Derivative Financial Instruments

12 Months Ended

Dec. 31, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

Interest Rate Swap

The Company holds derivative financial instruments, in the form of interest rate swaps, as required by Amended and Restated Credit Agreement, for the purpose of hedging certain identifiable transactions in order to mitigate risks relating to the variability of future earnings and cash flows caused by interest rate fluctuations. The Company has elected not to apply hedge accounting for financial reporting purposes. The interest rate swaps are recognized in the accompanying consolidated balance sheets at their fair value. Monthly settlement payments due on the interest rate swaps and changes in their fair value are recognized currently in net income as interest expense in the consolidated statements of operations.

Effective November 30, 2018, as required under the Amended and Restated Credit Agreement, the Company entered into an interest rate swap that requires the Company to pay a fixed rate of 3.075 percent per annum while receiving a variable interest rate per annum based on the one month LIBOR for a net monthly settlement based on the notional amount in effect. The notional amount at the effective date was $5.0 million, which increased by $0.4 million each quarter until June 28, 2019 when the notional amount increased to $17.5 million due to another interest rate swap from 2016 expiring. The notional amount then decreased each quarter by $0.2 million until September 30, 2020 when the notional amount increased to $17.5 million due to another interest rate swap from 2017 expiring. The notional amount then decreased each quarter by $0.4 million until December 31, 2021 after which it will then decrease each subsequent quarter by $0.6 million until it expires on November 8, 2023.

At December 31, 2021, the fair value of the swap was $0.6 million, which is included in other long-term liabilities in the consolidated balance sheet. The Company paid $0.5 million in the aggregate, in net monthly settlements with respect to the interest rate swap for the twelve months ended December 31, 2021. At December 31, 2020, the fair value of all the swaps was $1.2 million, which was included in other long-term liabilities in the consolidated balance sheet. The Company paid $0.5 million, in the aggregate, in net monthly settlements with respect to the interest rate swaps for the twelve months ended December 31, 2020.