Derivative Instruments

9 Months Ended

Sep. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

We use derivative instruments to mitigate the impact of changes in interest rates, both in anticipation of future debt issuances and to offset interest rate variability of certain floating rate debt issuances outstanding. We also use derivative instruments to mitigate the impact of changes in natural gas and diesel fuel prices and changes in foreign currency exchange rates. Derivative instruments that are designated and qualify as cash flow hedges are accounted for in accordance with applicable accounting standards. See Note 3 Fair Value Accounting for discussion of how the Company valued its commodity hedges and interest rate swap at September 30, 2015. See Note 11 Debt for a description of the Company's debt instruments.

Interest rate hedges

					Included in accompanying balance sheet at September 30, 2015
	Notional Amount		Interest Rate(1)		Liability		AOCL – loss/ (income)			Noncontrolling Interest
	(in millions, except %)
Expired hedges:
2006 secured railcar equipment notes	$	200.0	4.87	%	$	—	$	(1.1	)	$	—
TRIP Holdings warehouse loan	$	788.5	3.60	%	$	—	$	8.5		$	11.4
Open hedge:
TRIP Master Funding secured railcar equipment notes	$	48.8	2.62	%	$	2.2	$	0.9		$	1.2

⁽¹⁾  Weighted average fixed interest rate

	Effect on interest expense - increase/(decrease)
	Three Months Ended September 30,					Nine Months Ended September 30,						Expected effect during next twelve months(1)
	2015		2014			2015			2014
	(in millions)
Expired hedges:
2006 secured railcar equipment notes	$	—	$	(0.1	)	$	(0.2	)	$	(0.3	)	$	(0.3	)
Promissory notes	$	—	$	0.7		$	1.2		$	2.2		$	—
TRIP Holdings warehouse loan	$	1.2	$	1.3		$	3.7		$	3.9		$	4.8
Open hedges:
TRIP Master Funding secured railcar equipment notes	$	0.2	$	0.4		$	0.9		$	1.2		$	1.0
Promissory notes	$	—	$	3.8		$	5.3		$	11.5		$	—

⁽¹⁾ Based on the fair value of open hedges as of September 30, 2015

During 2005 and 2006, we entered into interest rate swap derivatives in anticipation of issuing our 2006 Secured Railcar Equipment Notes. These derivative instruments, with a notional amount of $200.0 million, were settled in 2006 and fixed the interest rate on a portion of the related debt issuance. These derivative instrument transactions are being accounted for as cash flow hedges with changes in the fair value of the instruments of $4.5 million in income recorded in Accumulated Other Comprehensive Loss ("AOCL") through the date the related debt issuance closed in 2006. The balance is being amortized over the term of the related debt. The effect on interest expense is due to amortization of the AOCL balance.

During 2006 and 2007, we entered into interest rate swap derivatives in anticipation of issuing our Promissory Notes. These derivative instruments, with a notional amount of $370.0 million, were settled in 2008 and fixed the interest rate on a portion of the related debt issuance. These derivative instrument transactions were being accounted for as cash flow hedges with changes in the fair value of the instruments of $24.5 million recorded as a loss in AOCL through the date the related debt issuance closed in 2008. The balance was being amortized over the term of the related debt. These derivative instruments were fully amortized in May 2015. The effect on interest expense is due to amortization of the AOCL balance.

In 2008, we entered into an interest rate swap derivative instrument to fix the variable Libor component of the Promissory Notes. This derivative instrument expired in May 2015 and was being accounted for as a cash flow hedge. The effect on interest expense is primarily a result of monthly interest settlements.

Between 2007 and 2009, TRIP Holdings, as required by the TRIP Warehouse Loan, entered into interest rate swap derivatives, all of which qualified as cash flow hedges, to reduce the effect of changes in variable interest rates in the TRIP Warehouse Loan. In July 2011, these interest rate hedges were terminated in connection with the refinancing of the TRIP Warehouse Loan. Balances included in AOCL at the date the hedges were terminated are being amortized over the expected life of the new debt with $4.8 million of additional interest expense expected to be recognized during the twelve months following September 30, 2015. Also in July 2011, TRIP Holdings’ wholly-owned subsidiary, TRIP Master Funding, entered into an interest rate swap derivative instrument, expiring in 2021, with a notional amount of $94.1 million to reduce the effect of changes in variable interest rates associated with the Class A-1b notes of the TRIP Master Funding secured railcar equipment notes. The effect on interest expense is primarily a result of monthly interest settlements.

See Note 11 Debt regarding the related debt instruments.

Other Derivatives

Natural gas and diesel fuel

We maintain a program to mitigate the impact of fluctuations in the price of natural gas and diesel fuel. The intent of the program is to protect our operating profit from adverse price changes by entering into derivative instruments. For those instruments that do not qualify for hedge accounting treatment, any changes in their valuation are recorded directly to the consolidated statement of operations. The effect on operating income for these instruments was not significant. The amount recorded in the consolidated balance sheet as of September 30, 2015 for these instruments was a liability of $0.7 million.