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Derivative Financial Instruments
 9 Months Ended
Sep. 30, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments Derivative Financial Instruments
Designated Nonderivative Financial Instruments
As of September 30, 2022, the Company has designated £68.5 million, A$133.5 million and €780.5 million debt and accrued interest as a hedge of our net investment in the international subsidiaries resulting from the UK-based Bowman Stores Acquisition, the Australia-based acquisitions of Lago Cold Stores and De Bruyn Cold Storage, the Agro Acquisition and our expansion and development projects in our foreign subsidiaries. The remeasurement of these instruments is recorded in “Change in unrealized net loss on foreign currency” on the accompanying Condensed Consolidated Statements of Comprehensive Loss.
Derivative Financial Instruments
During the three months ended September 30, 2022, the Company completed a refinancing of its 2022 Senior Unsecured Credit Facility. Details of the refinancing are included in Note 4 – Debt of these Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q. As a result of this refinancing, the Company’s variable interest rate exposure increased. To manage this risk, the Company entered into several interest rate swap agreements. The first tranche, containing three swaps, hedges an aggregate $200 million of variable interest rate debt, each maturing December 29, 2023. The second tranche, containing three swaps, hedges an aggregate $270 million of variable interest rate debt, which will go into effect in November 2022, each maturing December 31, 2027. The third tranche, containing three swaps, hedges an aggregate C$250 million of variable interest rate debt, each maturing December 31, 2027. 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.
In addition, 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 September 30, 2022 and December 31, 2021.
There have been no significant changes to our policy or strategy from what was disclosed in our 2021 Form 10-K. 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”. During the next twelve months, the Company estimates that an additional $0.7 million will be reclassified as a decrease to gain/loss on foreign exchange (a component of “Other, net”) and an additional $5.2 million will be reclassified as a decrease to “Interest expense”.
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 September 30, 2022 and December 31, 2021 (in thousands):
Derivative AssetsDerivative Liabilities
September 30, 2022December 31, 2021September 30, 2022December 31, 2021
Designated derivatives
Foreign exchange contracts$17,099 $2,015 $— $— 
Interest rate contracts10,829 — — — 
Total derivatives$27,928 $2,015 $— $— 
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 nine months ended September 30, 2022 and 2021, including the impacts to Accumulated Other Comprehensive Income (AOCI) (in thousands):
Amount of Gain or (Loss) Recognized in Other Comprehensive Income on DerivativeLocation of Gain or (Loss) Reclassified from AOCI into IncomeAmount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
Three Months Ended September 30,Three Months Ended September 30,
2022202120222021
Interest rate contracts$10,829 $— Interest expense$— $— 
Interest rate contracts— — Loss on debt extinguishment, modifications and termination of derivative instruments(1)(627)(627)
Foreign exchange contracts6,946 5,094 Other, net9,932 5,477 
Foreign exchange contracts— — Interest expense196 (3)
Total designated cash flow hedges$17,775 $5,094 $9,501 $4,847 
(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 September 30, 2022, 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 DerivativeLocation of Gain or (Loss) Reclassified from AOCI into IncomeAmount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
Nine Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Interest rate contracts$10,829 $— Interest expense$— $— 
Interest rate contracts— — Loss on debt extinguishment, modifications and termination of derivative instruments(1)(1,880)(2,055)
Foreign exchange contracts15,084 10,116 Other, net17,410 9,436 
Foreign exchange contracts— — Interest expense399 (142)
Total designated cash flow hedges$25,913 $10,116 $15,929 $7,239 
(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. During the nine months ended September 30, 2022, the Company recorded an increase to “Loss on debt extinguishment, modifications and termination of derivative instruments” related to this transaction.
As of September 30, 2022, there was no impact from netting arrangements and the Company did not have any outstanding derivatives in a net liability position. Refer to Note 10 for additional details regarding the impact of the Company’s derivatives on AOCI for the three and nine months ended September 30, 2022 and 2021, respectively.