Derivative Instruments |
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Derivative Instrument Detail [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments |
NOTE 15. DERIVATIVE INSTRUMENTS From time to time, we enter into derivative financial instruments to manage certain cash flow and fair value risks. Derivatives designated and qualifying as a hedge of the exposure to variability in the cash flows of a specific asset or liability that is attributable to a particular risk, such as interest rate risk, are considered cash flow hedges. As of December 31, 2019, we have six interest rate swaps associated with $397.5 million of term loan debt. These cash flow hedges convert variable rates ranging from one-month and three-month LIBOR plus 1.85% to 2.15%, to fixed rates ranging from 3.17% to 4.82%. Our cash flow hedges are expected to be highly effective in achieving the offsetting of cash flows attributable to the hedged interest rate risk through the term of the hedge. At December 31, 2019, the amount of net losses expected to be reclassified into earnings in the next 12 months is approximately $3.7 million. In January 2019, we entered into a $150.0 million interest rate swap associated with the new term loan that refinanced our Senior Notes. This cash flow hedge converted a variable rate of one-month LIBOR plus 1.85% to a fixed rate of 4.56%. In September 2019, we entered into a $40.0 million interest rate swap, with the objective to lock in the index component rate on an expected new term loan in December 2019. In December 2019, we refinanced an existing $40.0 million term loan that matured with a new term loan maturing December 2029. Upon completing the refinance of the term loan, the interest rate swap was re-designated under new terms consistent with the new term loan. This cash flow hedge converts a variable rate of one-month LIBOR plus 1.85% to a fixed rate of 3.17%. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset or liability to a particular risk, such as interest rate risk, are considered fair value hedges. Fair value interest rate swaps with notional amounts totaling $14.3 million matured during the first quarter of 2018. A $50.0 million notional fair value swap associated with the Senior Notes was terminated in December 2017 at a cost of $0.4 million. The termination cost was recorded as a reduction to the carrying value of our long-term debt. The remaining unamortized balance was expensed in 2019 upon redemption of the Senior Notes. As of December 31, 2019, we do not hold any derivatives designated or qualifying as fair value hedges. Derivatives not designated as hedges are not speculative and are used to manage our exposure to interest rate movements, commodity price movements or other identified risks, but do not meet the strict hedge accounting requirements. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly into income. In April 2017, we entered into a lumber price swap to fix the price on a total of 36 million board feet (MMBF) of southern yellow pine. The lumber price swap expired on December 31, 2017, resulting in a realized gain of $1.1 million for the year then ended. The fair values of our cash flow derivative instruments on our Consolidated Balance Sheets as of December 31 are as follows:
The following table details the effect of derivatives on our Consolidated Statements of Income:
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