XML 29 R17.htm IDEA: XBRL DOCUMENT
v3.20.2

Note 11 - Derivatives | 6 Months Ended
--- | ---
Jun. 30, 2020
Notes to Financial Statements |
Derivative Instruments and Hedging Activities Disclosure [Text Block] |
11. | Derivatives
The Company uses interest-rate-related derivative instruments to manage its exposure related to changes in interest rates on its variable-rate debt instruments. The Company does not enter into derivative instruments for any purpose other than cash flow hedging. The Company does not speculate using derivative instruments. By using derivative financial instruments to hedge exposures to changes in interest rates, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk for the Company. When the fair value of a derivative contract is negative, the Company owes the counterparty and, therefore, the Company is not exposed to the counterparty’s credit risk in those circumstances. The Company minimizes counterparty credit risk in derivative instruments by entering into transactions with carefully selected major financial institutions based upon their credit profile. Market risk is the adverse effect on the value of a derivative instrument that results from a change in interest rates. The market risk associated with interest-rate contracts is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken. The Company assesses interest rate risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities. The Company maintains risk management control systems to monitor interest rate risk attributable to both the Company’s outstanding and forecasted debt obligations as well as the Company’s offsetting hedge positions. The risk management control systems involve the use of analytical techniques, including cash flow sensitivity analysis, to estimate the expected impact of changes in interest rates on the Company’s future cash flows. The Company uses variable-rate LIBOR debt to finance its operations. The debt obligations expose the Company to variability in interest payments due to changes in interest rates. Management believes that it is prudent to limit the variability of a portion of its interest payments. To meet this objective, management enters into LIBOR based interest rate swap agreements to manage fluctuations in cash flows resulting from changes in the benchmark interest rate of LIBOR. These swaps change the variable-rate cash flow exposure on the debt obligations to fixed cash flows. Under the terms of the interest rate swaps, the Company receives LIBOR based variable interest rate payments and makes fixed interest rate payments, thereby creating the equivalent of fixed-rate debt for the notional amount of its debt hedged. As disclosed in Note 10, on January 31, 2018, the Company entered into a Financing Agreement comprised of a $64.0 million term loan and up to a $25.0 million revolving line of credit. Shortly after entering into this Financing Agreement, the Company entered into an interest rate swap contract with PNC Bank with a notional amount of $36.0 million and a termination date of January 1, 2023 in order to hedge the risk of changes in the effective benchmark interest rate (LIBOR) associated with the Company’s term loan. The swap contract converted specific variable-rate debt into fixed-rate debt and fixed the LIBOR rate associated with a portion of the term loan under the Financing Agreement at 2.72%. The interest rate swap was designated as a cash flow hedge instrument in accordance with ASC 815 “Derivatives and Hedging”. The following table presents the notional amount and fair value of the Company’s derivative instruments as of June 30, 2020 and December 31, 2019.
|  |  | June 30, 2020 |
|  |  | Notional Amount |  |  | Fair Value (a) |
Derivatives instruments | Balance sheet classification |  | (in thousands) |
Interest rate swaps | Other long-term liabilities |  | $ | 25,683 |  |  | $ | (661 | )
|  |  | December 31, 2019 |
|  |  | Notional Amount |  |  | Fair Value (a) |
Derivatives instruments | Balance sheet classification |  | (in thousands) |
Interest rate swaps | Other long-term liabilities |  | $ | 28,821 |  |  | $ | (603 | )
(a) See Note 12 for the fair value measurements related to these financial instruments. All of the Company’s derivative instruments are designated as hedging instruments. The Company has structured its interest rate swap agreements to be 100% effective and as a result, there was no impact to earnings resulting from hedge ineffectiveness. Changes in the fair value of interest rate swaps designated as hedging instruments that effectively offset the variability of cash flows associated with variable-rate, long-term debt obligations are reported in accumulated other comprehensive income (AOCI). These amounts subsequently are reclassified into interest expense as a yield adjustment of the hedged interest payments in the same period in which the related interest affects earnings. The Company’s interest rate swap agreement was deemed to be fully effective in accordance with ASC 815, and, as such, unrealized gains and losses related to these derivatives were recorded as AOCI. The following table summarizes the effect of derivatives designated as cash flow hedging instruments and their classification within comprehensive loss for the three and six months ended June 30, 2020 and 2019:
Derivatives in Hedging Relationships |  | Amount of gain (loss) recognized in OCI on derivative (effective portion) |
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
|  | (in thousands) |
Interest rate swaps |  | $ | (11 | ) |  | $ | (298 | ) |  | $ | (227 | ) |  | $ | (494 | )
The following table summarizes the reclassifications out of accumulated other comprehensive loss for the three and six months ended June 30, 2020 and 2019:
Details about AOCI Components |  | Amount reclassified from AOCI into income (effective portion) |  |  |
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |  |  | Location of amount reclassified from AOCI
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |  |  | into income (effective portion)
|  | (in thousands) |  |  |
Interest rate swaps |  | $ | 97 |  |  | $ | 19 |  |  | $ | 169 |  |  | $ | 36 |  |  | Interest expense
As of June 30, 2020, $0.3 million of deferred losses on derivative instruments accumulated in AOCI are expected to be reclassified to earnings during the next twelve months. Transactions and events expected to occur over the next twelve months that will necessitate reclassifying these derivatives’ losses to earnings include the repricing of variable-rate debt.

X
- 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
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_DisclosureTextBlockAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration