DERIVATIVE INSTRUMENTS

12 Months Ended

Dec. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

We used interest rate derivatives to stabilize interest expense and to manage our exposure to interest rate fluctuations. To accomplish this objective, we primarily used interest rate swap contracts to fix variable rate interest debt.

Changes in the fair value of derivatives designated and that qualify as cash flow hedges were recorded in accumulated other comprehensive income (loss) (“OCI”) and subsequently reclassified into earnings in the period that the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income (loss) will be reclassified to interest expense as interest payments are made on our variable rate debt. During the next 12 months, we estimate an additional $936,000 will be reclassified as an increase to interest expense.

Derivatives not designated as hedges were not speculative and were used to manage our exposure to interest rate movements and other identified risks but did not meet the strict hedge accounting requirements. Changes in fair value of derivatives not designated in hedging relationships were recorded directly into earnings within other income (loss) in the Consolidated Statements of Operations. For the years ended December 31, 2022 and 2021, we recorded a gain of $582,000 and $419,000, respectively, related to the interest rate swap not designated in a hedging relationship prior to its termination.

In February 2022, we paid $3.2 million to terminate our $75.0 million interest rate swap and our $70.0 million forward swap. As of December 31, 2022, we had no remaining interest rate swaps.

At December 31, 2021, we had one interest rate swap contract designated as a cash flow hedge of interest rate risk with a total notional amount of $75.0 million to fix the interest rate on the line of credit. We also had one interest rate swap with a notional

amount of $70.0 million that was not effective until January 31, 2023 and was not designated as a hedge in a qualifying hedging relationship.

In September 2021, we paid $3.8 million to terminate our $50.0 million interest rate swap and our $70.0 million interest rate swap in connection with the pay down of our term loans (see Note 6 - Debt for additional details). We accelerated the reclassification of a $5.4 million loss from OCI into other income loss in Consolidated Statements of Operations as a result of the hedged transactions becoming probable not to occur.

The fair value of the derivative financial instruments as well as their classification on our Consolidated Balance Sheets as of December 31, 2022 and 2021 is detailed below.


	(in thousands)
			December 31, 2022		December 31, 2021
		Balance Sheet Location	Fair Value		Fair Value
Total derivative instruments designated as hedging instruments - interest rate swaps		Accounts Payable and Accrued Expenses	$	—	$	4,610
Total derivative instruments not designated as hedging instruments - interest rate swaps		Accounts Payable and Accrued Expenses	$	—	$	1,097

The effect of the Company's derivative financial instruments on the consolidated statements of operations as of December 31, 2022, 2021, and 2020 is detailed below.


	(in thousands)
	Gain (Loss) Recognized in OCI						Location of Gain (Loss) Reclassified from Accumulated OCI into Income	Gain (Loss) Reclassified from Accumulated OCI into Net Income (Loss)
	Year Ended December 31,							Year Ended December 31,
	2022		2021		2020			2022		2021		2020
Total derivatives in cash flow hedging relationships - interest rate swaps	$	1,581	$	2,383	$	(11,068)	Interest expense	$	(799)	$	(9,087)	$	(2,770)