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Derivatives and Hedging Activities
 12 Months Ended
Dec. 31, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Hedging Activities DERIVATIVES AND HEDGING ACTIVITIES
Risk Management Objective of Using Derivatives
We are exposed to certain risks arising from both our business operations and economic conditions. We manage exposure to a wide variety of business and operational risks through our core business activities. We manage economic risks, including interest rate, liquidity and credit risk primarily by overseeing the amount, sources and duration of debt funding and the use of derivative financial instruments. Specifically, we have entered into derivative financial instruments to manage exposure to interest rate movements that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Our derivative financial instruments are used to manage differences in the amount, timing and duration of our known or expected cash receipts and known or expected cash payments principally related to our investments and borrowings.
Cash Flow Hedges of Interest Rate Risk
Our purpose for using interest rate derivatives is to add stability to interest expense and to manage our exposure to interest rate movements. During the year ended December 31, 2023, we used interest rate swaps to hedge the variable cash flows associated with existing variable-rate debt. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. We do not use derivatives for trading or speculative purposes and we currently do not have any derivatives that are not designated as hedges. As of December 31, 2023, we have not posted any collateral related to these agreements.
In April 2023, we amended the reference rates on our active and forward interest swaps from 1-month LIBOR to 1-month SOFR. We continue to account for these agreements as cash flow hedges under the expedients allowed in ASC Topic 848 for this type of amendment.
As of December 31, 2023, we had the following interest rate swap derivatives (notional amount in millions):
Effective DateNotional AmountFixed RateMaturity Date
April 28, 2023$200.0 0.46 %December 31, 2025
April 28, 2023100.0 1.32 %December 31, 2025
April 28, 2023100.0 1.32 %December 31, 2025
December 31, 2025300.0 3.06 %December 14, 2028
December 31, 2025100.0 2.93 %December 14, 2028
As of December 31, 2022, we had the following interest rate swap derivatives (notional amount in millions):
Effective DateNotional AmountFixed RateMaturity Date
July 30, 2021$200.0 0.51 %December 31, 2025
December 31, 2021100.0 1.37 %December 31, 2025
December 31, 2021100.0 1.37 %December 31, 2025
December 31, 2025300.0 3.09 %December 14, 2028
December 31, 2025100.0 2.98 %December 14, 2028
In July 2022, we amended the maturity date of each of our three active interest rate swaps to December 31, 2025 with other terms remaining unchanged. The remaining unrealized gains will be amortized as a decrease to interest expense, net through the original maturity dates of April 15, 2030 and December 15, 2028. For the years ended December 31, 2023 and 2022, we amortized $7.1 million and $3.4 million, respectively, of the unrealized gains as a decrease to interest expense, net.
The amended swaps included off-market terms at inception. This other-than-insignificant financing element will be amortized as an increase to interest expense, net through the December 31, 2025 maturity date of the amended swaps. For the years ended December 31, 2023 and 2022, we amortized $7.4 million and $3.6 million, respectively, of the financing element as an increase to interest expense, net. Future net cash settlements with interest rate counterparties are recognized through cash flows from investing activities in the Consolidated Statements of Cash Flows due to the other-than-insignificant financing element.
Also in July 2022, we entered into two forward interest rate swaps. As of December 31, 2023, these two forward interest rate swaps, combined with our three amended swaps, serve to hedge $400.0 million of the variable cash flows on our variable rate Term Loan through maturity. The assets associated with these interest rate swaps are included in other current assets and other non-current assets on the Consolidated Balance Sheets at their fair value amounts as described in Note 10, Fair Value Measurements.
The changes in the fair value of derivatives designated, and that qualify, as cash flow hedges are recorded in other comprehensive (loss) income, net of tax on the Consolidated Statements of Operations and Comprehensive Income and in accumulated other comprehensive income on the Consolidated Balance Sheets and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. We had no such changes during the years ended December 31, 2023 and 2022.
Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense, net as interest payments are made on our variable-rate debt, and as our terminated and amended swaps are amortized. Over the next twelve months, we estimate that an additional $10.4 million will be reclassified as a decrease to interest expense, net.
The following table summarizes amounts recorded to interest expense, net included in the Condensed Consolidated Statements of Operations and Comprehensive Income related to our interest rate swaps (in millions):
As of December 31,
202320222021
(Benefit) expense associated with swap net settlements$(16.7)$(3.1)$0.4 
Expense associated with amortization of amended/terminated swaps4.5 3.9 3.2 
The year over year changes from December 31, 2022 to December 31, 2023 above were a result of higher market interest rates which increased the benefit received from swap counterparties.