Derivative Instruments |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments |
10. Derivative Instruments
The Company is
exposed to certain market risks in the ordinary course of business due to adverse changes in interest rates. The exposure to interest rate risk primarily results from the Company’s variable-rate borrowing. The Company may elect to use
derivative financial instruments to manage risks from fluctuations in interest rates. The Company does not purchase or hold derivatives for trading or speculative purposes. Fluctuations in interest rates can be volatile and the Company’s risk
management activities do not eliminate these risks.
Interest Rate Swap
In May 2022, the Company entered into an interest rate swap agreement,
effective on June 30, 2022, with Bank of America, N.A, which had a $150 million notional value, and a maturity date of June 30, 2027. Beginning in July 2022, the Company receives 1-month SOFR and pays a fixed rate of interest of 2.815% on 1-month SOFR. The total interest rate in any period also includes an applicable margin based on the Company’s consolidated leverage ratio. In
connection with the swap, no cash was exchanged between the Company and the counterparty.
The Company designated its interest rate swap as a cash flow hedge and
structured it to be highly effective. Consequently, unrealized gains and losses related to the fair value of the interest rate swap are recorded to accumulated other comprehensive income (loss), net of tax.
The impact of the Company’s derivative instruments is reflected within the accompanying unaudited
Consolidated Statements of Comprehensive Income.
The valuations of the Company’s interest rate derivatives are measured as
the present value of all expected future cash flows based on SOFR-based yield curves. The present value calculation uses discount rates that have been adjusted to reflect the credit quality of the Company and its counterparty which is a Level
2 fair value measurement.
The carrying and fair value of the Company’s interest rate derivatives (included in other current assets and other assets) were as
follows.
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