Interest Rate Contracts

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both business operations and economic conditions. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of debt funding and the use of derivative financial instruments. Specifically, the Company entered into derivative financial instruments to manage exposures that arise from business activities that result in the payment of future known and uncertain cash amounts, the value of which are determined by expected cash payments principally related to borrowings and interest rates. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The Company does not use derivatives for trading or speculative purposes.

Derivative Instrument

On February 25, 2016, the Company entered into an interest rate swap agreement to hedge the variable cash flows associated with the LIBO Rate-based variable-rate debt, on the Company's Revolving Credit Facility. The interest rate swap is effective for the period from April 1, 2016 to December 12, 2018 with a notional amount of $100.0 million.

The effective portion of the change in fair value of derivatives designated and qualifying as cash flow hedges is initially recorded in accumulated other comprehensive income ("AOCI") and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate debt.

The following table sets forth a summary of the interest rate swap at September 30, 2017 and December 31, 2016:

Fair value ⁽¹⁾

Derivative Instrument

Effective Date

Maturity Date

Interest Strike Rate

September 30, 2017

December 31, 2016

Assets

Interest Rate Swap

4/1/2016

12/12/2018

0.74%

920

996


(1)	The Company records all derivative instruments on a gross basis on the consolidated balance sheets, and accordingly, there are no offsetting amounts that net assets against liabilities. As of September 30, 2017, the Company's derivative was in an asset position, and as such, the fair value is included in the line item "Other Assets, net" on the consolidated balance sheet.

The following table sets forth the impact of the interest rate swap on the consolidated statements of operations for the nine months ended September 30, 2017:



	Nine Months Ended September 30, 2017
Interest Rate Swap in Cash Flow Hedging Relationship:
Amount of loss recognized in AOCI on derivative (effective portion)	$	190
Amount of (gain) reclassified from AOCI into earnings under “Interest expense” (effective portion)	$	(207	)
Amount of (loss) recognized in earnings under “Interest expense” (ineffective portion and amount excluded from effectiveness testing)	$	(60	)

During the twelve months subsequent to September 30, 2017, the Company estimates that an additional $0.7 million of income will be recognized from AOCI into earnings.

Our agreement with the derivative counterparty contains a provision where if the Company defaults on any of the Company's indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender within a specified time period, then the Company could also be declared in default on its derivative obligation.

As of September 30, 2017, the fair value of interest rate swap was in an asset position excluding any adjustment for nonperformance risk related to our derivative counterparty agreement, which was approximately $0.9 million. As of September 30, 2017, the Company had not posted any collateral related to our derivative counterparty agreement.