Derivative Instruments and Hedging Activities

12 Months Ended

Dec. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

NOTE 14 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Interest rate risk

The Company is a party to interest rate swap agreements designated as cash flow hedges with notional amounts totaling $800.0 million as of December 31, 2022, which effectively fix LIBOR at approximately 2.8% through December 24, 2026. These agreements were designated as cash flow hedges on the exposure of the variability of future cash flows subject to the variable monthly interest rates on $800.0 million of the Company’s 2028 Term Loans and the 2026 Term Loans. The change in fair value is recorded as part of other comprehensive income (loss). Interest expense, net is adjusted to include the payments made or received under the swap agreements.

Foreign currency risk

The Company also enters into foreign currency forward contracts with durations of one month or less to mitigate the foreign currency risk related to certain balance sheet positions. The Company has not elected hedge accounting for these transactions and they are recorded at fair value. As of December 31, 2022, the Company had outstanding foreign currency forward contracts to sell $10.6 million and purchase €5.0 million and CHF5.0 million, all of which had settlement dates of less than one month.

No amounts are excluded from the assessment of effectiveness for cash flow hedges. Refer to Note 12 for further details on the valuation methodologies for the Company’s derivative instruments.

The Company did not enter into any material derivative instruments during the years ended December 31, 2021 and 2020.

The following table summarizes the amounts and locations of the Company’s derivative instruments on the consolidated balance sheet as of December 31, 2022 (in thousands):

	Fair value - Derivatives in asset position			Fair value - Derivatives in liability position
	Balance sheet location	December 31, 2022		Balance sheet location	December 31, 2022
Interest rate swap contracts
Designated as cash flow hedges	Prepaid expenses and other current assets	$	15,520	Accrued expenses and other current liabilities	$	—
Designated as cash flow hedges	Other long-term assets		14,828	Other long-term liabilities		—
Foreign currency forward contracts
Not designated as hedges	Prepaid expenses and other current assets		181	Accrued expenses and other current liabilities		—
Total derivatives		$	30,529		$	—

While foreign currency forward contracts are subject to a master netting arrangement, the Company does not offset derivative assets and liabilities within the consolidated balance sheet.

The following table summarizes the pre-tax amount and locations of derivative instrument net gains (losses) recognized in the consolidated statement of comprehensive income for the year ended December 31, 2022 (in thousands):
 

	Location	For the year ended December 31, 2022
Interest rate swap contracts designated as cash flow hedges	Interest expense, net	$	250
Foreign currency forward contracts not designated as cash flow hedges	Foreign exchange loss		(9,196	)

The following table presents the pre-tax amounts of gains from derivative instruments recognized in other comprehensive income (loss) for the year ended December 31, 2022 (in thousands):

	For the year ended December 31, 2022
Interest rate swap contracts designated as cash flow hedges	$	30,348

Assuming market rates remain constant through contract maturities, the Company expects to reclassify pre-tax net gains of $15.5 million into interest expense, net for interest rate swap cash flow hedges within the next 12 months.

The cash flow effects of the Company’s derivative contracts in the consolidated statement of cash flows are included in operating activities.