DERIVATIVE FINANCIAL INSTRUMENT AND HEDGING ACTIVITY

9 Months Ended

Sep. 30, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENT AND HEDGING ACTIVITY

DERIVATIVE FINANCIAL INSTRUMENT AND HEDGING ACTIVITY

In April 2020, the Company entered into an interest rate swap with Citizens Bank, N.A. to manage its exposure to changes in the London Interbank Offered Rate (“LIBOR”)LIBOR-based interest rates underlying total borrowings under term facilities related to the prior credit agreement, and the interest rate swap matures in December 2026. The Company amended its Credit Agreement to transition from LIBOR to the Secured Overnight Financing Rate (“SOFR”) due to the cessation of LIBOR in the third quarter of 2023, and accordingly, the interest rate swap transitioned from LIBOR to SOFR. The interest rate swap is used to manage changes in SOFR-based interest rates underlying a portion of the borrowing under the Term Facility. Concurrent with the termination of the prior credit agreement and entry into the Credit Agreement with Truist Bank, the interest rate swap with a notional value of $168.6 million at origin on November 21, 2021 was novated and Truist Bank became the new counterparty.

On August 30, 2024, in connection with the New Credit Facility, the interest rate swap with a notional value of $139.4 million was transferred from Truist Bank to JPMorgan Chase Bank, N.A., as the new counterparty. The interest rate swap is used to manage changes in SOFR-based interest rates underlying a portion of the borrowing under the New Term Facility. The interest rate swap provides an effective fixed interest rate of 2.313% and is designated as an effective cash flow hedge and therefore qualifies for hedge accounting. As of September 30, 2024, the notional amount of the interest rate swap was $139.4 million, and will remain static until maturity in December 2026. As of September 30, 2024, the fair value of the interest rate swap asset recorded in other non-current assets in the unaudited interim condensed consolidated balance sheets is $3.6 million. As of September 30, 2024, $5.6 million was recorded in accumulated other comprehensive (loss) income, net of tax in the unaudited interim condensed consolidated balance sheets.

During the three and nine months ended September 30, 2024, the loss on the fair value of the interest rate swaps, net of tax recorded in accumulated other comprehensive (loss) income in the unaudited interim condensed consolidated statements of comprehensive income was approximately $2.8 million and $3.3 million, respectively. Differences between the hedged SOFR rate and the fixed rate are recorded as interest expense in the same period that the related interest is recorded for the Term Facility based on the SOFR rate. In the three and nine months ended September 30, 2024, the Company recorded a reduction in interest expense of $1.7 million and $4.9 million in relation to the interest rate swaps, respectively. In the three and nine months ended September 30, 2023, the Company recorded a reduction in interest expense of $0.7 million and $1.8 million in relation to the interest rate swaps, respectively. Included in this amount for the three and nine months ended September 30, 2024 are reclassifications out of accumulated other comprehensive (loss) income of $0.2 million of interest income and $0.6 million, respectively, related to terminated and de-designated cash flow hedges. Included in this amount for the three and nine months ended September 30, 2023 are reclassifications out of accumulated other comprehensive (loss) income of $0.7 million of interest income and $2.1 million, respectively, related to terminated and de-designated cash flow hedges.