Derivative Financial Instruments

6 Months Ended

Jun. 30, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Designated Nonderivative Financial Instruments

As of June 30, 2021, the Company has designated €750 million debt and accrued interest as a hedge of our net investment in the international subsidiaries resulting from the Agro Acquisition. The remeasurement of these instruments is recorded in “Change in unrealized net gain (loss) on foreign currency” on the accompanying Condensed Consolidated Statements of Comprehensive Income.

Derivative Financial Instruments

The Company is subject to volatility in interest rates due to variable-rate debt. To manage this risk, the Company has entered into multiple interest rate swap agreements. The January 2019 agreement hedged $100.0 million of variable interest-rate debt and the August 2019 agreement hedged $225.0 million of variable interest-rate debt. Each agreement converted the Company’s variable-rate debt to a fixed-rate basis into 2024, thus reducing the impact of interest rate changes on future interest expense. These agreements involved the receipt of variable-rate amounts in exchange for fixed-rate interest payments over the life of the respective agreement without an exchange of the underlying notional amount. The Company’s objective for utilizing these derivative instruments was to reduce its exposure to fluctuations in cash flows due to changes in interest rates. Both of these interest rate swaps were terminated during the fourth quarter of 2020. The Company records a reclassification from other comprehensive income to earnings to “Loss on debt extinguishment, modification, and termination of derivative instruments” related to the amortization of the portion deferred following the termination, which totaled $1.4 million on the accompanying Condensed Consolidated Statement of Operations for the six months ended June 30, 2021. Additionally, during the next twelve months, the Company estimates that an additional $2.5 million will be reclassified as an increase to “Loss on debt extinguishment, modification, and termination of derivative instruments”. The Company classifies cash inflows and outflows from derivatives that hedge interest rate risk within operating activities on the Condensed Consolidated Statements of Cash Flows.

The Company is subject to volatility in foreign exchange rates due to foreign-currency denominated intercompany loans. The Company implemented cross-currency swaps on certain of these loans to manage the foreign currency exchange rate risk. These agreements effectively mitigate the Company’s exposure to fluctuations in cash flows due to foreign exchange rate risk by converting the Company’s floating exchange rate to a fixed-rate basis for the life of the intercompany loans. These agreements involve the receipt of fixed USD amounts in exchange for payment of fixed AUD and NZD amounts over the life of the respective intercompany loan. The Company’s intercompany loan receivable balances of $153.5 million AUD and $37.5 million NZD were hedged under the cross-currency swap agreements at June 30, 2021 and December 31, 2020.

For derivatives designated and that qualify as cash flow hedges of foreign exchange risk, the gain or loss on the derivative is recorded in Accumulated Other Comprehensive Income and subsequently reclassified in the period(s) during which the hedged transaction affects earnings within the same income statement line item as the earnings effect of the hedged transaction. During the next twelve months, the Company estimates that an additional $0.3 million will be reclassified as an increase to gain/loss on foreign exchange.

The Company is subject to volatility in foreign currencies against its functional currency, the US dollar. Periodically, the Company uses foreign currency derivatives including currency forward contracts to manage its exposure to fluctuations in exchange rates. While these derivatives are hedging the fluctuations in foreign currencies, they do not meet the requirements to be accounted for as hedging instruments. As a result, the changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings.

During 2019, in conjunction with the funding of the Nova Cold Acquisition, the Company entered into a foreign exchange forward with a notional to purchase CAD $217.0 million and sell USD with a maturity date of January 2, 2020. The Company simultaneously entered into a second contract with a notional to sell CAD $217.0 million and purchase USD with a maturity of January 31, 2020. These forwards were not designated as hedges in a qualifying hedging relationships. During the first quarter of 2020, the two outstanding foreign exchange forward contracts matured. The first contract with a notional to purchase CAD $217.0 million and sell USD matured on January 2, 2020 and settled for a gain of $2.1 million. The second contract with a notional to sell CAD $217.0 million and purchase USD maturing on January 31, 2020 was subsequently designated as a net investment hedge on January 2, 2020.

The Company is also exposed to fluctuations in foreign exchange rates on property investments it holds in foreign countries. The Company uses forward currency forwards to hedge its exposure to changes in exchange rates on certain of its foreign investments as well. For derivatives designated as net investment hedges, the changes in the fair value of the derivatives are reported in Accumulated Other Comprehensive Income as part of the cumulative translation adjustment. Amounts are reclassified out of accumulated other comprehensive income into earnings when the hedged net investment is either sold or substantially liquidated.

On January 2, 2020, the Company designated the above noted forward currency contract with a notional to sell CAD $217.0 million and purchase USD maturing on January 31, 2020. This contract was then settled for a gain of $0.2 million and a new contract was entered into with same notional to sell CAD $217.0 million and purchase USD which matured on February 28, 2020. The second contract was settled for a gain of $2.8 million upon the maturity date of February 28, 2020.

As of June 30, 2021 and December 31, 2020, the Company did not have any foreign currency forwards that were designated as net investment hedges outstanding.

