Quarterly report pursuant to Section 13 or 15(d)

Financial Instruments and Derivatives

v3.20.2
Financial Instruments and Derivatives
9 Months Ended
Sep. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Financial Instruments and Derivatives Financial Instruments and Derivatives
    We use interest rate swap derivative instruments to reduce earnings volatility and manage cash flow exposure resulting from changes in interest rates. These interest rate swaps apply a fixed interest rate on a portion of our expected LIBOR-indexed floating-rate borrowings. We held the following interest rate swaps as of September 30, 2020 (in thousands):

Hedged Item Current Notional Amount Designation Date Effective Date Termination Date Fixed Interest Rate Floating Rate Estimated Fair Value
1-month USD LIBOR Loan $ 15,000  May 31, 2018 June 1, 2018 September 23, 2021 2.611% 1-month USD LIBOR $ 369 
Total interest rate derivatives designated as cash flow hedge $ 15,000  $ 369 

    We have designated these derivative instruments as cash flow hedges. We assess the effectiveness of these derivative instruments and records the change in the fair value of a derivative instrument designated as a cash flow hedge as unrealized gains or losses in accumulated other comprehensive income (“AOCI”), net of tax. Once the hedged item affects earnings, the effective portion of any gain or loss will be reclassified to earnings. If the hedged cash flow does not occur, or if it becomes probable that it will not occur, we will reclassify the amount of any gain or loss on the related cash flow hedge to interest expense at that time.
    As of September 30, 2020, we estimate that approximately $280.0 thousand of losses associated with the cash flow hedge, net of tax, could be reclassified from AOCI into earnings within the next twelve months.