Derivative Instruments and Hedging Activities

9 Months Ended

Sep. 30, 2016

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity and credit risk primarily by managing the amount, sources and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings. The Company does not speculate using derivative instruments.

As of September 30, 2016 and December 31, 2015, the Company did not have any derivatives outstanding that were not designated in hedge accounting relationships.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. During the three and nine months ended September 30, 2016 and 2015, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. On September 30, 2016, the Company’s four Interest Rate Swap Agreements with a combined notional value of $1,250,000 matured in accordance with their terms and the five Forward Swaps with a combined notional value of $1,000,000 became effective.  The Interest Rate Swap Agreements and the Forward Swaps were designated as cash flow hedges of interest rate risk.  The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive loss and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the three and nine months ended September 30, 2016 and during the three months ended September 30, 2015, an immaterial loss related to the ineffective portion was recognized in other expense, net, on the accompanying unaudited condensed consolidated statements of comprehensive income (loss).  During the nine months ended September 30, 2015, a loss of $288 related to the ineffective portion was recognized in other expense, net, on the accompanying unaudited condensed consolidated statements of comprehensive income (loss).  Amounts reported in accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next 12 months, the Company estimates that an additional $15,112 will be reclassified as an increase to interest expense.

Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the unaudited condensed consolidated balance sheets as of September 30, 2016 and December 31, 2015:

	Liability Derivatives			Liability Derivatives
	As of September 30, 2016			As of December 31, 2015
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Interest rate swaps	Other liabilities	$	—	Other liabilities	$	1,673
Forward interest rate swaps	Other liabilities		42,267	Other liabilities		17,927
Total derivatives designated as hedging instruments		$	42,267		$	19,600

The unrealized gain (loss) on derivatives is recorded net of a tax benefit of $10,497 for the nine months ended September 30, 2016, and is included in the unaudited condensed consolidated statement of changes in stockholders’ equity and the unaudited condensed consolidated statements of comprehensive income (loss).  The unrealized gain (loss) on derivatives is recorded net of a tax expense of $1,003 and net of a tax benefit of $5,907 for the three months ended September 30, 2016 and 2015, respectively, and net of a tax benefit of $8,799 for the nine months ended September 30, 2015, and is included in the unaudited condensed consolidated statements of comprehensive income (loss).

Tabular Disclosure of the Effect of Derivative Instruments on the Statements of Comprehensive Income (Loss)

The table below presents the pretax effect of the Company’s derivative financial instruments on the unaudited condensed consolidated statements of comprehensive income (loss) for the three and nine months ended September 30, 2016 and 2015:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2016		2015			2016			2015
Derivatives in Cash Flow Hedging Relationships:
Gain (loss) related to effective portion of derivatives recognized in accumulated other comprehensive loss	$	1,612	$	(17,490	)	$	(25,276	)	$	(26,471	)
Gain related to effective portion of derivatives reclassified from accumulated other comprehensive loss to interest expense	$	880	$	843		$	2,546		$	2,312
Loss related to ineffective portion of derivatives recognized in other expense, net	$	—	$	(1	)	$	(1	)	$	(288	)

Credit Risk-Related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations.  As of September 30, 2016, the termination value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $44,824. As of September 30, 2016, the Company has posted no collateral related to these agreements. If the Company had breached any of these provisions at September 30, 2016, it could have been required to settle its obligations under the agreements at their termination value of $44,824.

Changes in Accumulated Other Comprehensive Loss

The following table reflects the changes in accumulated other comprehensive loss for the nine months ended September 30, 2016, net of tax:

Accumulated other comprehensive loss:	(Losses) Gains on Cash Flow Hedges
Accumulated other comprehensive loss at December 31, 2015	$	(13,137	)
Other comprehensive loss before reclassifications		(13,603	)
Amounts reclassified from accumulated other comprehensive loss to interest expense		1,371
Unrealized loss on derivatives, net of tax		(12,232	)
Accumulated other comprehensive loss at September 30, 2016	$	(25,369	)