Derivative Instruments

9 Months Ended

Sep. 30, 2023

Derivative Instrument Detail [Abstract]

NOTE 6. DERIVATIVE INSTRUMENTS

From time to time, we enter into derivative financial instruments to manage certain cash flow and fair value risks. Derivatives designated and qualifying as a hedge of the exposure to variability in the cash flows of a specific asset or liability that is attributable to a particular risk, such as interest rate risk, are considered cash flow hedges. All our cash flow hedges are expected to be highly effective in achieving offsetting cash flows attributable to the hedged interest rate risk through the term of the hedges.

At September 30, 2023, we have interest rate swaps associated with $721.0 million of SOFR-indexed term loan debt. These cash flow hedges convert variable rates ranging from one-month SOFR plus 1.66% to 2.30%, to fixed rates ranging from 2.19% to 4.79% before patronage credits from lenders. At September 30, 2023, we also have $250.0 million of forward-starting interest rate swaps designated as cash flow hedges for expected future debt refinances that require settlement on the stated maturity date.

The gross fair values of derivative instruments at September 30, 2023 and December 31, 2022, were $166.3 million and $144.6 million, respectively, all of which were classified in Other assets, non-current on our Condensed Consolidated Balance Sheets. Derivative instruments that mature within one year, as a whole, are classified as current.

The following table details the effect of derivatives on the Condensed Consolidated Statements of Operations and the Condensed Consolidated Statements of Comprehensive Income:


		Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	Location	2023		2022		2023		2022
Derivatives designated in cash flow hedging relationships:
Interest rate contracts
Income recognized in other comprehensive income (loss), net of tax		$	33,607	$	32,900	$	42,353	$	115,408
Amounts reclassified from accumulated other comprehensive income (loss), net of tax1	Interest expense, net	$	5,143	$	175	$	13,505	$	(3,122	)

Interest expense, net		$	7,971	$	8,280	$	15,783	$	18,593

1 Realized gains and losses on interest rate contracts consist of realized net cash received or paid and interest accruals on the interest rate swaps during the periods in addition to amortization of amounts out of other comprehensive (loss) income related to certain terminated hedges and adjustments to interest expense resulting from amortization of inception value of certain off-market designated hedges. Net cash received or paid is included within Interest expense, net in the Condensed Consolidated Statements of Operations.

At September 30, 2023, the amount of net gains expected to be reclassified into earnings in the next 12 months is approximately $20.9 million. However, this expected amount to be reclassified into earnings is subject to volatility as the ultimate amount recognized in earnings is based on the SOFR rates at the time of net swap cash payments.