XML 27 R17.htm IDEA: XBRL DOCUMENT v3.25.3
Interest Rate Swaps
 9 Months Ended
Sep. 30, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Interest Rate Swaps

7. INTEREST RATE SWAPS

The Company uses derivative instruments to manage exposures to interest rates arising in connection with its outstanding debt arrangements. The Company has established policies and procedures that govern the risk management of these exposures. Both at inception and on an ongoing basis, the derivative instruments that qualify for hedge accounting are assessed as to their effectiveness, when applicable.

The Company is subject to the credit risk of counterparties to derivative instruments. Counterparties include a number of major banks and financial institutions. None of the concentrations of risk with an individual counterparty was considered significant as of September 30, 2025. The Company does not expect any counterparties to fail to meet their obligations. The Company records derivatives in the condensed consolidated balance sheets at fair value.

Cash Flow Hedge

On March 3, 2025, the Company entered into interest rate swap agreements to manage interest rate risk exposure on the Term Loan. The aggregate notional amount of these contracts is $200.0 million, and they mature in March 2028. The interest rate swap agreements utilized by the Company effectively modify the Company’s exposure to interest rate risk by converting a portion of the Company’s floating-rate debt to a fixed rate of 3.664%, thus reducing the impact of interest-rate changes on future interest expense. The agreements involve the receipt of floating-rate amounts in exchange for fixed-rate interest payments over the life of the agreement without an exchange of the underlying principal amount.

On September 10, 2025, the Company entered into five sequential interest rate swap agreements to manage interest rate risk exposure on the Revolving Credit Facility, with the first interest rate swap agreement effective September 12, 2025. Each agreement is structured to commence immediately following the maturity of the preceding agreement. The aggregate notional amount on these contracts is $100.0 million, and they mature in six-month intervals, with the final maturity in March 2028. The interest rate swap agreements utilized by the Company effectively modify the Company’s exposure to interest rate risk by converting a portion of the Company’s floating-rate debt to a weighted average fixed rate of 3.22%, reducing the impact of interest-rate changes on future interest expense. The agreements involve the receipt of floating-rate amounts in exchange for fixed-rate interest payments over the life of the agreement without an exchange of the underlying principal amount.

The above interest rate swap agreements are designated and qualify as a cash flow hedge and as such, the gain or loss on the derivative instruments due to the change in fair value is reported as a component of AOCI and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. If a derivative is deemed to be ineffective, the change in fair

value of the derivative is recognized directly in earnings. The Company did not have any ineffectiveness related to cash flow hedges during the three and nine months ended September 30, 2025.

The cash inflows and outflows associated with the Company’s interest rate swap agreements designated as cash flow hedges are classified in cash flows from operating activities in the accompanying condensed consolidated statements of cash flows.

The Company expects a gain of $1.7 million, net of tax, related to interest rate swap agreements to be reclassified from AOCI to earnings over the next 12 months as the hedged transactions are realized.

The effects of designated cash flow hedges on the Company’s condensed consolidated statements of operations and comprehensive income (loss) consisted of the following for the three and nine months ended September 30, 2025:

 

 

Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)

Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)

Amount of Gain Reclassified from Accumulated OCI into Income (Effective Portion)

 

(in thousands)
Derivatives in Cash Flow Hedging Relationships

 

2025

 

 

 

 

2025

 

For the three months ended September 30

 

 

 

 

 

 

 

 

Interest rate swaps

 

$

379

 

 

Interest expense, net

 

$

342

 

 

 

 

 

 

 

 

 

 

For the nine months ended September 30

 

 

 

 

 

 

 

 

Interest rate swaps

 

$

(696

)

 

Interest expense, net

 

$

778

 

The table below shows the fair value and location of the derivatives recognized in the Company’s condensed consolidated balance sheets:

 

 

Derivative Assets

 

 

 

 

 

Fair Value as of

 

(in thousands)
Derivatives Designated as Hedging Instruments:

 

Balance Sheet Location

 

September 30, 2025

 

Interest rate swaps

 

 Other assets

 

$

253

 

 

 

 

Derivative Liabilities

 

 

 

 

 

Fair Value as of

 

(in thousands)
Derivatives Designated as Hedging Instruments:

 

Balance Sheet Location

 

September 30, 2025

 

Interest rate swaps

 

 Accounts payable and accrued liabilities

 

$

(1,727

)