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Derivatives and Hedging Activities | 9 Months Ended
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Sep. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives and Hedging Activities | DERIVATIVES AND HEDGING ACTIVITIES Cash Flow Hedges of Interest Rate Risk Our purpose for using interest rate derivatives is to add stability to interest expense and to manage our exposure to interest rate movements. During the nine months ended September 30, 2023, we used interest rate swaps to hedge the variable cash flows associated with existing variable-rate debt. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. We do not use derivatives for trading or speculative purposes and we currently do not have any derivatives that are not designated as hedges. As of September 30, 2023, we have not posted any collateral related to these agreements. In April 2023, we amended the reference rates on our active and forward interest swaps from 1-month LIBOR to 1-month SOFR. We continue to account for these agreements as cash flow hedges under the expedients allowed in ASC Topic 848 for this type of amendment. As of September 30, 2023, we had the following interest rate swap derivatives:
Effective Date |  | Notional Amount |  | Fixed Rate |  | Maturity Date
|  | (in millions) |  |  |  |
April 28, 2023 |  | $ | 200.0 |  |  | 0.46 | % |  | December 31, 2025
April 28, 2023 |  | 100.0 |  |  | 1.32 | % |  | December 31, 2025
April 28, 2023 |  | 100.0 |  |  | 1.32 | % |  | December 31, 2025
December 31, 2025 |  | 300.0 |  |  | 3.06 | % |  | December 14, 2028
December 31, 2025 |  | 100.0 |  |  | 2.93 | % |  | December 14, 2028
As of December 31, 2022, we had the following interest rate swap derivatives:
Effective Date |  | Notional Amount |  | Fixed Rate |  | Maturity Date
|  | (in millions) |  |  |  |
July 30, 2021 |  | $ | 200.0 |  |  | 0.51 | % |  | December 31, 2025
December 31, 2021 |  | 100.0 |  |  | 1.37 | % |  | December 31, 2025
December 31, 2021 |  | 100.0 |  |  | 1.37 | % |  | December 31, 2025
December 31, 2025 |  | 300.0 |  |  | 3.09 | % |  | December 14, 2028
December 31, 2025 |  | 100.0 |  |  | 2.98 | % |  | December 14, 2028
As of September 30, 2023, our two forward interest rate swaps, combined with our three active swaps, serve to hedge $400.0 million of the variable cash flows on our variable rate Term Loan through maturity. The assets associated with these interest rate swaps are included in other current assets and other non-current assets on the Consolidated Balance Sheets at their fair value amounts as described in Note 9, Fair Value Measurements. In July 2022, we amended the maturity date of each of our three active interest rate swaps to December 31, 2025 with the other terms remaining unchanged. The remaining unrealized gains will be amortized as a decrease to interest expense, net through the original maturity dates of April 15, 2030 and December 15, 2028. For the three and nine months ended September 30, 2023, we amortized $1.8 million and $5.3 million, respectively, of the remaining unrealized gains as a decrease to interest expense, net. For the three and nine months ended September 30, 2022, we amortized $1.6 million of the unrealized gains to interest expense, net. The amended swaps included off-market terms at inception. This other-than-insignificant financing element will be amortized as an increase to interest expense, net through the December 31, 2025 maturity date of the amended swaps. For the three and nine months ended September 30, 2023, we amortized $1.8 million and $5.5 million, respectively, of the financing element as an increase to interest expense, net. For the three and nine months ended September 30, 2022, we amortized $1.7 million of the financing element to interest expense, net. Cash settlements are recognized through cash flows from investing activities in the Condensed Consolidated Statements of Cash Flows due to the other-than-insignificant financing element. In August 2020, we terminated two then-existing interest rate swaps and one then-existing forward interest rate swap. During the three months ended September 30, 2023 and 2022 we amortized $1.0 million and $1.1 million, respectively, and during the nine months ended September 30, 2023 and 2022 we amortized $3.1 million and $2.8 million, respectively, of the remaining unrealized loss associated with the terminated swaps as an increase to interest expense, net. The changes in the fair value of derivatives designated, and that qualify, as cash flow hedges are recorded in other comprehensive income, net of tax on the Condensed Consolidated Statements of Operations and Comprehensive Income and in accumulated other comprehensive income on the Condensed Consolidated Balance Sheets and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. We had no such changes during the nine months ended September 30, 2023 and 2022. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense, net as interest payments are made on our variable-rate debt, and as our terminated and amended swaps are amortized. Over the next twelve months, we estimate that an additional $12.9 million will be reclassified as a decrease to interest expense, net. The following table summarizes amounts recorded to interest expense, net included in the Condensed Consolidated Statements of Operations and Comprehensive Income related to our interest rate swaps (in thousands):
| Three months ended September 30, |  | Nine months ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
(Benefit) associated with swap net settlements | $ | (4,457) |  |  | $ | (1,303) |  |  | $ | (12,187) |  |  | $ | (344) |
Expense associated with amortization of amended/terminated swaps | 1,124 |  |  | 1,127 |  |  | 3,342 |  |  | 2,796 |

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