Annual report pursuant to Section 13 and 15(d)

INTEREST RATE SWAP AGREEMENT

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INTEREST RATE SWAP AGREEMENT
12 Months Ended
Dec. 31, 2015
INTEREST RATE SWAP AGREEMENT
12. INTEREST RATE SWAP AGREEMENT

The Company is currently a party to one interest rate swap agreement that is used to hedge a portion of the interest rate risk associated with the variable interest rates on the Company’s term loan debt and qualifies for cash flow hedge accounting. The fair value of the interest rate swap is recorded on the Company’s consolidated balance sheet as an asset or liability with the effective portion of the interest rate swap’s gains or losses reported as a component of accumulated other comprehensive loss and the ineffective portion reported in earnings. The changes in fair value are reclassified from accumulated other comprehensive loss into earnings in the same period that the hedged item affects earnings.

The valuation technique used to determine fair value is the income approach and under this approach, the Company uses projected future interest rates as provided by counterparty to the interest rate swap agreement and the fixed rates that the Company is obligated to pay under the agreement. Therefore, the Company’s measurements use significant unobservable inputs, which fall in Level 3 of the U.S. GAAP hierarchy as defined by FASB ASC Topic 820-10-35. There were no changes in valuation techniques during the period and no transfers in or out of Level 3. See Note 13 for a summary of unrealized gains or losses recorded in accumulated other comprehensive loss and earnings.

Below is a summary of the Company’s interest rate swap agreement designated as cash flow hedge as of December 31, 2015:

 

Notional
Amount

   Effective Date      Pay Rate     Receive Rate      Expiration Date      Estimated
Total Fair
Value at
December 31,
2015 (1)
 

$100,000

     November 2011         1.7150     1-Month LIBOR         April 2016       $ 373   

 

(1) 

Included in accrued other current liabilities on the consolidated balance sheet as of December 31, 2015.

The changes in accumulated other comprehensive loss, net of taxes, related to the Company’s interest rate swap agreements for the years ended December 31, 2013, 2014 and 2015 were as follows:

 

     2013      2014      2015  

Beginning balances — January 1

   $ (8,867    $ (5,716    $ (2,870
  

 

 

    

 

 

    

 

 

 

Other comprehensive loss before reclassifications, net of taxes

     (2,668      (3,169      (2,154

Amounts reclassified from accumulated other comprehensive loss to interest expense,

net of taxes

     5,819         6,015         4,790   
  

 

 

    

 

 

    

 

 

 

Net other comprehensive income

     3,151         2,846         2,636   
  

 

 

    

 

 

    

 

 

 

Ending balances — December 31

   $ (5,716    $ (2,870    $ (234