The Company is exposed to certain risks during the normal course of its business arising from adverse changes in interest rates. The Company selectively uses derivative financial instruments (“derivatives”), including interest rate swaps, to manage interest rate risk. The Company does not hold or issue derivative instruments for speculative purposes. Fluctuations in interest rates can be volatile, and the Company’s risk management activities do not totally eliminate these risks. Consequently, these fluctuations could have a significant effect on the Company’s financial results.

The Company’s exposure to interest rate risk results primarily from its variable rate borrowings. On May 9, 2018, the Company entered into variable to fixed interest rate swap agreements for a notional amount of $1,361.2 million to hedge a portion of the outstanding principal balance of its variable rate term loan debt. The Company’s outstanding derivatives had a notional amount of $1,323.5 million and the fair value was presented within accrued liabilities and other of $9.4 million within the consolidated balance sheet as of December 31, 2020. The Company did not have such amounts as of December 31, 2022 and 2021 as the interest rate swap contracts expired in May of 2021.

Gains on derivatives designated as cash flow hedges included in the consolidated statements of comprehensive income for the year ended December 31, 2021 is shown in the table below.

(1)

Gains (losses) on derivatives reclassified from AOCI into income will be included in “Interest expense” in the consolidated statements of operations, the same income statement line item as the earnings effect of the hedged item. Losses recognized in the consolidated statements of operations for the years ended December 31, 2022, 2021 and 2020 total nil, $9.5 million and $21.2 million, respectively.

For the periods presented, all cash flows associated with derivatives are classified as operating cash flows in the consolidated statements of cash flows.