMENTS

12 Months Ended

Dec. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

We are exposed to certain risks relating to our ongoing business operations. The primary risk managed by us using derivative instruments is interest rate risk.

Our credit facilities are comprised of two tranches of term loans. On July 1, 2016, we issued $485 million of the First Lien Term Loans. We also previously entered into a Second Lien Credit Agreement pursuant to which we issued $180 million of Second Lien Term Loans. Proceeds from the First Lien Term Loans were used in part to make a $12 million principal payment of the Second Lien Term Loans to reduce the outstanding balance due to $168 million. Both tranches of term loans have a LIBOR floor of 1% which serves as an interest rate floor based on our three month LIBOR rate election. See Note 8, Notes Payable, Revolving Credit Facility and Capital Leases for more information.

In the fourth quarter of 2016, the Company entered into two forward interest rate cap agreements ("2016 Caps"). The 2016 Caps will mature in September and October 2020. The 2016 Caps had notional amounts of $150,000,000 and $350,000,000, respectively, which were designated at inception as cash flow hedges of future cash interest payments associated with portions of the Company’s variable rate bank debt. Under these arrangements, the Company purchased a cap on 3 month LIBOR at 2.0%. The Company is liable for a $5.3 million premium to enter into the caps which is being accrued over the life of the agreements.

At inception, we designated our interest rate cap agreements as cash flow hedges of floating-rate borrowings. In accordance with ASC Topic 815, derivatives that have been designated and qualify as cash flow hedging instruments are reported at fair value. The gain or loss on the effective portion of the hedge (i.e., change in fair value) is initially reported as a component of accumulated other comprehensive income in the consolidated statement of equity (deficit). The remaining gain or loss, if any, is recognized currently in earnings. As of December 31, 2016, the cash flow hedges were deemed to be effective. No amount is expected to be reclassified into earnings in the next twelve months.

Below represents as of December 31, 2016 the fair value of our interest rate caps and gain recognized:

The fair value of derivative instruments as of December 31, 2016 is as follows (amounts in thousands):

Derivatives	Balance Sheet Location	Fair Value – Asset Derivatives
Interest rate contracts	Current assets	$818

A tabular presentation of the effect of derivative instruments on our statement of comprehensive income is as follows (amounts in thousands):

Effective Interest Rate Cap	Amount of Gain Recognized on Derivative	Location of Gain Recognized in Income on Derivative
Interest rate contracts	$818	Other Comprehensive Income