v3.26.1
Derivative Instruments and Hedging Activities
 3 Months Ended
Mar. 31, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities Derivative Instruments and Hedging Activities
We have entered into receive-variable, pay-fixed interest rate swap agreements with five high-quality institutional banks, each of which had an effective date of April 8, 2025 and is set to expire on April 5, 2028. On the effective date, the initial aggregate notional amount associated with these interest rate swaps was $997.5 million, the then-outstanding variable rate borrowings under our Term Loan Facility. The aggregate notional amount associated with these interest rate swaps decreases over time in a manner that is aligned with the timing and amount of scheduled principal payments due with respect to the outstanding borrowings under our Term Loan Facility. At March 31, 2026, the aggregate notional amount associated with these interest rate swaps was $990.0 million. Pursuant to these interest rate swaps, we make fixed interest payments at 3.409% in exchange for receiving variable interest payments based on Term Secured Overnight Financing Rate (“SOFR”).
Because the fair value of interest rate swap arrangements is derived from market-based rates, they are classified as derivative financial instruments. We recognize all of our interest rate swap assets and liabilities at fair value (see “Fair Value Measurements” within Note 2, Summary of Significant Accounting Policies).
Each of our interest rate swaps qualifies for and has been designated as a cash flow hedge. As of March 31, 2026, we have determined that each of our interest rate swaps is highly effective in achieving offsetting changes in the fair value of the expected future variable cash flows associated with the outstanding borrowings under our Term Loan Facility. Accordingly, unrealized gains or losses associated with changes in the fair value of our interest rate swaps are recognized as a component of accumulated other comprehensive loss (“AOCL”) on our condensed consolidated balance sheets. Realized gains or losses associated with the monthly cash settlements we receive or pay, respectively, in connection with our interest rate swaps are reclassified out of AOCL and recognized in Interest expense, net of interest income in our condensed consolidated statements of operations in the same period during which interest expense associated with the hedged variable interest rate payments is recognized.
The monthly cash settlements we receive or pay in connection with these interest rate swaps are reported within operating activities in our condensed consolidated statements of cash flows.
The fair value of our outstanding designated interest rate swap assets and liabilities is reported in our condensed consolidated balance sheet as follows:
March 31, 2026
December 31, 2025
Classification on Condensed Consolidated Balance Sheet
Interest rate swap assets:
Current
$
2,475
$
397
Prepaid expenses and other current assets
Non-current
1,148
—
Other assets
Total interest rate swap assets
$
3,623
$
397
Interest rate swap liabilities
$
—
$
2,917
Other liabilities
The unrealized gain (loss) associated with our interest rate swaps that was recognized in AOCL, as well as the realized gain that was reclassified out of AOCL to earnings, during the three months ended March 31, 2026 were as follows:
Three Months Ended March 31, 2026
Affected Line Item on Condensed Consolidated Statements of Operations
Balance in AOCL at December 31, 2025
$
(2,053)
Unrealized gain:
Pretax unrealized gain (effective portion)
6,931
Less: Tax expense
(1,802)
Unrealized gain, net of tax (effective portion)
5,129
Realized gain reclassified to earnings:
Pretax realized gain reclassified to earnings (effective portion)
(656)
Interest expense, net of interest income
Less: Tax expense
170
Provision for income taxes
Realized gain reclassified to earnings, net of tax (effective portion)
(486)
Balance in AOCL at March 31, 2026
$
2,590
At March 31, 2026, we expect approximately $1.8 million of after-tax realized gain on interest rate swaps to be reclassified out of AOCL to earnings within the next 12 months. The remaining maturity of our interest rate swaps at March 31, 2026 was 2.0 years.