Derivatives and Hedging Activities

9 Months Ended

Sep. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Hedging Activities

5. Derivatives and Hedging Activities

In connection with the Company’s prior debt facilities, on January 15, 2020, the Company entered into two interest rate swaps with UBS AG that were designed to protect the Company against adverse fluctuations in interest rates by reducing its exposure to variability in cash flows on a portion of the previous floating rate debt facilities. The swaps fixed the variable interest rate of the debt facilities and provided protection over potential interest rate increases by providing a fixed rate of interest payment in return. The interest rate swaps were for £95.0 million ($106.1 million) at a fixed rate of 0.9255% based on the 6-month LIBOR rate and for €60.0 million ($58.8 million) at a fixed rate of 0.102% based on the 6-month EURIBOR rate.

In connection with the issuance of Senior Secured Notes and the entry into a Revolving Credit Facility Agreement, on May 19, 2021 (the “RCF Agreement”), the Company terminated its two interest rate swaps. The termination fees were settled on May 20, 2021, for £1.3 million ($1.9 million) and €0.1 million ($0.2 million), respectively.

Hedges of Multiple Risks

The Company’s objectives in using interest rate derivatives were to add stability to interest and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily used interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in Accumulated Other Comprehensive Income and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next twelve months, the Company estimates that an additional $0.5 million will be reclassified as an increase to interest expense.

The Company did not have any derivatives as of September 30, 2022 or as of December 31, 2021. Losses reclassified from accumulated other comprehensive income into interest expense in the consolidated statements of operations and income for the nine months ended September 30, 2022 amounted to $0.5 million.

The table below presents the effect of fair value and cash flow hedge accounting on accumulated other comprehensive income for the nine months ended September 30, 2021.

	Amount of Gain/(Loss) Recognized in Other Comprehensive Income on Derivative			Location of Gain Reclassified from Accumulated Other Comprehensive Income into Income
		(in millions)			(in millions)
Interest Rate Products	$	0.3	Interest Expense	$	(1.3	)
Total	$	0.3		$	(1.3	)

The table below presents the effect of the Company’s derivative financial instruments on the consolidated statements of operations for the nine months ended September 30, 2021.

	Interest Expense, net
	(in millions)
Total amounts of income and expense line items presented in the statement of operations and comprehensive loss in which the effects of fair value or cash flow hedges are recorded	$	37.9
Gain/(loss) on cash flow hedging relationships in Subtopic 815-20	$	(1.3	)