Derivatives and Hedging

6 Months Ended

Jun. 30, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Hedging

Derivatives and Hedging

The fair value of all our interest rate swap contracts was reported as follows (in thousands):

	Assets			Liabilities
	Balance Sheet Location	Amount		Balance Sheet Location	Amount
Designated Hedges:
June 30, 2016	Other Assets, net	$	—	Other Liabilities, net	$	8,227
December 31, 2015	Other Assets, net	2,664		Other Liabilities, net	725

The gross presentation, the effects of offsetting for derivatives with the right to offset under master netting agreements and the net presentation of our interest rate swap contracts is as follows (in thousands):

							Gross Amounts Not Offset in Balance Sheet
	Gross Amounts Recognized		Gross Amounts Offset in Balance Sheet		Net Amounts Presented in Balance Sheet		Financial Instruments			Cash Collateral Received		Net Amount
June 30, 2016
Liabilities	$	8,227	$	—	$	8,227	$	—		$	—	$	8,227
December 31, 2015
Assets	2,664		—		2,664		(346		)	—		2,318
Liabilities	725		—		725		(346		)	—		379

Cash Flow Hedges

As of June 30, 2016 and December 31, 2015, we had three interest rate swap contracts, maturing through March 2020, with an aggregate notional amount of $200 million that were designated as cash flow hedges and fix the LIBOR component of the interest rates at 1.5%. We have determined that these contracts are highly effective in offsetting future variable interest cash flows.

Also, at June 30, 2016, we had a forward-starting interest rate swap contract that will be effective in October 2016 with an aggregate notional amount of $200 million hedging future fixed-rate debt issuances. This contract matures in October 2026 and fixes the 10-year swap rate at 1.5% per annum.

During 2015, we entered into and settled two forward-starting interest rate swap contracts with an aggregate notional amount of $215 million hedging future fixed-rate debt issuances, which fixed the 10-year swap rates at 2.0% per annum. Upon settlement of these contracts during 2015, we received $5.0 million resulting in a gain in accumulated other comprehensive loss.

As of June 30, 2016 and December 31, 2015, the net gain balance in accumulated other comprehensive loss relating to cash flow interest rate swap contracts was $.3 million and $8.2 million, respectively, and will be reclassified to net interest expense as interest payments are made on the originally hedged debt. Within the next 12 months, a loss of approximately $2.3 million in accumulated other comprehensive loss is expected to be reclassified to net interest expense related to our interest rate contracts.

A summary of cash flow interest rate swap contract hedging activity is as follows (in thousands):

Derivatives Hedging Relationships	Amount of (Gain) Loss  Recognized in Other Comprehensive Income on Derivative  (Effective Portion)			Location of  Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income	Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)			Location of  Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount  Excluded from Effectiveness Testing)	Amount of  Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Three Months Ended June 30, 2016	$	4,140		Interest expense, net	$	(360	)	Interest expense, net	$	—
Six Months Ended June 30, 2016	8,571			Interest expense, net	(731		)	Interest expense, net	—
Three Months Ended June 30, 2015	(6,738		)	Interest expense, net	(321		)	Interest expense, net	—
Six Months Ended June 30, 2015	(5,388		)	Interest expense, net	(709		)	Interest expense, net	—

Fair Value Hedges

Associated with the refinancing of a secured note, on June 24, 2016, we terminated two interest rate swap contracts that were designated as fair value hedges and had an aggregate notional amount of $62.9 million. Upon settlement, we received $2.2 million, which was recognized as part of the gain on extinguishment of debt related to the hedged debt.

As of December 31, 2015, we had two interest rate swap contracts, maturing through October 2017, with an aggregate notional amount of $63.7 million that were designated as fair value hedges and convert fixed interest payments at rates of 7.5% to variable interest payments ranging from 4.41% to 4.44%. We have determined that our fair value hedges were highly effective in limiting our risk of changes in the fair value of fixed-rate notes attributable to changes in interest rates.

A summary of fair value interest rate swap contract hedging activity is as follows (in thousands):

	Gain (Loss)  on Contracts			Gain (Loss)  on Borrowings		Net Settlements  and Accruals on Contracts (1) (3)		Amount of Gain  (Loss) Recognized in Income (2) (3)
Three Months Ended June 30, 2016
Interest expense, net	$	(320	)	$	320	$	2,674	$	2,674
Six Months Ended June 30, 2016
Interest expense, net	(418		)	418		3,140		3,140
Three Months Ended June 30, 2015
Interest expense, net	(442		)	442		513		513
Six Months Ended June 30, 2015
Interest expense, net	(389		)	389		1,038		1,038

_______________

(1) Amounts in this caption include gain (loss) recognized in income on derivatives and net cash settlements.

(2) No ineffectiveness was recognized during the respective periods.

(3) Included in each caption for both the three and six months ended June 30, 2016 is $2.2 million received upon the termination of two interest rate swap contracts.

Credit-risk-related Contingent Features

We have agreements with some of our derivative counterparties that contain a provision that if we default on any of our indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, we could also be declared in default on our derivative obligations.

As of June 30, 2016, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $7.1 million. As of June 30, 2016, we have not posted any collateral related to these agreements, and if we had breached any of the provisions, we would have been required to settle our obligations under them at their termination value of $7.1 million.