v3.26.1
Derivatives
 6 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives

10. Derivatives

Derivative Instruments & Hedging Activities

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company manages economic risks, including interest rate, liquidity, and credit risks, primarily by managing the amount, sources, and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company may use derivatives to manage exposures that arise from changes in interest rates and limits the risk by following established risk management policies and procedures, including the use of derivative financial instruments.

The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate these risks, the Company only enters into derivative financial instruments with counterparties with major financial institutions. The Company does not anticipate that any of the counterparties will fail to meet their obligations. The Company's objectives in using interest rate derivatives are to attempt to stabilize interest expense where possible and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

As of June 30, 2026, the Company has 26 interest rate swap agreements with notional amounts aggregating to $860.0 million. The interest rate swap agreements are designated as cash flow hedges and are held by the Company to reduce the impact of changes in interest rates on variable rate debt. As of June 30, 2026, all interest rate swaps were deemed effective and are therefore included within Accumulated other comprehensive income/(loss) (“AOCI”) on the Company’s Condensed Consolidated Balance Sheets. As of June 30, 2026, the Company expects approximately $1.6 million of accumulated comprehensive income on derivative instruments to be reclassified into earnings as a reduction to interest expense during the next 12 months.

The interest rate swaps are measured at fair value using a market standard methodology that incorporates the discounted net present value of estimated future fixed and variable cash flows. The variable cash flows are based on forward interest rate curves derived from observable market data. Accordingly, the Company classifies its interest rate swaps within Level 2 of the fair value hierarchy, which are measured on a recurring basis. See Footnote 13 of the Notes to Condensed Consolidated Financial Statements for fair value measurement disclosure.

The following table summarizes the terms and fair value of the Company’s derivative financial instruments as of June 30, 2026 (dollars in thousands):

 

Instrument

 

Number of Swap Agreements

 

Associated Debt Instrument

 

Effective Date

 

Maturity Date

 

Notional
Amount (1)

 

 

Derivative
Assets (2)

 

 

Derivative
 Liabilities (2)

 

Interest rate swap

 

1

 

$200.0 Million Term Loan

 

Jan-24

 

Jan-29

 

$

200,000

 

 

$

1,351

 

 

$

-

 

Interest rate swaps

 

3

 

$50.0 Million Term Loan

 

Jan-24

 

Nov-26

 

 

50,000

 

 

 

-

 

 

 

(18

)

Interest rate swaps

 

3

 

$100.0 Million Term Loan

 

Jan-24

 

Feb-27

 

 

100,000

 

 

 

19

 

 

 

-

 

Interest rate swaps

 

7

 

$50.0 Million Term Loan

 

Jan-24

 

Aug-27

 

 

50,000

 

 

 

127

 

 

 

-

 

Interest rate swaps

 

7

 

$110.0 Million Term Loan

 

Jan-24

 

Feb-28

 

 

110,000

 

 

 

490

 

 

 

-

 

Interest rate swaps

 

4

 

$300.0 Million Term Loan

 

Jul-24

 

Jan-29

 

 

300,000

 

 

 

525

 

 

 

-

 

Interest rate swap

 

1

 

$50.0 Million Term Loan

 

Sept-24

 

Jan-29

 

 

50,000

 

 

 

642

 

 

 

-

 

 

 

 

 

 

 

 

 

 

$

860,000

 

 

$

3,154

 

 

$

(18

)

 

(1)
These interest rate swap agreements utilize a one-month SOFR CME index.
(2)
Derivative assets and derivative liabilities are included within Other assets and Other liabilities, respectively, on the Company’s Condensed Consolidated Balance Sheets.

The table below details the location in the financial statements of the gain/(loss) recognized on interest rate swaps designated as cash flow hedges for the three and six months ended June 30, 2026 and 2025 (in thousands):

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2026

 

 

2025

 

 

2026

 

 

2025

 

Amount of gain/(loss) recognized in AOCI on interest rate swaps, net

 

$

6,094

 

 

$

(4,148

)

 

$

11,420

 

 

$

(13,135

)

Amount reclassified from AOCI into Interest expense as (expense)/income

 

$

(184

)

 

$

1,292

 

 

$

(286

)

 

$

2,574

 

Total amount of Interest expense presented in the Condensed
   Consolidated Statements of Income in which the effects
   of cash flow hedges are being recorded

 

$

(83,905

)

 

$

(81,204

)

 

$

(167,030

)

 

$

(161,581

)