Annual report pursuant to Section 13 and 15(d)

Interest Rate Hedge Swaps

v3.6.0.2
Interest Rate Hedge Swaps
 12 Months Ended
Dec. 31, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Interest Rate Hedge Swaps
INTEREST RATE HEDGE SWAPS
Derivative Instruments and Hedging Activities
The Company uses interest rate swaps to add stability to interest expense and to manage its exposure to interest rate movements. In February 2013, the Company entered into two interest rate swap agreements associated with a portion of its variable rate debt under the $70 million Pinedale Credit Facility, as discussed further in Note 12. The notional amount covered under these agreements totaled $52.5 million (split evenly between the two agreements). Under the terms of the interest rate swap agreements, the Company received a floating rate based on the one-month LIBOR and paid a fixed rate of 0.865%. Each of the swap agreements was set to expire in December 2017. The agreements were designated as cash flow hedges at inception and accordingly, the effective portion of the gain or loss on the swap was reported as a component of accumulated other comprehensive income ("AOCI") and was reclassified into interest expense when the interest rate swap transaction affected earnings. Any ineffective portion of the gain or loss was recognized immediately in interest expense.
On March 30, 2016, the Company restructured the Pinedale Credit Facility, as further discussed in Note 12. In connection with the assignment of the Pinedale Credit Facility, the Company terminated one of the interest rate swap agreements with a notional amount of $26.3 million and the remaining interest rate swap with a notional amount of $26.3 million was de-designated from hedge accounting.
The table below presents the effect of the Company’s derivative financial instruments on the Statements of Income and Comprehensive Income for the years ended December 31, 2016, 2015 and 2014 (note that the ineffective portion is not presented as it was inconsequential for all periods presented):
 
 
For the Years Ended December 31,
Derivatives in Cash Flow Hedging Relationship
 
2016
 
2015
 
2014
Amount of Loss on Derivatives Recognized in AOCI (Effective Portion)
 
$
(300,181
)
 
$
(611,879
)
 
$
(705,826
)
Amount of Loss on Derivatives Reclassified from AOCI (Effective Portion) Recognized in Net Income(1)
 
(50,964
)
 
(287,999
)
 
(305,945
)
 
 
 
 
 
 
 
Derivatives Not Designated as Hedging Instruments
 
 
 
 
 
 
Amount of Gain on Derivatives Recognized in Income(2)
 
$
73,204

 
$
—

 
$
—

(1) Included in "Interest Expense" on the face of the Consolidated Statements of Income and Comprehensive Income.
(2) The gain recognized in income on derivatives includes changes in fair value for derivatives subsequent to de-designation from hedge accounting.