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Derivative Financial Instruments and Hedging Activities
 12 Months Ended
Dec. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments and Hedging Activities
Note 8: Derivative Financial Instruments and Hedging Activities
The Company is exposed to certain risks arising from both business operations and economic conditions, including interest rate risk and foreign exchange risk. To mitigate the impact of interest rate and foreign exchange risk, the Company enters into derivative financial instruments. The Company maintains the majority of its overall interest rate exposure on floating rate borrowings to a fixed-rate basis, primarily with interest rate swap agreements. The Company manages exposure to foreign exchange fluctuations primarily through short-term forward contracts.
During 2018, the Company elected to terminate sixteen interest rate cap agreements, five interest rate swap agreements, and all of its cross-currency interest rate swap agreements. Amounts relating to these terminated derivatives recorded in Accumulated other comprehensive loss in the consolidated balance sheet will be amortized into earnings over the remaining life of the contracts, which were scheduled to expire between October 2019 and August 2021.
Effective January 1, 2019, the Company adopted ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities (Topic 815). The new guidance eliminates the requirement to separately measure and report hedge ineffectiveness and has had an immaterial impact on the Company's financial statements and related disclosures. See Note 2: Summary of Significant Accounting Policies for additional information on the adoption.
Interest Rate Derivative Instruments
In January 2019, the Company entered into an interest rate swap agreement that became effective in the month of trade, expiring August 2025. The Company immediately designated this instrument as a cash flow hedge.
As of December 31, 2019, the Company's active interest rate hedging instruments consist of five interest rate swap agreements designated as cash flow hedges. The Company's hedge instrument balances as of December 31, 2019 relate solely to these interest rate swaps. The hedge instruments expire in August 2025 and are further described below.
The changes in the fair value of derivatives designated and qualifying as cash flow hedges is recorded in Accumulated other comprehensive loss in the consolidated balance sheets and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. As of December 31, 2019 and 2018, there were $74.5 million in pre-tax losses and $16.5 million in pre-tax gains, respectively, included in Accumulated other comprehensive loss related to these agreements, which will be reclassified to Interest expense as interest payments are made in accordance with the 2018 Credit Agreement; refer to Note 9: Long-term Debt and Other Borrowings for discussion of these agreements. During the next twelve months, the Company estimates that pre-tax losses of $8.2 million will be reclassified to Interest expense on the consolidated statements of operations.
Non-designated Foreign Exchange Derivative Instruments
Additionally, the Company enters into short-term forward contracts to mitigate the risk of fluctuations in foreign currency exchange rates that would adversely impact some of the Company’s foreign currency denominated transactions. Hedge accounting was not elected for any of these contracts. As such, changes in the fair values of these contracts are recorded directly in earnings. There were losses of $0.9 million, gains of $1.0 million and losses of $3.1 million included in the consolidated statements of operations for the years ended December 31, 2019, 2018 and 2017, respectively. As of December 31, 2019 and 2018, the Company had 23 foreign currency exchange forward contracts outstanding covering a notional amount of $498.2 million and $406.6 million, respectively. As of December 31, 2019 and 2018, the fair value of forward contracts disclosed above were included in Other current assets and Other current liabilities in the consolidated balance sheets. The Company does not net these derivatives in the consolidated balance sheets. As of December 31, 2019 and 2018, the Company has not posted and does not hold any collateral related to these agreements.
The following table presents the fair value of derivatives as of December 31, 2019 and 2018 (in millions):
 
 
 
 
December 31, 2019
 
December 31, 2018
 
 
 
 
Assets
 
Liabilities
 
Assets
 
Liabilities
Derivative Instrument
 
Notional
 
Fair Value
 
Fair Value
 
Fair Value
 
Fair Value
Designated:
 
 
 
 
 
 
 
 
 
 
Cash flow hedges:
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
2,050.0

 
$
—

 
$
97.7

 
$
—

 
$
25.1

Non-designated:
 
 
 
 
 
 
 
 
 
 
Foreign currency forward contracts
 
498.2

 
1.0

 
2.2

 
0.5

 
0.8


The fair value of derivative assets is included within Other non-current assets and the fair value of derivative liabilities is included within Other non-current liabilities in the consolidated balance sheets. The Company does not net derivatives in the consolidated balance sheets.
The following tables presents the effect of derivatives designated as hedges, net of applicable income taxes, in the consolidated statements of operations for the years ended December 31, 2019, 2018 and 2017 (in millions):
 
Beginning Accumulated Other Comprehensive Loss (Gain)
 
Amount of Loss (Gain) Recognized in Other Comprehensive Loss on Derivatives(1)
 
Amount of (Loss) Gain Reclassified from Accumulated Other Comprehensive Loss into Statement of Operations(2)
 
Ending Accumulated Other Comprehensive Loss (Gain)
Year Ended December 31, 2017
 
 
 
 
 
 
 
Foreign currency cash flow hedges
$
0.9

 
$
11.0

 
$
(9.7
)
 
$
2.2

Foreign currency net investment hedges
(1.9
)
 
2.6

 
—

 
0.7

Interest rate cash flow hedges
(16.4
)
 
1.0

 
(7.1
)
 
(22.5
)
 
$
(17.4
)
 
$
14.6

 
$
(16.8
)
 
$
(19.6
)
Year Ended December 31, 2018
 
 
 
 
 
 
 
Foreign currency cash flow hedges
$
2.2

 
$
(7.3
)
 
$
5.1

 
$
—

Foreign currency net investment hedges
0.7

 
(1.3
)
 
—

 
(0.6
)
Interest rate cash flow hedges
(22.5
)
 
1.1

 
8.1

 
(13.3
)
 
$
(19.6
)
 
$
(7.5
)
 
$
13.2

 
$
(13.9
)
Year Ended December 31, 2019
 
 
 
 
 
 
 
Foreign currency cash flow hedges
$
—

 
$
—

 
$
—


$
—

Foreign currency net investment hedges
(0.6
)
 
—

 
—


(0.6
)
Interest rate cash flow hedges
(13.3
)
 
88.5

 
3.8


79.0

 
$
(13.9
)
 
$
88.5

 
$
3.8


$
78.4

(1) Amount is net of related income tax expense (benefit) of $4.4 million, $0.7 million and $(2.9) million for the years ended December 31, 2019, 2018 and 2017, respectively.
(2) Amount is net of related income tax (expense) benefit of $(3.1) million, $(1.9) million and $3.7 million for the years ended December 31, 2019, 2018 and 2017, respectively.
Gains of $6.9 million and $9.8 million and losses of $8.4 million were reclassified into earnings during the years ended December 31, 2019, 2018 and 2017, respectively, relating to interest rate hedges and were recognized in Interest expense on the consolidated statements of operations.
Gains of $0.2 million and $5.1 million were reclassified into earnings during the year ended December 31, 2018 relating to foreign currency cash flow hedges and were recognized in Interest expense and Operating, administrative and other, respectively, in the consolidated statements of operations.
Losses of $0.1 million and $12.0 million were reclassified into earnings during the year ended December 31, 2017 relating to foreign currency cash flow hedges and were recognized in Interest expense and Operating, administrative and other, respectively, in the consolidated statements of operations.