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DERIVATIVE INSTRUMENTS

3 Months Ended

Mar. 31, 2021

8 – DERIVATIVE INSTRUMENTS

The Company is exposed to interest rate risk on its floating rate debt. As of March 31, 2021, the Company had three interest rate cap agreements outstanding to manage interest costs and the risk associated with variable interest rates. The three interest rate cap agreements have been designated and qualify as cash flow hedges. The premium paid is recognized in income on a rational basis and all changes in the value of the caps are deferred in Accumulated other comprehensive income (“AOCI”) and are subsequently reclassified into Interest expense in the period when the hedged interest affects earnings.

The following table summarizes the interest rate cap agreements in place as of March 31, 2021.


Interest Rate Cap Detail						Notional Amount Outstanding
						March 31,
Trade date	Cap Rate		Start Date	End Date		2021

March 25, 2021	0.75	%	April 29, 2021	March 28, 2024	$	50,000
July 29, 2020	0.75	%	July 31, 2020	December 29, 2023		100,000
March 6, 2020	1.50	%	March 10, 2020	March 10, 2023		50,000
					$	200,000

The Company records the fair value of the interest rate caps as Fair value of derivatives in the non-current asset section on its condensed consolidated balance sheet. The Company has elected to use the income approach to value the interest rate derivatives using observable Level 2 market expectations at the measurement date and standard valuation techniques to convert future amounts to a single present amount (discounted) reflecting current market expectations about those future amounts. Level 2 inputs for derivative valuations are limited to quoted prices for similar assets or liabilities in active markets (specifically futures contracts) and inputs other than quoted prices that are observable for the asset or liability (specifically LIBOR cash and swap rates, implied volatility, basis swap adjustments, and credit risk at commonly quoted intervals). Mid-market pricing is used as a practical expedient for most fair value measurements.

The Company recorded a $161 gain for the three months ended March 31, 2021. The estimated income that is currently recorded in AOCI as of March 31, 2021 that is expected to be reclassified into earnings within the next twelve months is $167.


The Effect of Fair Value and Cash Flow Hedge Accounting on the Statement of Operations

	For the Three Months Ended March 31,
	2021		2020
	Interest Expense		Interest Expense
Total amounts of income and expense line items presented in the statement of operations in which the effects of fair value or cash flow hedges are recorded	$	4,541	$	6,945

The effects of fair value and cash flow hedging

Gain or (loss) on cash flow hedging relationships in Subtopic 815-20:
Interest contracts:
Amount of gain or (loss) reclassified from AOCI to income	$	—	$	—
Premium excluded and recognized on an amortized basis		69		—
Amount of gain or (loss) reclassified from AOCI to income as a result that a forecasted transaction is no longer probable of occurring		—		—

The following table shows the interest rate cap assets as of March 31, 2021:

The components of AOCI included in the accompanying condensed consolidated balance sheet consists of net unrealized gain (loss) on cash flow hedges as of March 31, 2021.


AOCI — January 1, 2021	$	—

Amount recognized in OCI on derivative, intrinsic		(97)
Amount recognized in OCI on derivative, excluded		258
Amount reclassified from OCI into income		—

AOCI — March 31, 2021	$	161

The

March 31,

Derivatives designated as hedging instruments

Balance Sheet Location

Interest rate caps

Fair value of derivative instruments - noncurrent