v3.26.1
Derivatives and Hedging Activities
 3 Months Ended
Mar. 31, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Hedging Activities Derivatives and Hedging Activities
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate caps as part of its interest rate risk management strategy. During 2026 and 2025, such derivatives have been used to hedge the variable cash flows associated with existing variable-rate debt.
The key terms of interest rate caps outstanding are presented below:
March 31, 2026December 31, 2025
DescriptionEffective DateNotional Amount (in millions)StatusNotional Amount (in millions)StatusMaturity Date
Deferred premium capMarch 31, 2025$392.0 Active$393.0 ActiveDecember 31, 2028
Deferred premium capMarch 31, 2025196.0 Active196.5 ActiveDecember 31, 2028
Deferred premium capMarch 31, 2025392.0 Active393.0 ActiveDecember 31, 2028
Deferred premium capMarch 31, 2025196.0 Active196.5 ActiveDecember 31, 2028
Deferred premium capMarch 31, 2025196.0 Active196.5 ActiveDecember 31, 2028
$1,372.0 $1,375.5 
Within the Company’s condensed consolidated balance sheets, the interest rate caps are recorded at fair value. The cash flows related to the interest rate caps are classified as operating activities in the condensed consolidated statements of cash flows. The fair value of the interest rate caps is determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected receipts on the caps are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. The interest rate caps are classified using Level 2 inputs within the fair value hierarchy.
For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive income ("OCI") and subsequently reclassified into interest expense in the same period(s) during which
the hedged transaction affects earnings, as documented at hedge inception in accordance with the Company’s accounting policy election. Amounts reported in accumulated OCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. Over the next 12 months, the Company estimates that an additional $5.4 million will be reclassified as an increase to interest expense.
The following table presents the fair values of our derivatives and their location on the condensed consolidated balance sheets (in millions):
March 31, 2026December 31, 2025
AssetsLiabilitiesAssetsLiabilities
Derivatives in cash flow hedging relationships
Interest rate caps (1)
$— $10.5 $— $13.8 
Total$— $10.5 $— $13.8 
(1)Amounts were included in other long-term liabilities on the condensed consolidated balance sheets as of March 31, 2026 and December 31, 2025.
The following table presents the pre-tax effect of the interest rate swaps and caps on the Company's accumulated OCI and condensed consolidated statements of operations (in millions):
Three Months Ended March 31,
Location20262025
Derivatives not designated as hedging instruments
Gain (loss) recognized in income
Other income, net$— $— 
Derivatives in cash flow hedging relationships
Gain (loss) recognized in OCI (effective portion)
$1.9 $(5.6)
Gain (loss) reclassified from accumulated OCI into income (effective portion)
Interest expense, net1.4 (11.0)