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DERIVATIVE FINANCIAL INSTRUMENTS | 9 Months Ended
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Sep. 30, 2020
DERIVATIVE FINANCIAL INSTRUMENTS |
DERIVATIVE FINANCIAL INSTRUMENTS | 11. DERIVATIVE FINANCIAL INSTRUMENTS The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, and foreign exchange risk primarily through the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s known or expected cash payments principally related to the Company’s borrowings. The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. In February 2017, the Company entered into three interest rate swaps with a combined notional amount of $40,000 that mature in February 2022. In March 2020, the Company entered into two additional interest rate swaps with a combined notional amount of $20,000 that increases to $60,000 in March 2022 and matures in December 2024. The changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in Accumulated Other Comprehensive Loss and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During 2020 and 2019, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. The Company estimates that an additional $896 will be reclassified as an increase to interest expense over the next twelve months. Additionally, the Company does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not designated as hedges. The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019 (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | Asset Derivatives | ​ | ​ | ​ | Liability Derivatives | ​
​ | ​ | ​ | ​ | Fair value as of: | ​ | ​ | ​ | Fair value as of: | ​
Derivatives designated as | ​ | Balance Sheet | ​ | September 30, | ​ | December 31, | ​ | Balance Sheet | ​ | September 30, | ​ | December 31, | ​
hedging instruments |  | Location |  | 2020 |  | 2019 |  | Location |  | 2020 |  | 2019 |
Interest rate products | ​ | Other long-term assets | ​ | $ | — | ​ | $ | — | ​ | Other long-term liabilities | ​ | $ | 2,137 | ​ | $ | 363 | ​
​ The tables below present the effect of cash flow hedge accounting on other comprehensive income (loss) (“OCI”) for the three and nine months ended September 30, 2020 and 2019 (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Amount of pre-tax loss recognized | ​ | Amount of pre-tax loss recognized | ​
​ | ​ | in OCI on derivatives | ​ | in OCI on derivative | ​
Derivatives in cash flow hedging relationships | ​ | Three months ended September 30, | ​ | Nine months ended September 30, | ​
​ |  | 2020 |  | 2019 |  | 2020 |  | 2019 |
Interest rate products | ​ | $ | (133) | ​ | $ | (108) | ​ | $ | (2,184) | ​ | $ | (914) | ​
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Amount of pre-tax gain (loss) reclassified | ​ | Amount of pre-tax gain (loss) reclassified | ​
​ | ​ | from accumulated OCI into income | ​ | from accumulated OCI into income | ​
Location of gain (loss) reclassified | ​ | Three months ended September 30, | ​ | Nine months ended September 30, | ​
from accumulated OCI into income | ​ | 2020 | ​ | 2019 |  | 2020 |  | 2019 | ​
Interest income (expense) | ​ | $ | (224) | ​ | $ | 27 | ​ | $ | (410) | ​ | $ | 128 | ​
​ The table below presents the effect of the Company’s derivative financial instruments on the condensed consolidated statements of income and comprehensive income for the three and nine months ended September 30, 2020 and 2019 (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | Total amounts of income and expense | ​ | Total amounts of income and expense | ​
​ | ​ | ​ | ​ | line items presented that reflect the | ​ | line items presented that reflect the | ​
​ | ​ | ​ | ​ | effects of cash flow hedges recorded | ​ | effects of cash flow hedges recorded | ​
​ | ​ | ​ | ​ | Three months ended September 30, | ​ | Nine months ended September 30, | ​
Derivatives designated as hedging instruments |  | Income Statement Location |  | 2020 |  | 2019 |  | 2020 |  | 2019 |
Interest rate products |  | Interest Expense | ​ | $ | 844 | ​ | $ | 1,359 | ​ | $ | 2,799 | ​ | $ | 3,974 | ​
​ The tables below present a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of September 30, 2020 and December 31, 2019. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented in the condensed consolidated balance sheets (in thousands). ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Gross amounts | ​ | Net amounts of liabilities | ​ | Gross amounts not offset in the condensed consolidated
As of | ​ | Gross amounts | ​ | offset in the | ​ | presented in the | ​ | balance sheets
September 30, | ​ | of recognized | ​ | condensed consolidated | ​ | condensed consolidated | ​ | Financial | ​ | Cash collateral | ​ | ​ | ​
2020 |  | liabilities |  | balance sheets |  | balance sheets |  | instruments |  | received |  | Net amount
Derivatives | ​ | $ | 2,137 | ​ | $ | — | ​ | $ | 2,137 | ​ | $ | — | ​ | $ | — | ​ | $ | 2,137
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Gross amounts | ​ | Net amounts of liabilities | ​ | Gross amounts not offset in the condensed consolidated
As of | ​ | Gross amounts | ​ | offset in the | ​ | presented in the | ​ | balance sheets
December 31, | ​ | of recognized | ​ | condensed consolidated | ​ | condensed consolidated | ​ | Financial | ​ | Cash collateral | ​ | ​ | ​
2019 |  | liabilities |  | balance sheets |  | balance sheets |  | instruments |  | received |  | Net amount
Derivatives | ​ | $ | 363 | ​ | $ | — | ​ | $ | 363 | ​ | $ | — | ​ | $ | — | ​ | $ | 363
​ The Company has agreements with each of its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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