Note 9 - Derivative Financial Instruments and Hedging Activities
|3 Months Ended|
Mar. 31, 2021
|Notes to Financial Statements|
|Derivative Instruments and Hedging Activities Disclosure [Text Block]||
During the quarter ended March 31, 2021, the Company adopted a derivative investment policy which provides guidelines and objectives related to managing financial and operational exposures arising from market changes in short term interest rates. In accordance with this policy, the Company can enter into interest rate swaps or similar instruments, will endeavor to evaluate all the risks inherent in a transaction before entering into a derivative financial instrument and will not enter into derivative financial instruments for speculative or trading purposes. Hedging relationships are formally documented at the inception of the hedge and hedges must be highly effective in offsetting changes to future cash flows on hedged transactions at the inception of a hedge and on an ongoing basis to be designated for hedge accounting treatment.
The Company is exposed to interest rate risk related to its variable rate debt obligations under the 2021 Credit Agreement. In order to manage the volatility in interest rate markets, in February 2021, the Company entered intointerest rate swaps agreements to manage exposure arising from this risk. On a combined basis, the agreements have a constant notional amount over a -year term that ends on February 5, 2026. The agreements both pay the Company 30-day LIBOR on the notional amount and the Company pays a fixed rate of interest equal to 0.73%. These derivative instruments are considered cash flow hedges. The Company does not have any other derivative financial instruments.
The table below presents the gross fair value amounts of our derivative financial instruments and the associated notional amounts designated as cash flow hedges (in thousands):
The table below presents the effect of our derivative financial instruments designated as hedging instruments in the income statement and in AOCI:
The Company didincur any hedge ineffectiveness during the three months ended March 31, 2021.
The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef