Note 6: Derivative Instruments

During the normal course of operations, we are exposed to market risks including interest rates, foreign currency exchange rates and commodity prices. From time to time, and consistent with our risk management policies, we use derivative instruments to balance the cost and risk of such exposure. We do not use derivative instruments for trading or other speculative purposes.

The accounting for gains and losses that result from changes in the fair value of derivative instruments depends on whether the derivatives have been designated and qualify as hedging instruments and the type of hedging relationship. The interest rate locks described below were designated as cash flow hedges. The changes in fair value of our cash flow hedges are recorded in accumulated other comprehensive income (AOCI) and are reclassified into interest expense in the same period the hedged items affect earnings.

In 2007 and 2018, we entered into interest rate locks of future debt issuances to hedge the risk of higher interest rates. The gain/loss upon settlement of the interest rate hedges is deferred (recorded in AOCI) and amortized to interest expense over the term of the related debt.

This amortization was reflected in the accompanying Condensed Consolidated Statements of Comprehensive Income as follows:



		Three Months Ended		Nine Months Ended
	Location on	September 30		September 30
in thousands	Statement	2018	2017	2018	2017
Interest Rate Hedges
Loss reclassified from AOCI	Interest
(effective portion)	expense	$ (72)	$ (1,955)	$ (232)	$ (3,022)

The 2017 loss reclassified from AOCI includes the acceleration of deferred losses in the amount of $1,405,000 referable to the July 2017 debt purchases as described in Note 7.

For the 12-month period ending September 30, 2019, we estimate that $302,000 of the pretax loss in AOCI will be reclassified to interest expense.