Derivative Instruments and Hedging Activities

9 Months Ended

Sep. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

Interest Rate Swap Hedges

To reduce exposure to variability in expected future cash outflows on variable rate debt attributable to the changes in the applicable interest rates under the 2022 Credit Agreement, the Company entered into interest rate swaps to economically offset a portion of this risk.

For interest rate swap derivatives designated and that qualify as hedges for accounting purposes, the unrealized gain or loss on the derivative is initially recorded in OCI, reclassified into earnings in the same period or periods during which the hedged transaction affects earnings and is presented in the same income statement line item as the earnings effect of the hedged item.

As of September 30, 2023, the Company had the following outstanding interest rate swap derivatives that were used to hedge its interest rate risks:

Product	Number of Instruments	Effective Date	Maturity Date	Current Notional(1)
Interest Rate Swaps	4	February 28, 2023	November 29, 2027	$300.0 million USD

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(1)The notional value steps down from $300.0 million to $150.0 million on February 27, 2026.

All financial derivative instruments are carried at their fair value on the balance sheet. The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the unaudited condensed consolidated balance sheets as of the dates presented:

	Asset Derivatives
	September 30, 2023			December 31, 2022
(in thousands)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Interest rate swaps	Other current assets	$	3,073	Other current assets	$	—

	Liability Derivatives
	September 30, 2023			December 31, 2022
(in thousands)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Interest rate swaps	Other liabilities	$	475	Other liabilities	$	—

The tables below present the effect of cash flow hedge accounting on accumulated OCI for the periods presented:

	Three Months Ended September 30,					Three Months Ended September 30,
(in thousands)	2023		2022			2023		2022
Derivatives designated as hedging instruments:	Amount of Gain or (Loss) Recognized in OCI on Derivative				Location of Gain or (Loss) Reclassified from Accumulated OCI into Income	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income
Interest rate swaps	$	3,910	$	—	Interest expense	$	761	$	—
	Nine Months Ended September 30,					Nine Months Ended September 30,
(in thousands)	2023		2022			2023		2022
Derivatives designated as hedging instruments:	Amount of Gain or (Loss) Recognized in OCI on Derivative				Location of Gain or (Loss) Reclassified from Accumulated OCI into Income	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income
Interest rate swaps	$	4,008	$	—	Interest expense	$	1,410	$	—

The table below presents the effect of the Company’s cash flow hedge accounting on the unaudited condensed consolidated statements of operations and comprehensive income for the periods presented:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
(in thousands)	Interest Expense
Total amounts of income and expense line items in which the effects of cash flow hedges are recorded	$	9,305	$	7,764	$	26,903	$	20,719
Gain or (loss) on cash flow hedging relationships
Interest rate swaps:
Amount of gain or (loss) reclassified from accumulated OCI into income	$	761	$	—	$	1,410	$	—

Amounts reported in accumulated OCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company's variable-rate debt. Based on current interest rates, during the next twelve months, the Company estimates that an additional $3.1 million net gain will be reclassified from accumulated OCI as a decrease to interest expense. No gain or loss was reclassified from accumulated OCI into earnings as a result of forecasted transactions that failed to occur during the periods presented.

Non-designated Derivatives

Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements and/or the Company has not elected to apply hedge accounting.

Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings.

As of September 30, 2023, the Company did not have any outstanding derivatives not designated as a hedge in qualifying hedging relationships.

The table below presents the effect of the Company’s derivative financial instruments that are not designated as hedging instruments in the unaudited condensed consolidated statements of operations and comprehensive income for the periods presented:

		Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)		2023		2022		2023		2022
Derivatives Not Designated as Hedging Instruments	Location of Gain or (Loss) Recognized in Income on Derivative	Amount of Gain or (Loss) Recognized in Income on Derivative
Interest rate swaps	Gain on interest rate swaps	$	—	$	—	$	—	$	296