Quarterly report pursuant to Section 13 or 15(d)

Derivatives

v3.22.1
Derivatives
 6 Months Ended
Mar. 31, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives DERIVATIVES
Interest Rate Derivative Instrument
In June 2021, the Company entered into an interest rate swap agreement for a notional amount of $300.0 million, effective June 28, 2021, with an expiration date of May 28, 2026, which hedges the floating LIBOR on a portion of the term loan (Term Loan A, $1.10 billion balance) under the Credit Agreement to a fixed rate of 0.986%. The Company elected to designate this interest rate swap as a cash flow hedge for accounting purposes.
As this cash flow hedge is considered effective, any future gains and losses are reflected within Accumulated Other Comprehensive Income in the Consolidated Statements of Comprehensive Income. Derivatives in a net asset position are recorded in "Prepaid expenses and other current assets" on our Consolidated Balance Sheets and derivatives in a net liability position are recorded in "Other current liabilities" on our Consolidated Balance Sheets. No ineffectiveness was recorded on this contract during the six months ended March 31, 2022.
Table 8.1: Details of Derivatives Fair Value
March 31, 2022 September 30, 2021
(in thousands)
Assets:
Interest rate swap $ 17,737  $ — 
Total assets $ 17,737  $ — 
Liabilities:
Interest rate swap $ —  $ 410 
Total liabilities $ —  $ 410 
Table 8.2: Gains on Derivatives
For the Three Months Ended For the Six Months Ended
March 31, 2022 March 31, 2021 March 31, 2022 March 31, 2021
(in thousands)
Net gains recognized in AOCI on derivatives, net of tax (1) $ 10,225  $ —  $ 12,401  $ — 
Amounts reclassified to earnings from accumulated other comprehensive loss (2) 464  —  973  — 
Net current period other comprehensive income $ 10,689  $ —  $ 13,374  $ — 
(1)Amount is net of tax expense of $3.7 million and $4.4 million for the three and six months ended March 31, 2022, respectively.
(2)Amount is net of tax benefit of $0.2 million and $0.3 million for the three and six months ended March 31, 2022, respectively.
Counterparty Risk
The Company is exposed to credit losses in the event of nonperformance by the counterparty to our derivative instrument. Our counterparty has investment grade credit ratings; accordingly, we anticipate that the counterparty will be able to fully satisfy its obligations under the contracts. Our agreements outline the conditions upon which it or the counterparty are required to post collateral. As of March 31, 2022, there was no collateral posted with its counterparty related to the derivatives.