DERIVATIVE INSTRUMENTS

12 Months Ended

Dec. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The Company utilizes derivative financial instruments for hedging and non-trading purposes to limit the Company’s exposure to its variable interest rate risk. Use of derivative financial instruments in hedging strategies subjects the Company to certain risks, such as market and credit risks. Market risk represents the possibility that the value of the derivative financial instrument will change. Credit risk related to a derivative financial instrument represents the possibility that the counterparty will not fulfill the terms of the contract. The notional, or contractual, amount of the Company’s derivative financial instruments is used to measure interest to be paid or received and does not represent the Company’s exposure due to credit risk. Credit risk is monitored through established approval procedures, including reviewing credit ratings when appropriate.

In August 2019, the Company entered into an interest rate swap agreement that reduced the variability in the interest rates on the newly-issued debt obligations following the Merger with BioScrip. The interest rate swap for $925.0 million notional was effective in August 2019 with $911.1 million designated as a cash flows hedge against the underlying interest rate on the First Lien Term Loan interest payments indexed to one-month LIBOR through August 2021. In accordance with ASU 2017-12, Targeted Improvements to Accounting for Hedges, the Company had determined that the $911.1 million designated cash flows hedge is perfectly effective. The remaining $13.9 million notional amount of the interest rate swap is not designated as a hedging instrument. The interest rate swap expired in August 2021.

In October 2021, the Company entered into an interest rate cap hedge with a notional amount of $300.0 million for a five-year term beginning November 30, 2021. The hedge partially offsets risk associated with the First Lien Term Loan’s variable interest rate. The interest rate cap instrument perfectly offsets the terms of the interest rates associated with the variable interest rate of the First Lien Term Loan.

The following table summarizes the amount and location of the Company’s derivative instruments in the consolidated balance sheets (in thousands):


	Fair Value - Derivatives in Asset Position
Derivative	Balance Sheet Caption	December 31, 2023		December 31, 2022
Interest rate cap designated as cash flows hedge	Prepaid expenses and other current assets	$	9,746	$	10,926
Interest rate cap designated as cash flows hedge	Other noncurrent assets	10,183		17,342
Total derivative assets		$	19,929	$	28,268

The gain and loss associated with the changes in the fair value of the effective portion of hedging instruments are recorded into other comprehensive (loss) income. The gain and loss associated with the changes in the fair value of the hedging instruments not designated are recognized in net income through interest expense. The following table presents the pre-tax (loss) gain from derivative instruments recognized in other comprehensive (loss) income in the Company’s consolidated statements of comprehensive income (in thousands):


	Year Ended December 31,
Derivative	2023		2022		2021
Interest rate cap designated as cash flows hedge	$	(8,339)	$	28,869	$	(601)
Interest rate swap designated as cash flows hedge	—		—		11,172
Total	$	(8,339)	$	28,869	$	10,571

The following table presents the amount and location of pre-tax income (loss) recognized in the Company’s consolidated statement of comprehensive income related to the Company’s derivative instruments (in thousands):


		Year Ended December 31,
Derivative	Income Statement Caption	2023		2022		2021
Interest rate cap designated as cash flows hedge	Interest expense	$	10,974	$	1,090	$	(239)
Interest rate swap designated as cash flows hedge	Interest expense	—		—		(11,298)
Interest rate swap not designated as hedge	Interest expense	—		—		(2)
Total		$	10,974	$	1,090	$	(11,539)

The Company expects to reclassify $2.8 million of total interest rate costs from accumulated other comprehensive income (loss) against interest expense during the next 12 months.