Derivative Financial Instruments

12 Months Ended

Dec. 31, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

Designated Nonderivative Financial Instruments

As of December 31, 2021, the Company designated £68.5 million and A$80.0 million debt and accrued interest as a hedge of our net investment in the international subsidiaries from the UK-based Bowman Stores Acquisition and the Australia-based Lago Cold Stores Acquisition. As of December 31, 2020, the Company 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 on foreign currency” on the accompanying Consolidated Statements of Comprehensive (Loss) Income.

Derivative Financial Instruments

The Company is subject to volatility in interest rates due to variable-rate debt. To manage this risk, the Company entered into multiple interest rate swap agreements. The January 2019 agreement hedged $100 million of variable interest-rate debt, and the August 2019 agreement hedged $225 million of variable interest-rate debt. Each agreement converted the Company’s variable-rate debt to a fixed-rate basis for five years, 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 accelerated the reclassification in other comprehensive income to earnings as a result of the hedged forecasted transactions becoming not probable to occur resulting in a charge to “Loss on debt extinguishment, modifications, and termination of derivative instruments” of $7.7 million on the accompanying Consolidated Statement of Operations for the year ended December 31, 2020. 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, modifications, and termination of derivative instruments”. The Company classifies cash inflow and outflows from derivatives that hedge interest rate risk within operating activities on the 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 to manage the foreign currency exchange rate risk on

certain intercompany loans. These agreements effectively mitigate the Company’s exposure to fluctuations in cash flows due to foreign exchange rate risk. 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 entirety of the Company’s outstanding intercompany loans receivable balances, $153.5 million AUD and $37.5 million NZD, were hedged under the cross-currency swap agreements at December 31, 2021 and 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 $0.1 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 year ended December 31, 2019, the net unrealized loss on the change in fair value of the foreign exchange forward contracts included within “Foreign currency exchange gain (loss), net” on the accompanying Consolidated Statement of Operations was less than $0.1 million.

During the first quarter of 2020, the Company’s previous 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 net realized loss on these foreign exchange forward contracts included within “Foreign currency exchange gain (loss), net” on the accompanying Consolidated Statement of Operations for the year ended December 31, 2020 was $0.1 million.

During the fourth quarter of 2020, the Company entered into an undesignated foreign currency forward contract to lock in the expected proceeds from the issuance of the Series D & E Senior Unsecured Notes, which would convert the Euro denominated debt issuance to USD. The notional amount was €750 million which settled on December 30, 2020. The realized loss on the foreign currency forward contract was $45 million and was reflected in “Foreign currency exchange (loss) gain, net” on the accompanying Consolidated Statements of Operations.

As of December 31, 2021 and 2020, the Company did not have any foreign currency forwards outstanding.

The Company is also exposed to fluctuations in foreign exchange rates on property investments it holds in foreign countries. The Company uses foreign 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 foreign currency forward contract with a notional to sell CAD $217.0 million and purchase USD maturing on January 31, 2020 as a net investment hedge. 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 December 31, 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 its 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 accompanying Consolidated Balance Sheets within “Other assets” and derivative liability balances are recorded on the accompanying Consolidated Balance Sheets within “Accounts payable and accrued expenses”. The following table presents the fair value of the derivative financial instruments within “Other assets” and “Accounts payable and accrued expenses” as of December 31, 2021 and 2020 (in thousands):

	Derivative Assets				Derivative Liabilities
	As of December 31,				As of December 31,
	2021		2020		2021		2020
Designated derivatives
Foreign exchange contracts	$	2,015	$	—	$	—	$	9,611
Total fair value of derivatives	$	2,015	$	—	$	—	$	9,611

The following tables present the effect of the Company’s designated derivative financial instruments on the accompanying Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and 2019, 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
	As of December 31,							As of December 31,
	2021		2020		2019			2021		2020		2019
Interest rate contracts	$	—	$	(11,465)	$	(571)	Interest expense	$	—	$	(3,368)	$	248
Interest rate contracts	—		(7,688)		—		Loss on debt extinguishment, modifications and termination of derivative instruments(1)	(2,681)		(7,688)		—
Foreign exchange contracts	11,626		(11,015)		(879)		Foreign currency exchange (loss) gain, net	7,595		(12,158)		(264)
Foreign exchange contracts	—		—		—		Interest expense	(175)		(74)		58
Foreign exchange forwards	—		5,250		—			—		—		—
Total designated cash flow hedges	$	11,626	$	(24,918)	$	(1,450)		$	4,739	$	(23,288)	$	42

(1) The Company accelerated the reclassification in other comprehensive income to earnings as a result of the hedged forecasted transactions becoming not probable to occur resulting in a charge to “Loss on debt extinguishment,

modification, and termination of derivative instruments” on the accompanying Consolidated Statement of Operations for the year ended December 31, 2020.

Total interest expense recorded in the Consolidated Statements of Operations was $99.2 million, $91.5 million and $94.4 million during the years ended December 31, 2021, 2020 and 2019, respectively. Total “Foreign currency exchange (loss) gain, net”, recorded in the accompanying Consolidated Statements of Operations was a loss of $0.6 million, $45.3 million, and nominal during the years ended December 31, 2021, 2020, and 2019, respectively.

The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of December 31, 2021 and 2020, respectively. 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 Consolidated Balance Sheets (in thousands):

December 31, 2021
Offsetting of Derivative Assets
							Gross Amounts Not Offset in the Consolidated Balance Sheet
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Assets Presented in the Consolidated Balance Sheet		Financial Instruments		Cash Collateral Received		Net Amount
Derivatives	$	2,015	$	—	$	2,015	$	—	$	—	$	2,015

As of December 31, 2021, the Company did not have any offsetting derivative liabilities.

December 31, 2020
Offsetting of Derivative Liabilities
							Gross Amounts Not Offset in the Consolidated Balance Sheet
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Liabilities Presented in the Consolidated Balance Sheet		Financial Instruments		Cash Collateral Received		Net Amount
Derivatives	$	9,611	$	—	$	9,611	$	—	$	—	$	9,611

As of December 31, 2020, the Company did not have any offsetting derivative assets.

As of December 31, 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. Refer to Note 20 for additional details regarding the impact of the Company’s derivatives on AOCI for the years ended December 31, 2021, 2020 and 2019.