Quarterly report pursuant to Section 13 or 15(d)

Note 9 - Derivative Financial Instruments and Hedging Activities

Note 9 - Derivative Financial Instruments and Hedging Activities
6 Months Ended
Jun. 30, 2021
Notes to Financial Statements  
Derivative Instruments and Hedging Activities Disclosure [Text Block]


Derivative Financial Instruments and Hedging Activities


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 into two interest rate swap agreements to manage exposure arising from this risk. On a combined basis, the agreements have a constant notional amount over a five-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 location and gross fair value amounts of our derivative financial instruments and the associated notional amounts designated as cash flow hedges (in thousands):



June 30, 2021 (a)


Balance Sheet Location




Fair Value Derivative Assets


Derivatives designated as hedges:


Cash flow hedges


Interest rate swaps

Other noncurrent assets

  $ 20,000     $ 52  


(a) No derivative instruments existed at December 31, 2020.


The table below presents the effect of our derivative financial instruments designated as hedging instruments in AOCI (in thousands):



Three Months

Ended June 30,


Six Months

Ended June 30,


2021 (a)


2021 (a)


Gain/(loss) on cash flow hedges - interest rate swaps


Beginning balance

  $ 158     $ -  

Unrealized gain/(loss) recognized in AOCI

    (137 )     11  

Amounts reclassified to interest expense (b)( c)

    31       41  

Tax provision

    (13 )     (13 )

Ending balance

  $ 39     $ 39  


(a) No derivative instruments existed for the three and six months ended June 30, 2020

(b) Positive amounts represented interest expense. Total interest expense as presented in the consolidated statement of operations for the three months and six months ended June 30, 2021 were $0.3 million and $0.6 million, respectively

(c) $0.1 million of expense is expected to be reclassified into earnings within the next 12 months


The Company did not incur any hedge ineffectiveness during the three or six months ended June 30, 2021.