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DERIVATIVE INSTRUMENTS

12 Months Ended

Dec. 31, 2023

DERIVATIVE INSTRUMENTS

DERIVATIVE INSTRUMENTS

8 – DERIVATIVE INSTRUMENTS

​

The Company is exposed to interest rate risk on its floating rate debt. As of December 31, 2023 and 2022, the Company had one and three interest rate cap agreements outstanding, respectively, to manage interest costs and the risk associated with variable interest rates. The three interest rate cap agreements that we held were initially designated and qualified 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. One of the Company’s $50,000 interest rate cap agreements expired on March 10, 2023 and the Company’s $100,000 interest rate cap agreement expired on December 29, 2023.

​

During the second quarter of 2022, based on the total outstanding debt under the $450 Million Credit Facility being below the total notional amount of the interest rate cap agreements, a portion of one of the interest rate cap agreements was dedesignated as a hedge. Subsequent gains and losses resulting from valuation adjustments on the dedesignated portion of the cap are recorded within interest expense. As the forecasted interest payments hedged are not remote of occurring, the amounts in AOCI as of the date of de-designation will be recognized over the remaining original hedge period. During the years ended December 31, 2023 and 2022, the Company recorded a loss (gain) of $66 and ($94) in interest expense for the portion of the interest rate caps not designated as a hedging instrument.

​

The following table summarizes the interest rate cap agreement in place as of December 31, 2023.

​

​	​	​	​	​	​	​	​	​	​	​
Interest Rate Cap Detail								​	​	Notional Amount Outstanding
​	​	​	​	​	​	​	​	​	​	December 31,
Trade date	​	Cap Rate		​	Start Date	​	End Date		​	2023
​	​	​	​	​	​	​	​	​	​	​
March 25, 2021	​	0.75	%	​	April 29, 2021	​	March 28, 2024	​	$	50,000
​	​	​	​	​	​	​	​	​	$	50,000

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The Company records the fair value of the interest rate caps as Fair value of derivative instruments in the current and non-current asset section on its Consolidated Balance Sheets. 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 SOFR 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 valuation of the interest rate caps was transitioned to the use of SOFR rates on June 30, 2023 upon the transition of the calculation of the interest expense under the Company’s debt from LIBOR to SOFR (see Note 7 — Debt).

​

The Company recorded a $5,953 unrealized loss for the year ended December 31, 2023 in AOCI. The estimated income that is currently recorded in AOCI as of December 31, 2023 that is expected to be reclassified into earnings within the next twelve months is $527.

​

​	​	​	​	​	​	​	​	​	​	​
The Effect of Fair Value and Cash Flow Hedge Accounting on the Statements of Operations								​	​	​
​	​	​	​	​	​	​	​	​	​	​
​	​	For the Year Ended December 31,								​
​	​	2023			2022		​	2021		​
​	​	Interest Expense		​	Interest Expense		​	Interest Expense		​
Total amounts of income and expense line items presented in the statements of operations in which the effects of fair value or cash flow hedges are recorded	​	$	8,780	​	$	9,094	​	$	15,357	​
​	​	​	​	​	​	​	​	​	​	​
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	​	$	(6,871)	​	$	(2,056)	​	$	—	​
Premium excluded and recognized on an amortized basis	​	​	143	​	​	180	​	​	197	​
Amount of gain or (loss) reclassified from AOCI to income as a result that a forecasted transaction is no longer probable of occurring	​	​	—	​	​	—	​	​	—	​

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The following table shows the interest rate cap assets as of December 31, 2023 and 2022:

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​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	December 31,	​	​	December 31,	​
​	​	Balance Sheet Location	​	​	2023	​	​	2022	​
Derivatives designated as hedging instruments									​
Interest rate caps	​	Fair value of derivative instruments - current	​	$	515	​	$	6,112	​
​	​	​	​	​	​	​	​	​	​
Interest rate caps	​	Fair value of derivative instruments - noncurrent	​	$	—	​	$	381	​
​	​	​	​	​	​	​	​	​	​
Derivatives not designated as hedging instruments									​
Interest rate caps	​	Fair value of derivative instruments - current	​	$	57	​	$	200	​
​	​	​	​	​	​	​	​	​	​
Interest rate caps	​	Fair value of derivative instruments - noncurrent	​	$	—	​	$	42	​

​

The components of AOCI included in the accompanying Consolidated Balance Sheet consists of net unrealized losses on cash flow hedges as of December 31, 2023.

​

​	​	​	​	​
AOCI — January 1, 2023	​	$	6,480	​
​	​	​	​	​
Amount recognized in OCI on derivative, intrinsic	​		(6,275)	​
Amount recognized in OCI on derivative, excluded	​		322	​
Amount reclassified from OCI into income	​		—	​
​	​	​	​	​
AOCI — December 31, 2023	​	$	527	​

​

X

- References

No definition available.

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- Definition

The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 815
-SubTopic 40
-Name Accounting Standards Codification
-Section 50
-Paragraph 5
-Subparagraph (f)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480237/815-40-50-5

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 815
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 5C
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480434/815-10-50-5C

Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
-Topic 815
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//815/tableOfContent

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