DERIVATIVE AND HEDGING ACTIVITIES

12 Months Ended

Dec. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The Company from time to time enters into derivative financial instruments, such as interest rate collar agreements (“Collars”), to manage its exposure to fluctuations in interest rates under the Company’s variable rate debt.

Accounting For Derivative Instruments and Hedging Activities

The Company recognizes at fair value all derivatives, whether designated in hedging relationships or not, in the balance sheet as either net assets or net liabilities. The accounting for changes in the fair value of a derivative, including certain derivative instruments embedded in other contracts, depends on the intended use of the derivative and the resulting designation. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and the hedged item are recognized in the statement of operations. If the derivative is designated as a cash flow hedge, changes in the fair value of the derivative are recorded in other comprehensive income and are recognized in the statement of operations when the hedged item affects net income. If a derivative does not qualify as a hedge, it is marked to fair value through the statement of operations. Any fees associated with these derivatives are amortized over their term. Cash flows from derivatives are classified in the statement of cash flows within the same category as the cash flows from the items subject to designated hedge or undesignated (economic) hedge relationships. Under these derivatives, the differentials to be received or paid are recognized as an adjustment to interest expense over the life of the contract. In the event the cash flow hedges are terminated early, any amount previously included in comprehensive income (loss) would be reclassified as interest expense to the statement of operations as the forecasted transaction settles.

The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. This process includes ongoing effectiveness assessments by relating all derivatives that are designated as fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The Company’s derivative activities, all of which are for purposes other than trading, are initiated within the guidelines of corporate risk-management policies. The Company reviews the correlation and effectiveness of its derivatives on a periodic basis.

The fair value of these derivatives is determined using observable market based inputs (a Level 2 measurement, as described in Note 21, Fair Value Of Financial Instruments) and the impact of credit risk on a derivative’s fair value (the creditworthiness of the Company’s counterparty for assets and the creditworthiness of the Company for liabilities).

Hedge Accounting Treatment

During the quarter ended June 30, 2019, the Company entered into a derivative rate hedging transaction in the aggregate notional amount of $560.0 million to manage interest rate risk on the Company’s variable rate debt. The notional amount of the hedging transaction reduces in June of each year and as of December 31, 2022, the notional amount was $220.0 million. During the period of the hedging relationship, the beginning and ending balance of the Company’s variable rate debt was greater than the notional amount of the derivative rate hedging transaction. This transaction is tied to the one-month LIBOR interest rate. Under the Collar transaction, two separate agreements are established with an upper limit, or cap, and a lower limit, or floor, for the Company’s LIBOR borrowing rate. As of December 31, 2022, the Company had the following derivative outstanding,

which was designated as a cash flow hedge that qualified for hedge accounting treatment:

Type
Of
Hedge

Notional
Amount

Effective
Date

Collar

Fixed
LIBOR
Rate

Expiration
Date

Notional
Amount
Decreases

Amount
After
Decrease

(amounts
in millions)

Cap

2.75%

Collar

220.0

Jun. 25, 2019

Floor

0.402%

Jun. 28, 2024

Jun. 28, 2023

90.0

Total

220.0

For the year ended December 31, 2022, the Company recorded the net change in the fair value of this derivative as a gain of $3.2 million (net of a tax benefit of $1.2 million as of December 31, 2022) to the statement of comprehensive income (loss). The fair value of this derivative was determined using observable market-based inputs (a Level 2 measurement) and the impact of credit risk on a derivative’s fair value (the creditworthiness of the Company for liabilities). As of December 31, 2022, the fair value of these derivatives was an asset of $4.0 million, and is recorded as other assets on the balance sheet. The Company does not expect to reclassify any of this amount to the condensed consolidated statement of operations over the next twelve months.

The following table presents the accumulated derivative gain (loss) recorded in other comprehensive income (loss) as of December 31, 2022, and December 31, 2021:


	Accumulated Derivative Gain (Loss)
Description	December 31, 2022		December 31, 2021
	(amounts in thousands)
Accumulated derivative unrealized gain (loss)	$	2,942	$	(289)

The following table presents the accumulated net derivative gain (loss) recorded in accumulated other comprehensive income (loss) for the years ended December 31, 2022 , 2021 and 2020 :


Other Comprehensive Income (Loss)
Net Change in Accumulated Derivative Unrealized Gain (Loss)						Net Amount of Accumulated Derivative Gain (Loss) Reclassified to the Consolidated Statement of Operations
Years Ended December 31,
2022		2021		2020		2022		2021		2020
(amounts in thousands)
$	3,231	$	1,500	$	(1,650)	$	232	$	1,176	$	663

Undesignated Derivatives

The Company is subject to equity market risks due to changes in the fair value of the notional investments selected by its employees as part of its non-qualified deferred compensation plans. During the quarter ended June 30, 2020, the Company entered into a Total Return Swap ("TRS") in order to manage the equity market risks associated with its non-qualified deferred compensation plan liabilities. The Company pays a floating rate, based on SOFR, on the notional amount of the TRS. The TRS is designed to substantially offset changes in its non-qualified deferred compensation plan's liabilities due to changes in the value of the investment options made by employees. As of December 31, 2022, the notional investments underling the TRS amounted to $24.1 million. The contract term of the TRS is through April 2023 and is settled on a monthly basis, therefore limiting counterparty performance risk. The Company did not designate the TRS as an accounting hedge. Rather, the Company records all changes in the fair value of the TRS to earnings to offset the market value changes of its non-qualified deferred compensation plan liabilities.

For the year ended December 31, 2022, the Company recorded the net change in the fair value of the TRS in station operating expenses and corporate, general and administrative expenses in the amount of a $4.6 million benefit. Of this amount, a $1.5 million benefit was recorded in corporate, general and administrative expenses and $3.1 million benefit was recorded in station operating expenses.