Derivative financial instruments

9 Months Ended

Sep. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Our two interest rate swaps mitigate the interest rate risk inherent to our floating rate debt, including the Revolving Credit Facility and Term Loan. The interest rate swaps are not for trading purposes and have fixed notional values of $200.0 million and $600.00 million. The fixed rate paid by us is 2.85% and the variable rate received resets monthly to the one-month LIBOR rate, which results in us fixing LIBOR at 2.85% on $800.0 million of our Term Loan. The interest rate swaps mature on March 31, 2023.

Our interest rate swaps are designated as cash flow hedges, but were deemed ineffective due to the decrease in interest rates. All changes in fair value are recognized through interest expense in the Condensed Consolidated Statements of Operations.

The following tables present the effect of our interest rate swaps, net of tax, in the Condensed Consolidated Statements of Comprehensive Income (Loss) and Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021 ($ in thousands):


	2022		2021
AOCI from our cash flow hedges as of January 1	$	14,632	$	26,369
Change in fair value	—		—
Reclassification from AOCI to interest expense	(2,894)		(2,894)
OCI related to our cash flow hedges for the three months ended March 31	(2,894)		(2,894)
Change in fair value	—		—
Reclassification from AOCI to interest expense	(2,926)		(2,926)
OCI related to our cash flow hedges for the three months ended June 30	(2,926)		(2,926)
Change in fair value	—		—
Reclassification from AOCI to interest expense	(2,958)		(2,958)
OCI related to our cash flow hedges for the three months ended September 30	(2,958)		(2,958)
AOCI from our cash flow hedges as of September 30 (1)	$	5,854	$	17,591

________

(1) As of September 30, 2022, the total amount expected to be reclassified from AOCI to interest expense during the remaining six month term is $5.9 million, which represents prior losses recognized in AOCI when our interest rate swaps were deemed effective hedges.


Derivative Instruments for Ineffective Hedges	Financial Statement Classification	Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021
Interest rate swaps (1)	Interest expense	$	16	$	3,807	$	(7,776)	$	10,209

________

(1) Includes the loss or (gain) from the change in fair value of our interest rate swaps and the cash interest paid for the monthly settlements of the derivative.

The following tables present the effect of our interest rate swaps in the Condensed Consolidated Balance Sheet as of September 30, 2022 and December 31, 2021 ($ in thousands):


Derivative Assets for Ineffective Hedges	Financial Statement Classification	As of September 30,		As of December 31,
		2022		2021
Interest rate swaps	Derivative financial instruments	$	4,979	$	—


Derivative Liabilities for Ineffective Hedges	Financial Statement Classification	As of September 30,		As of December 31,
		2022		2021
Interest rate swaps	Derivative financial instruments	$	—	$	22,543

Derivative financial instruments expose us to credit risk in the event of non-performance by the counterparty under the terms of the interest rate swaps. We incorporate these counterparty credit risks in our fair value measurements (see Note 13) and believe we minimize this credit risk by transacting with major creditworthy financial institutions.