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Interest Rate Cap
 6 Months Ended
Jun. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Interest Rate Cap Interest Rate Cap
The Company is subject to market risk exposure arising from changes in interest rates on its term loan. The term loan bears interest at a variable rate that is indexed to a benchmark which changed from LIBOR to SOFR on May 31, 2023. The Company’s objective in using an interest rate derivative is to mitigate its exposure to increases in interest rates. The interest rate cap limits the Company’s exposure to increases in the variable interest rate to 1.0% on $2.0 billion of principal outstanding under the term loan, as the interest rate cap provides for payments from the counterparty when interest rates rise above 1.0%. The interest rate cap has a $2.0 billion notional amount and is effective through September 30, 2024. The Company will pay a monthly premium for the interest rate cap over the term of the agreement. The annual premium is equal to 0.0916% of the notional amount, or approximately $1.8 million.
The interest rate cap has been designated as a cash flow hedge and is highly effective at offsetting the changes in cash outflows when the variable interest rate exceeds 1.0%. Changes in the fair value of the interest rate cap, net of tax, are recognized in other comprehensive income and are reclassified out of accumulated other comprehensive income and into interest expense when the hedged interest obligations affect earnings.
The following table outlines the changes in accumulated other comprehensive income (loss), net of tax, during the periods presented:
Six Months Ended June 30,
20222023
(in thousands)
Balance as of January 1$12,282 $88,602 
Gain (loss) on interest rate cap cash flow hedge
39,814 (2,696)
Amounts reclassified from accumulated other comprehensive income
39 (13,252)
Balance as of March 31$52,135 $72,654 
Gain on interest rate cap cash flow hedge
11,833 17,527 
Amounts reclassified from accumulated other comprehensive income
(6)(15,134)
Balance as of June 30$63,962 $75,047 
The effects on net income of amounts reclassified from accumulated other comprehensive income are as follows:
Three Months Ended June 30,Six Months Ended June 30,
Statement of Operations2022202320222023
(in thousands)
Gains (losses) included in interest expense$8 $20,045 $(43)$37,597 
Income tax benefit (expense)(2)(4,911)10 (9,211)
Amounts reclassified from accumulated other comprehensive income$6 $15,134 $(33)$28,386 
The Company expects that approximately $82.1 million of estimated pre-tax gains will be reclassified from accumulated other comprehensive income into interest expense within the next twelve months.
Refer to Note 9 – Fair Value of Financial Instruments for information on the fair value of the Company’s interest rate cap contract and its balance sheet classification.