Derivative Instruments and Hedging Activities

The Company is exposed to market fluctuations in interest rates, including those in connection with its March 2017 lease agreement (see Note 10). During the three months ended June 30, 2017, the Company entered into interest rate swap and interest rate cap agreements to manage a portion of such interest rate risk. All of the Company’s derivative instruments are utilized for risk management purposes, and are not used for trading or speculative purposes.

The Company's derivative instruments are designated as cash flow hedges for accounting purposes. Since the specific terms of the derivative instruments match those of the item being hedged, the derivative instruments are deemed to be highly effective in offsetting the changes in cash flows of the hedged item. As such, changes in the fair value of these derivatives are recorded in accumulated other comprehensive income (loss) until the underlying transaction affects earnings, and are then reclassified to earnings in the same account as the hedged transaction. The Company would record any gain or loss related to the ineffectiveness directly to earnings.

The Company assesses, both at inception and on an ongoing basis, whether derivatives used continue to be highly effective in offsetting changes in cash flows of the hedged items. The Company does not exclude any portion of the cash flow hedge contracts from the assessment of hedge effectiveness. If and when a derivative is no longer expected to be highly effective, hedge accounting is discontinued.

The following table summarizes the notional amounts of the Company's outstanding interest rate swap and cap agreements as of June 30, 2017:



	Notional Amount
Interest rate swap contracts	$	20,000
Interest rate cap contracts	$	20,000

As it relates to cash flow hedges, for the three months ended June 30, 2017, amounts of gains and losses recognized in other comprehensive income (loss), and amounts reclassified from accumulated other comprehensive income (loss) into interest expense, net were not material. As of June 30, 2017, the amounts expected to be reclassified out of accumulated other comprehensive income into interest expense over the next 12 months is not expected to be material. For the three months ended June 30, 2017, there were no gains or losses recorded related to the ineffective portion of the derivative instruments.