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Interest Rate Cap
 3 Months Ended
Mar. 31, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Interest Rate Cap Interest Rate Cap
The Company is subject to market risk exposure arising from changes in interest rates on its term loan, which bears interest at a rate which is indexed to one-month Term SOFR. The Company’s objective in using an interest rate derivative is to mitigate its exposure to increases in interest rates. The interest rate cap limits the Company’s exposure to increases in the variable rate index to 1.0% on $2.0 billion of principal outstanding under the term loan, as the interest rate cap provides for payments from the counterparty when interest rates rise above 1.0%. The interest rate cap has a $2.0 billion notional amount and is effective through September 30, 2024. The Company will pay a monthly premium for the interest rate cap over the term of the agreement. The annual premium is equal to 0.0916% of the notional amount, or approximately $1.8 million.
The interest rate cap has been designated as a cash flow hedge and is highly effective at offsetting the changes in cash outflows when the variable rate index exceeds 1.0%. Changes in the fair value of the interest rate cap, net of tax, are recognized in other comprehensive income and are reclassified out of accumulated other comprehensive income and into interest expense when the hedged interest obligations affect earnings.
The following table outlines the changes in accumulated other comprehensive income (loss), net of tax, during the periods presented:
Three Months Ended March 31,
20232024
(in thousands)
Balance as of January 1$88,602 $42,907 
Gain (loss) on interest rate cap cash flow hedge
(2,696)4,370 
Amounts reclassified from accumulated other comprehensive income
(13,252)(16,347)
Balance as of March 31$72,654 $30,930 
The effects on net income of amounts reclassified from accumulated other comprehensive income are as follows:
Three Months Ended March 31,
Statement of Operations20232024
(in thousands)
Gains included in interest expense$17,552 $21,509 
Income tax expense(4,300)(5,162)
Amounts reclassified from accumulated other comprehensive income$13,252 $16,347 
The Company expects that approximately $40.7 million of estimated pre-tax gains will be reclassified from accumulated other comprehensive income into interest expense through the expiration of the interest rate cap on September 30, 2024.
Refer to Note 10 – Fair Value of Financial Instruments for information on the fair value of the Company’s interest rate cap contract and its balance sheet classification.