Derivative Instruments

12 Months Ended

Dec. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Interest Rate Swaps / Caps

The Company enters into derivative agreements to manage interest rate risk exposure. Interest rate swap agreements are utilized to limit the Company's exposure to interest rate risk by converting a portion of its floating-rate debt to a fixed rate basis, thus reducing the impact of interest rate changes on future interest expense. Interest rate swaps involve the receipt of floating-rate amounts in exchange for fixed rate interest payments over the lives of the agreements without an exchange of the underlying principal amounts. The Company also utilizes interest rate cap agreements to manage interest rate risk exposure. Interest rate cap agreements place a ceiling on the Company's exposure to rising interest rates.

The counterparties to these agreements are highly rated financial institutions. In the unlikely event that the counterparties fail to meet the terms of these agreements, the Company's exposure is limited to the interest rate differential on the notional amount at each monthly settlement period over the life of the agreements. The Company does not anticipate any non-performance by the counterparties. Substantially all of the assets of certain indirect, wholly-owned subsidiaries of the Company have been pledged as collateral for the underlying indebtedness and the amounts payable under the agreements for each of these entities. In addition, certain assets of the Company's subsidiaries, are pledged as collateral for various credit facilities and the amounts payable under certain agreements.

During the year ended December 31, 2019, the Company entered into the following hedging instruments:



Derivative Instrument	Date Effective	Notional Amount	Fixed Leg (Pay) Interest Rate	Indexed To	Scheduled Maturity
Interest rate swap	June 20, 2019	$75.0 million	1.84%	1 month LIBOR	June 20, 2026
Interest rate swap	June 20, 2019	$75.0 million	1.83%	1 month LIBOR	June 20, 2026
Interest rate swap	November 29, 2019	$200.0 million	1.57%	1 month LIBOR	November 30, 2029
Interest rate swap	November 29, 2019	$100.0 million	1.55%	1 month LIBOR	November 30, 2029
Interest rate swap	November 29, 2019	$100.0 million	1.57%	1 month LIBOR	November 30, 2029
Forward starting interest rate swap	April 15, 2020	$100.0 million	1.84%	1 month LIBOR	April 15, 2027
Forward starting interest rate swap	April 15, 2020	$100.0 million	1.83%	1 month LIBOR	April 15, 2027
Forward starting interest rate swap	September 30, 2024	$100.0 million	1.68%	1 month LIBOR	September 30, 2029
Forward starting interest rate swap	September 30, 2024	$100.0 million	1.74%	1 month LIBOR	September 30, 2029
Forward starting interest rate swap	September 30, 2024	$150.0 million	1.72%	1 month LIBOR	September 30, 2029
Interest rate cap	June 20, 2019	$200.0 million	n/a	1 month LIBOR	December 20, 2021

During the year ended December 31, 2019, the Company canceled the following interest rate swaps:



Date Canceled	Notional Amount	Funds Paid
November 22, 2019	$100.0 million	$3.9 million
November 22, 2019	$100.0 million	$3.9 million
November 22, 2019	$190.0 million	$14.5 million

As of December 31, 2019, the Company had interest rate swap and cap agreements in place to fix or limit the floating interest rates on a portion of the borrowings under its debt facilities summarized below:



Derivatives	Notional Amount	Weighted Average Fixed Leg (Pay) Interest Rate	Cap Rate	Weighted Average Remaining Term
Interest Rate Swap⁽¹⁾	$1,799.2 million	2.02%	n/a	5.1 years
Interest Rate Cap	$200.0 million	n/a	5.50%	2.0 years


(1)	The impact of forward starting swaps with total notional amount of $550.0 million will increase the weighted average remaining term to 6.7 years.

The following table represents pre-tax amounts in accumulated other comprehensive income (loss) related to interest rate swap and cap agreements expected to be recognized in income over the next twelve months (in thousands):



	Year Ended December 31, 2019
Unrealized gain (loss) on derivative instruments designated as cash flow hedges	$	(1,906	)
Net gain (loss) on terminated derivative instruments designated as cash flow hedges	(3,621		)

The following table summarizes the impact of derivative instruments on the consolidated statements of operations and the consolidated statements of comprehensive income on a pretax basis (in thousands):



	Financial statement caption	Year Ended December 31,
Derivative instrument	Financial statement caption	2019			2018			2017
Non-designated derivative instruments	Realized (gain) loss on derivative instruments, net	$	(2,237	)	$	(2,072	)	$	900
Non-designated derivative instruments	Unrealized (gain) loss on derivative instruments, net	3,107			430			(1,397		)
Designated derivative instruments	Interest and debt (income) expense	(6,048		)	(6,780		)	611
Designated derivative instruments	Comprehensive loss	48,653			2,119			641

Fair Value of Derivative Instruments

The Company has elected to use the income approach to value its interest rate swap and cap agreements, using Level 2 market expectations at the measurement date and standard valuation techniques to convert future values to a single discounted present value. The Level 2 inputs for the interest rate swap and cap valuations are inputs other than quoted prices that are observable for the asset or liability (specifically LIBOR and swap rates and credit risk at commonly quoted intervals).

The Company presents its derivative financial instruments on a gross basis on the consolidated balance sheet. Any amounts of cash collateral received or posted related to derivative instruments are included in Other Assets on the consolidated balance sheet and are presented in operating activities of the consolidated statements of cash flows. As of December 31, 2019, there was cash collateral of $12.2 million related to interest rate swap contracts.

The fair value of derivative instruments on the Company's consolidated balance sheets as of December 31, 2019 and December 31, 2018 was as follows (in thousands):



	Asset Derivatives				Liability Derivatives
Derivative Instrument	December 31, 2019		December 31, 2018		December 31, 2019		December 31, 2018
Interest rate hedges, designated	$	10,562	$	10,531	$	36,087	$	10,966
Interest rate hedges, non-designated	286		3,392		—		—
Total derivatives	$	10,848	$	13,923	$	36,087	$	10,966