Derivative Financial Instruments and Hedging Activities

3 Months Ended

Mar. 31, 2025

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.

There have been no significant changes to the interest rate and foreign exchange risk management objectives from those disclosed in the Company’s audited Consolidated Financial Statements for the year ended December 31, 2024.

Interest Rate Derivative Instruments

As of March 31, 2025, the Company’s interest rate hedging instruments consisted of twelve interest rate swap agreements designated as cash flow hedges. Of these hedges, there are three interest rate swaps with a notional amount of $1.2 billion expiring on August 21, 2025 and six interest rate swaps with a notional amount of $550.0 million expiring on May 31, 2028. In March 2025, the Company entered into three forward-starting interest rate swap agreements for a notional amount of $200.0 million, with an effective date of August 21, 2025, expiring on August 21, 2027.

The Company also elected to terminate a portion of one of its interest rate swap agreements for a notional amount of $200.0 million. The immaterial amount relating to this partially terminated derivative instrument recorded in Accumulated other comprehensive loss will be amortized into earnings over the remaining life of the original swap agreement, which was scheduled to expire on August 21, 2025.

In addition, the Company previously elected to terminate certain interest rate swap agreements in November 2022 and June 2023. Amounts relating to these terminated derivative instruments recorded in Accumulated other comprehensive loss will be amortized into earnings over the remaining life of the original agreements, which were scheduled to expire on August 21, 2025.

The Company records changes in the fair value of derivatives designated and qualifying as cash flow hedges in Accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets and subsequently reclassifies the changes into earnings in the period that the hedged forecasted transaction affects earnings. As of March 31, 2025 and December 31, 2024, there were $11.2 million and $22.7 million in pre-tax gains, respectively, included in Accumulated other comprehensive loss related to these agreements, which will be reclassified to Interest expense, net of interest income 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 the 2018 Credit Agreement (which is defined therein). During the next twelve months, the Company estimates that pre-tax gains of $11.0 million will be reclassified to Interest expense, net of interest income in the Condensed 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 certain 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. The Company recognized a realized loss of $0.9 million and an unrealized loss of $0.3 million during the three months ended March 31, 2025. The Company recognized a realized loss of $5.3 million and an unrealized loss of $0.8 million during the three months ended March 31, 2024.

As of March 31, 2025 and December 31, 2024, the Company had 25 and 31 foreign currency exchange forward contracts outstanding covering a notional amount of $554.0 million and $559.5 million, respectively. As of March 31, 2025 and December 31, 2024, the Company had not posted, and did not hold, any collateral related to these agreements.

The following table presents the fair value of derivatives as of March 31, 2025 and December 31, 2024 (in millions):

			March 31, 2025				December 31, 2024
	March 31, 2025		Assets		Liabilities		Assets		Liabilities
Derivative Instrument	Notional		Fair Value		Fair Value		Fair Value		Fair Value
Designated:
Cash flow hedges:
Interest rate swaps	$	1,973.6	$	4.2	$	1.6	$	11.3	$	3.0
Non-designated:
Foreign currency forward contracts	$	554.0	$	1.0	$	1.8	$	1.3	$	1.7

The fair value of interest rate swap assets is included within Other non-current assets. The fair value of interest rate swap liabilities is included within Other current liabilities and Other non-current liabilities based on the termination date of the respective agreements. The fair value of foreign currency forward contracts is included in Prepaid expenses and other current assets and Other current liabilities. The Company does not net derivatives in the Condensed Consolidated Balance Sheets.

The following table presents the effect of derivatives designated as cash flow hedges in the Condensed Consolidated Statements of Operations for the three months ended March 31, 2025 and 2024 (in millions):

	Beginning Accumulated Other Comprehensive (Gain) Loss(1)		Amount of Loss (Gain) Recognized in Other Comprehensive Loss on Derivatives(2)		Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Statement of Operations(3)		Ending Accumulated Other Comprehensive (Gain) Loss
Three Months Ended March 31, 2025
Interest rate cash flow hedges	$	(25.2)	$	4.0	$	5.4	$	(15.8)
Three Months Ended March 31, 2024
Interest rate cash flow hedges	$	(37.0)	$	(22.1)	$	11.4	$	(47.7)

(1) Amount is net of related deferred tax benefit of $2.5 million and $2.5 million as of March 31, 2025 and 2024, respectively.

(2) Amount is net of related deferred tax benefit of $1.2 million and expense of $4.3 million for the three months ended March 31, 2025 and 2024, respectively.

(3) Amount is net of related deferred tax expense of $0.9 million and $0.0 million for the three months ended March 31, 2025 and 2024, respectively.

During the three months ended March 31, 2025 and 2024, gains of $5.4 million and $11.4 million, respectively, related to interest rate hedges were reclassified into earnings and recognized in Interest expense, net of interest income in the Condensed Consolidated Statements of Operations.