Derivatives and Hedging Activities

9 Months Ended

Sep. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The Company has four interest rate swaps with a total notional amount of $125.0 million that are used to manage its interest rate risk and fix the SOFR component on the Credit Facilities. Within the $125.0 million, $50.0 million of the swaps mature in January 2027 and fix the interest rate of the 2021 Term Loan at 2.291% as of September 30, 2022. An additional $50.0 million of the swaps mature in February 2028 and fix the first $50.0 million amount outstanding under the 2022 Term Loan at 4.237% as of September 30, 2022. The remaining $25.0 million of the swaps mature in February 2028 and fix the remaining $25.0 million amount outstanding under the 2022 Term Loan at 4.81% as of September 30, 2022.

The Company’s objectives in using the interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company uses the interest rate swaps as part of its interest rate risk management strategy. The interest rate swaps are designated as cash flow hedges, with any gain or loss recorded in “Accumulated other comprehensive income” on the Consolidated Balance Sheets and subsequently reclassified into interest expense as interest payments are made on the Company’s Credit Facilities. During the next twelve months, the Company estimates that an additional $2.6 million will be reclassified from “Accumulated other comprehensive income” as a decrease to interest expense.

The Company does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not designated as hedges.

The table below presents the effect of the Company’s interest rate swap derivative instruments on the Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 30, 2022 and 2021.


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Derivatives in Cash Flow Hedging Relationships (Interest Rate Swaps)	2022		2021		2022		2021
Amount of gain recognized on derivative in "Accumulated other comprehensive income"	$	5,397	$	—	$	8,198	$	—
Amount of income (loss) reclassified from "Accumulated other comprehensive income" into interest expense	$	45	$	—	$	(169)	$	—

Interest expense, net presented in the Consolidated Statements of Operations and Comprehensive Income, in which the effects of cash flow hedges are recorded, totaled $1.8 million and $3.9 million for the three and nine months ended September 30, 2022, respectively, and $1.0 million and $2.8 million for the three and nine months ended September 30, 2021, respectively.

As of September 30, 2022, the Company did not have any derivatives in a net liability position and did not post any collateral related to these agreements. If the Company had breached any of these provisions as of September 30, 2022, it could have been required to settle its obligations under the agreements at their termination value.