Annual report [Section 13 and 15(d), not S-K Item 405]

Financial Instruments

v3.25.4
Financial Instruments
 12 Months Ended
Dec. 31, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Financial Instruments
17. Financial Instruments:
The Company uses interest rate related derivative instruments to manage its exposure to changes in interest rates on its variable-rate debt instruments. The Company does not speculate using derivative instruments.
By using derivative financial instruments to hedge exposures to changes in interest rates, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is an asset, the counterparty owes the Company, which creates credit risk for the Company. When the fair value of a derivative contract is a liability, the Company owes the counterparty and therefore, the Company is not exposed to the counterparty’s credit risk in those circumstances. The Company minimizes counterparty credit risk in derivative instruments by entering into transactions with high quality counterparties. The derivative instruments entered into by the Company do not contain credit-risk-related contingent features.
Market risk is the adverse effect on the value of a derivative instrument that results from a change in interest rates. The market risk associated with the Company’s derivative instruments is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.
Use of Derivative Financial Instruments to Manage Interest Rate Risk. The Company is exposed to fluctuations in interest rates on its senior secured credit facilities. Changes in interest rates will not affect the market value of such debt but will affect the Company’s interest payments over the term of the loans. Likewise, an increase in interest rates could have a material impact on the Company’s consolidated statements of cash flows. The Company hedges the interest rate fluctuations on debt obligations through interest rate cap agreements. The Company records these agreements at fair value as assets or liabilities in the consolidated balance sheets. As the derivatives are designated and qualify as cash flow hedges, the gains or losses on the interest rate cap agreements are recorded in stockholders’ equity as a component of other comprehensive income, net of tax. Reclassifications of the gains and losses on the interest rate cap agreements into earnings are recorded as part of interest expense in the consolidated statements of income as the Company makes its interest payments on the hedged portion of its senior secured credit facilities. Fair value is determined based on estimated amounts that would be received or paid to terminate the contracts at the reporting date based on quoted market prices.
The following table provides a summary of the Company’s interest rate cap agreements:
Financial instrument Number of instruments
In effect as of December 31, 2025
 Current notional amount of instruments in effect Annuitized premium of instruments in effect
Cap rate in effect for all agreements at December 31, 2025
Interest rate caps 3 2 $ 625,000  $ 30,698  1.00  %
The current notional amounts of the two interest rate cap agreements in effect at December 31, 2025 are $175,000 and $450,000. The Company entered into a $175,000 interest rate cap agreement to mitigate interest rate volatility from August 2024 to July 2026 and a $450,000 to mitigate interest rate volatility from November 2025 to October 2026.
During the year ended December 31, 2025, the Company dedesignated a portion of its interest rate caps. With the Company’s prepayments on the 2025 Term Loan Facility (see Note 16 to these consolidated financial statements for additional information), the original forecasted interest rate payments associated with the dedesignated portion of the interest rate cap agreement are no longer highly probable of occurring. As a result of the discontinuance of cash flow hedge accounting on this portion of the interest rate cap agreement, the Company immediately reclassified the remaining loss of $743 located in AOCI into earnings as part of interest expense in the consolidated statements of (loss) income. Any future gains and losses associated with the dedesignated portion of the interest rate cap agreement through its maturity in October 2026 will be recognized in earnings.
The Company had a $150,000 interest rate cap agreement to mitigate interest rate volatility from August 2023 to July 2024, a $250,000 interest rate cap to mitigate interest rate volatility from September 2023 to October 2025, and a $200,000 interest rate cap agreement to mitigate interest rate volatility from November 2024 to October 2025.
The Company also entered into a $200,000 forward starting interest rate cap agreement to mitigate interest volatility from August 2026 to July 2028.
The fair values of derivative instruments held as of December 31, 2025 and 2024, respectively are shown below:
December 31,
Balance sheet location 2025 2024
Derivative assets:
Derivatives designated as cash flow hedges:
Interest rate caps Prepaid and other current assets $ 446  $ 6,532 
Interest rate caps Other long-term assets —  5,968 
446  12,500 
Derivative not designated as hedging instrument:
Interest rate caps Prepaid and other current assets 866  — 
Total derivative assets $ 1,312  $ 12,500 
Derivative liabilities:
Derivatives designated as cash flow hedges:
Interest rate caps Accrued liabilities $ 841  $ 235 
Interest rate caps Other long-term liabilities 396  475 
Total derivative liabilities $ 1,237  $ 710 
The following tables show the effect of the Company’s derivative instruments designated as cash flow hedges on AOCI and the consolidated statements of (loss) income for the years ended December 31, 2025, 2024 and 2023, respectively:
Amount of (loss) gain recognized in other comprehensive income
Years ended December 31,
2025 2024 2023
Interest rate caps $ (4,287) $ 13,672  $ 5,419 
Amount of loss reclassified from AOCI
Years ended December 31,
2025 2024 2023
Interest rate caps $ (8,208) $ (17,197) $ (22,731)
Amount of loss reclassified into income
Years ended December 31,
2025 2024 2023
Interest rate caps $ 8,208  $ 17,197  $ 22,731 
The following table shows the amounts for the line items presented on the consolidated statements of (loss) income in which the effects of cash flow hedges are recorded for the years ended December 31, 2025, 2024 and 2023, respectively:
Years ended December 31,
Location and amount of gain (loss) recognized in income on cash flow hedging relationships 2025 2024 2023
Derivatives designated as cash flow hedges:
Interest rate caps Interest (expense) income $ (34,203) $ (36,488) $ (31,697)
The amount of net unrealized gains in AOCI related to the Company’s cash flow hedges that is expected to be reclassified to the consolidated statements of (loss) income over the next twelve months is $584 as of December 31, 2025.