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Interest Rate Risk
−Removed: As of September 30, 2020, the Company had no outstanding variable rate debt and therefore no exposure to interest rate risk on its current borrowings.
+Added: During the three months ended March 31, 2021, the Company borrowed an additional $80.0 million, resulting in $80.0 million of outstanding variable rate debt as of March 31, 2021.
+Added: We may incur additional variable rate debt in the future, including additional amounts that we may borrow under our revolving credit facility.
+Added: As of March 31, 2021, assuming no change in the outstanding balance of our existing variable rate debt, which bears interest at the London Inter-Bank Offered Rate (“LIBOR”) plus 1.20% and is subject to a zero percent LIBOR floor, a hypothetical 100 basis point increase or decrease in LIBOR would increase or decrease our projected annual interest expense by approximately $0.8 million or $0.1 million, respectively.
+Added: This analysis does not consider the effects of the reduced level of overall economic activity that could exist in such an environment.
+Added: Further, in the event of a change of such magnitude, we would consider taking actions to further mitigate our exposure to the change.
+Added: However, because of the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no changes in our capital structure.
+Added: Treasury lock agreements are used from time to time to manage the potential change in interest rates in anticipation of the possible issuance of fixed rate debt.
+Added: We do not hold or issue these derivative contracts for trading or speculative purposes.
+Added: As further described in Note 13.
+Added: Fair Value to our condensed consolidated financial statements in this report, during the three months ended March 31, 2021, in anticipation of a debt issuance and in order to hedge interest rate risk, the Company entered into a treasury lock agreement with a notional amount of $400.0 million based on the 10-year treasury note rate at the time.
+Added: The treasury lock was designated as a cash flow hedging instrument and had a fair value of $9.2 million recognized as an unrealized gain in the condensed consolidated financial statements as of March 31, 2021.
+Added: If the 10-year treasury note rate were to decrease, there would be a corresponding decrease in the unrealized gain or loss on our treasury lock.
+Added: The treasury lock will be settled upon the issuance of debt and the amounts recorded in other comprehensive income will be reclassified into earnings as a reduction of interest expense over the term of the debt.
There have been no other material changes to our market risk from those disclosed in section Part II, “Item 7A.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.