XML 34 R17.htm IDEA: XBRL DOCUMENT v3.25.0.1
DERIVATIVE INSTRUMENTS
 12 Months Ended
Dec. 31, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE INSTRUMENTS
NOTE 8: DERIVATIVE INSTRUMENTS

During the first quarter of 2023, we entered into two interest rate swap arrangements with an aggregate notional amount of $125.0 million that effectively fixed the interest at 4.73% for the 2023 Term Loan beginning on July 21, 2023 through the 2023 Term Loan’s initial maturity date of January 10, 2025.

During the second quarter of 2024, we entered into two forward interest rate swap arrangements for the 2023 Term Loan with an aggregate notional amount of $150.0 million beginning on January 10, 2025 through January 10, 2026. These forward interest rate swap arrangements effectively fix a portion of our variable rate debt based on an adjusted daily SOFR at 4.72% (subject to applicable interest rate margins).
The interest rate swap arrangement is recorded at fair value in accordance with GAAP, based on discounted cash flow methodologies and observable inputs. We record the effective portion of changes in fair value of the cash flow hedge in Other comprehensive income (loss). We assess the effectiveness of a cash flow hedge both at inception and on an ongoing basis. If a cash flow hedge is no longer expected to be effective, hedge accounting is discontinued. Hedge ineffectiveness of our cash flow hedges is recorded in earnings.
The fair values of the interest rate swap as of December 31, 2024 and 2023, were as follows (in thousands):
Aggregate
Notional
Amount		Effective DateFair Value
Derivative Assets (Liabilities)
December 31,
Derivative InstrumentMaturity Date20242023
Interest rate swap$75,000July 21, 2023January 10, 2025$14 $740 
Interest rate swap50,000 July 21, 2023January 10, 20259 494 
Interest rate swap100,000 January 10, 2025January 10, 2026(624)— 
Interest rate swap50,000 January 10, 2025January 10, 2026(312)— 
$(913)$1,234 

We record interest rate swaps on our consolidated balance sheets with prepaid expenses and other assets when in a net asset position, and with accounts payable and other liabilities when in a net liability position. The current interest rate swaps have been effective since inception. The gains or losses on the effective swaps are recognized in other comprehensive income, as follows (in thousands):
Year Ending December 31,
202420232022
Unrealized (loss) gain on interest rate hedges
$(2,147)$(764)$2,819 

Amounts reported in Accumulated other comprehensive loss related to effective cash flow hedges will be reclassified to interest expense as interest payments are made on our variable-rate debt. During the next twelve months, we estimate that an additional
$0.9 million related to our four outstanding interest rate swap arrangements will be reclassified as a decrease to interest expense.

The losses reclassified from Accumulated other comprehensive income into interest expense for the three years ended December 31, 2024, were as follows (in thousands):
Year Ending December 31,
202420232022
Loss reclassified from accumulated other comprehensive income (loss) into interest expense$2,039 $2,039 $2,039 

During the next twelve months, we estimate that an additional $2.0 million related to the previously settled interest rate swap arrangements will be reclassified as an increase to interest expense.

We have agreements with each of our derivative counterparties that contain a provision whereby we could be declared in default on our derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to our default on the indebtedness. As of December 31, 2024, the fair value of derivative assets, including accrued interest, was $23,000 and the fair value of the derivative liabilities, including accrued interest, was $0.9 million. As of December 31, 2024, we have not posted any collateral related to these agreements.

Derivative instruments expose us to credit risk in the event of non-performance by the counterparty under the terms of the interest rate hedge agreement. We believe that we minimize our credit risk on these transactions by dealing with major, creditworthy financial institutions. We monitor the credit ratings of counterparties and our exposure to any single entity, thus minimizing our credit risk concentration.