The Company determines the fair value of these derivative instruments using a present value calculation with significant observable inputs classified as Level 2 of the fair value hierarchy. Derivative asset balances are recorded on the Condensed Consolidated Balance Sheets within “Other assets” and derivative liability balances are recorded on the Condensed Consolidated Balance Sheets within “Accounts payable and accrued expenses”. The following table illustrates the disclosure in tabular format of fair value amounts of derivative instruments at June 30, 2021 and December 31, 2020 (in thousands):


			Derivative Assets						Derivative Liabilities
			June 30, 2021				December 31, 2020				June 30, 2021				December 31, 2020


Designated derivatives
Foreign exchange contracts			$	5			$	—			$	4,594			$	9,611




Total derivatives	$	5			$	—			$	4,594			$	9,611

The following table presents the effect of the Company’s derivative financial instruments on the accompanying Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020, including the impacts to Accumulated Other Comprehensive Income (AOCI) (in thousands):


	Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivative				Location of Gain or (Loss) Reclassified from AOCI into Income	Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income

	Three Months Ended June 30,					Three Months Ended June 30,
	2021		2020			2021		2020

Interest rate contracts	$	—	$	(1,729)	Interest expense	$	—	$	(949)
Interest rate contracts	—		—		Loss on debt extinguishment, modifications and termination of derivative instruments(1)	(801)		—
Foreign exchange contracts	2,350		(15,097)		Foreign currency exchange gain, net	1,588		(12,309)
Foreign exchange contracts	—		—		Interest expense	(46)		(74)

Total designated cash flow hedges	$	2,350	$	(16,826)		$	741	$	(13,332)

(1) In conjunction with the termination of the interest rate swaps in 2020, the Company recorded amounts in other comprehensive income that will be reclassified as an adjustment to earnings over the term of the original hedges and respective borrowings. As of June 30, 2021, the Company recorded an increase to “Loss on debt extinguishment, modifications and termination of derivative instruments” related to this transaction.


	Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivative				Location of Gain or (Loss) Reclassified from AOCI into Income	Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income

	Six Months Ended June 30,					Six Months Ended June 30,
	2021		2020			2021		2020

Interest rate contracts	$	—	$	(17,994)	Interest expense	$	—	$	(939)
Interest rate contracts	—		—		Loss on debt extinguishment, modifications and termination of derivative instruments(1)	(1,428)		—
Foreign exchange contracts	5,022		8,364		Foreign currency exchange gain, net	3,959		3,885
Foreign exchange contracts			—		Interest expense	(139)		207
Foreign exchange forwards	—		5,250			—		—
Total designated cash flow hedges	$	5,022	$	(4,380)		$	2,392	$	3,153

Interest expense recorded in the accompanying Condensed Consolidated Statements of Operations was $26.6 million and $23.2 million during the three months ended June 30, 2021 and 2020, respectively, and $52.5 million and $47.0 million during the six months ended June 30, 2021 and 2020, respectively. The Company recorded total foreign currency exchange loss, net in its Condensed Consolidated Statements of Operations of $0.1 million for

the three months ended June 30, 2021 and a nominal gain for total foreign currency exchange gain, net for the six months ended June 30, 2021, During the three months ended June 30, 2020, the Company recorded total foreign currency exchange gain, net in its Condensed Consolidated Statements of Operations of $0.3 million. The total foreign currency exchange loss, net for the six months ended June 30, 2020 was $0.2 million.

The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of June 30, 2021 and December 31, 2020. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the accompanying Condensed Consolidated Balance Sheets (in thousands):


June 30, 2021
Offsetting of Derivative Assets
							Gross Amounts Not Offset in the Condensed Consolidated Balance Sheet
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Condensed Consolidated Balance Sheet		Net Amounts of Assets presented in the Condensed Consolidated Balance Sheet		Financial Instruments		Cash Collateral Received		Net Amount
Derivatives	$	5	$	—	$	5	$	(5)	$	—	$	—

Offsetting of Derivative Liabilities
							Gross Amounts Not Offset in the Condensed Consolidated Balance Sheet
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Condensed Consolidated Balance Sheet		Net Amounts of Liabilities presented in the Condensed Consolidated Balance Sheet		Financial Instruments		Cash Collateral Received		Net Amount
Derivatives	$	(4,594)	$	—	$	(4,594)	$	5	$	—	$	(4,589)


December 31, 2020
Offsetting of Derivative Assets
							Gross Amounts Not Offset in the Condensed Consolidated Balance Sheet
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Condensed Consolidated Balance Sheet		Net Amounts of Assets presented in the Condensed Consolidated Balance Sheet		Financial Instruments		Cash Collateral Received		Net Amount
Derivatives	$	—	$	—	$	—	$	—	$	—	$	—

Offsetting of Derivative Liabilities
							Gross Amounts Not Offset in the Condensed Consolidated Balance Sheet
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Condensed Consolidated Balance Sheet		Net Amounts of Liabilities presented in the Condensed Consolidated Balance Sheet		Financial Instruments		Cash Collateral Received		Net Amount
Derivatives	$	9,611	$	—	$	9,611	$	—	$	—	$	9,611

As of June 30, 2021, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $4.9 million. As of June 30, 2021, the Company has not posted any collateral related to these agreements.

The Company has agreements with each of its derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on the indebtedness. In addition, termination events such as the Company’s credit agreement not being secured, or not being guaranteed pursuant to the Company, could cause the Company to be in default on its derivative obligations. The Company has not defaulted on any of its derivative obligations.

If the Company had breached any of these provisions at June 30, 2021, it could have been required to settle its obligations under the agreements at their termination value of $4.9 million.

Refer to Note 15 for additional details regarding the impact of the Company’s derivatives on AOCI for the three and six months ended June 30, 2021 and 2020, respectively.