Quarterly report [Sections 13 or 15(d)]

Financial Instruments

v3.26.1
Financial Instruments
 3 Months Ended
Mar. 31, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Financial Instruments
12. 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 condensed 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 condensed 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 condensed consolidated statements of income (loss) 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 March 31, 2026
 Current notional amount of instruments in effect Annuitized premium of instruments in effect
Cap rate in effect for all agreements at March 31, 2026
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 March 31, 2026 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 interest rate cap agreement to mitigate interest rate volatility from November 2025 to October 2026.
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 March 31, 2026 and December 31, 2025, respectively, are shown below:
Balance sheet location March 31,
2026		 December 31,
2025
Derivative assets
Derivatives designated as cash flow hedges:
Interest rate caps Prepaid and other current assets $ 810  $ 446 
Interest rate caps Other long-term assets 538  — 
1,348  446 
Derivative not designated as hedging instrument:
Interest rate caps Prepaid and other current assets 975  866 
Total derivative assets $ 2,323  $ 1,312 
Derivative liabilities
Derivatives designated as cash flow hedges:
Interest rate caps Accrued liabilities $ 381  $ 841 
Interest rate caps Other long-term liabilities —  396 
Total derivative liabilities $ 381  $ 1,237 
The following tables show the effect of the Company’s derivative instruments designated as cash flow hedges on AOCI and the condensed consolidated statements of income (loss) for the three months ended March 31, 2026 and 2025, respectively:
Amount of gain (loss) recognized in OCI
Three months ended
March 31,
2026 2025
Interest rate caps $ 1,730  $ (3,598)
Amount of loss reclassified from AOCI
Three months ended
March 31,
2026 2025
Interest rate caps $ (373) $ (2,140)
Amount of loss reclassified into income
Three months ended
March 31,
2026 2025
Interest rate caps $ 373  $ 2,140 
The following table shows the amounts in the line items presented in the condensed consolidated statements of income (loss) in which the effects of derivatives designated as cash flow hedges are recorded for the three months ended March 31, 2026 and 2025, respectively:
Three months ended
March 31,
Location and amount of gain (loss) recognized in income on cash flow hedging relationships 2026 2025
Interest rate caps Interest expense, net $ (3,172) $ (8,353)
The amount of net unrealized gains in AOCI related to the Company’s cash flow hedges that is expected to be reclassified to the condensed consolidated statements of income (loss) over the next twelve months is $1,160 as of March 31, 2026.