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Interest Rate Hedging
 9 Months Ended
Sep. 30, 2015
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Interest Rate Hedging

Note 13. Interest Rate Hedging

Our policy is to manage interest expense using a mix of fixed and variable rate debt. To manage this mix effectively, we may enter into interest rate swaps in which we agree to exchange the difference between fixed and variable interest amounts calculated by reference to an agreed upon notional principal amount.

On December 16, 2014, we entered into a $150,000 interest rate swap that will go into effect on December 29, 2015 (one year delayed start), at which time our interest rate will be locked at 7.216% until December 31, 2018. Prior to December 16, 2014, we did not have any existing interest rate hedges. The hedge instrument will be 100% effective and as such the mark to market gains or losses on this hedge will be included in accumulated other comprehensive income (loss) to the extent effective, and reclassified into interest expense over the term of the related debt instruments.

 

The table below summarizes the fair value measurements of the gross asset and liability of this swap as of September 30, 2015, valued on a recurring basis:

 

(Dollars in thousands)           Fair Value Measurements at September 30, 2015  

Description

    September 30,
2015		      Quoted Prices in
Active Markets
for Identical
Assets (Level 1)		      Significant Other
Observable Inputs
(Level 2)		      Significant
Unobservable
Inputs (Level 3)		  

Derivative asset

    $ 1,609       $ —         $ 1,609       $ —     

Derivative liability

      (5,084 )       —           (5,084 )       —     
  

 

 

     

 

 

     

 

 

     

 

 

  
   $ (3,475 )     $ —         $ (3,475 )     $ —     
  

 

 

     

 

 

     

 

 

     

 

 

  

The interest rate swap derivative is classified as Level 2. Level 2 fair value is based on estimates using standard pricing models. These standard pricing models use inputs which are derived from or corroborated by observable market data such as interest rate yield curves, index forward curves, discount curves, and volatility surfaces. Counterparties to these derivative contracts are highly rated financial institutions which we believe carry only a minimal risk of nonperformance.

We have elected to present the derivative contracts on a gross basis in the Condensed Consolidated Balance Sheet included within other non-current assets and other non-current liabilities. Had we chosen to present the derivative contract on a net basis, we would have a derivative in a net liability position of $3,475 as of September 30, 2015. We do not have any cash collateral due under such agreements.

Derivatives’ Hedging Relationships

 

(Dollars in thousands)    Amount of after tax of gain/
(loss) recognized in Other
Comprehensive Income on
Derivatives (effective portion)		      Location of gain/(loss)
reclassified from
Accumulated Other
Comprehensive Income
into Income (effective
portion)		      Pre-tax amount of gain/(loss)
reclassified from Accumulated
Other Comprehensive Income
into Income (effective portion)		  

Derivatives’ Cash Flow Hedging Relationships

    September 30,
2015		      December 31,
2014		         September 30,
2015		      December 31,
2014		  

Forward starting interest rate swap contract

    $ (3,475 )     $ (431 )       Interest Expense       $ —         $ —     
  

 

 

     

 

 

        

 

 

     

 

 

  
   $ (3,475 )     $ (431 )        $ —         $ —