Derivative Financial Instruments

9 Months Ended

Sep. 30, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Interest Rate Swaps

We use various financial instruments to minimize the impact of variable market conditions on our results of operations. We use interest rate swaps to minimize the impact of fluctuations of interest rate changes on our outstanding debt where LIBOR is applied. We do not enter into derivative contracts for trading or speculative purposes.

The fair values of the derivatives designated as cash flow hedges as of September 30, 2021 and December 31, 2020 on our condensed consolidated balance sheets are as follows (in thousands):


	September 30,		December 31,
	2021		2020





Liabilities

Accrued expenses and other current liabilities	$	11,853	$	15,989

PPA V - In July 2015, PPA V entered into nine interest rate swap agreements to convert a variable interest rate debt to a fixed rate and we designated and documented the interest rate swap arrangements as cash flow hedges. Three of these swaps matured in 2016, three will mature on December 31, 2021 and the remaining three will mature on June 30, 2031. The effective change is recorded in accumulated other comprehensive loss and is recognized as interest expense on settlement. The notional amounts of the swaps are $178.9 million and $181.4 million as of September 30, 2021 and December 31, 2020, respectively.

We measure the swaps at fair value on a recurring basis. Fair value is determined by discounting future cash flows using LIBOR rates with appropriate adjustment for credit risk. We realized immaterial gains attributable to the change in valuation during the three and nine months ended September 30, 2021 and 2020, and these gains are included in other expense, net, in the condensed consolidated statements of operations.

The changes in fair value of the derivative contracts designated as cash flow hedges and the amounts recognized in accumulated other comprehensive loss and in earnings are as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Beginning balance	$	12,651	$	17,881	$	15,989	$	9,238
Loss (gain) recognized in other comprehensive loss	(264)		(72)		(2,548)		9,212
Amounts reclassified from other comprehensive loss to earnings	(499)		(501)		(1,483)		(1,068)
Net loss (gain) recognized in other comprehensive loss	(763)		(573)		(4,031)		8,144
Gain recognized in earnings	(35)		(36)		(105)		(110)
Ending balance	$	11,853	$	17,272	$	11,853	$	17,272

Embedded EPP Derivatives in Sales Contracts

For the three months ended September 30, 2021 and 2020, we recorded the fair value of the embedded EPP derivatives and recognized an unrealized loss of $0.2 million and an unrealized gain of $1.5 million, respectively. For the nine months ended September 30, 2021 and 2020, we recorded the fair value of the embedded EPP derivatives and recognized an unrealized loss of $1.6 million and an unrealized gain of $2.2 million, respectively. These gains and losses are included within loss on revaluation of embedded derivatives in the condensed consolidated statements of operations. The fair value of these derivatives was $7.2 million and $4.0 million as of September 30, 2021 and 2020, respectively.