The Company is exposed to certain market risks during the normal course of its business arising from adverse changes in interest rates and foreign currency exchange rates. The Company selectively uses derivative financial instruments (“derivatives”), including cross-currency interest rate swap and foreign currency forward contracts and interest rate swap and cap contracts, to manage the risks from fluctuations in foreign currency exchange rates and interest rates, respectively. The Company does not purchase or hold derivatives for trading or speculative purposes.

The Company’s exposure to interest rate risk results primarily from its variable-rate borrowings. The Company manages its debt centrally, considering tax consequences and its overall financing strategies. The Company manages its exposure to interest rate risk by using interest rate caps and pay-fixed swaps as cash flow hedges of variable rate debt in order to adjust the relative fixed and variable proportions.

A substantial portion of the Company’s operations is conducted by its subsidiaries outside of the United States in currencies other than the USD. Almost all of the Company’s non-U.S. subsidiaries conduct their business primarily in their local currencies, which

are also their functional currencies. The USD, the EUR, GBP, Chinese Renminbi and Indian rupee are the principal currencies in which the Company and its subsidiaries enter into transactions. The Company is exposed to the impacts of changes in foreign currency exchange rates on the translation of its non-U.S. subsidiaries’ assets, liabilities and earnings into USD. The Company manages this exposure by having certain U.S. subsidiaries borrow in currencies other than the USD or utilizing cross-currency interest rate swaps as net investment hedges.

The Company and its subsidiaries are also subject to the risk that arises when they, from time to time, enter into transactions in currencies other than their functional currency. To mitigate this risk, the Company and its subsidiaries typically settle intercompany trading balances at least quarterly. The Company also selectively uses forward currency contracts to manage this risk. These contracts for the sale or purchase of European and other currencies generally mature within one year.

The following table summarizes the notional amounts, fair values and classification of the Company’s outstanding derivatives by risk category and instrument type within the Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021.


June 30, 2022
Derivative Classification		Notional Amount(1)		Fair Value(1) Other Current Assets		Fair Value(1) Other Assets		Fair Value(1) Accrued Liabilities		Fair Value(1) Other Liabilities
Derivatives Designated as Hedging Instruments
Interest rate swap contracts	Cash flow	$	528.5	$	—	$	—	$	0.6	$	2.0
Interest rate cap contracts	Cash flow	1,000.0		1.5		8.0		—		—
Cross-currency interest rate swap contracts	Net investment	1,054.2		21.4		—		—		15.4
Derivatives Not Designated as Hedging Instruments
Foreign currency forwards	Fair value	$	25.1	$	—	$	—	$	—	$	—
Foreign currency forwards	Fair value	7.3		—		—		—		—


December 31, 2021
Derivative Classification		Notional Amount(1)		Fair Value(1) Other Current Assets		Fair Value(1) Other Assets		Fair Value(1) Accrued Liabilities		Fair Value(1) Other Liabilities


Derivatives Not Designated as Hedging Instruments
Foreign currency forwards	Fair Value	$	22.1	$	—	$	—	$	—	$	—
Foreign currency forwards	Fair Value	19.3		—		—		0.2		—

(1)Notional amounts represent the gross contract amounts of the outstanding derivatives excluding the total notional amount of positions that have been effectively closed through offsetting positions. The net gains and net losses associated with positions that have been effectively closed through offsetting positions but not yet settled are included in the asset and liability derivatives fair value columns, respectively.

Payments of interest rate cap premiums are classified as financing cash flows in the Condensed Consolidated Statements of Cash Flows. All other cash flows related to derivatives are classified as operating cash flows in the Condensed Consolidated Statements of Cash Flows.

As of June 30, 2022, the Company was the fixed rate payor on two interest rate swap contracts that effectively fix the SOFR-based index used to determine the interest rates charged on a total of $528.5 million of the Company’s SOFR-based variable rate borrowings. These contracts carry a fixed rate of 3.2% and expire in 2025. These swap agreements qualify as hedging instruments and have been designated as cash flow hedges of forecasted SOFR-based interest payments. Based on SOFR-based swap yield curves as of June 30, 2022, the Company expects to reclassify losses of $0.7 million out of accumulated other comprehensive income (“AOCI”) into earnings during the next 12 months.

As of June 30, 2022, the Company entered into three interest rate cap contracts that effectively limit the SOFR-based index used to determine the interest rates charged on a total of $1,000.0 million of the Company’s SOFR-based variable rate borrowings to 4.0% and expire in 2025. These swap agreements qualify as hedging instruments and have been designated as cash flow hedges of forecasted SOFR-based interest payments. As of June 30, 2022, the Company expects to reclassify $4.5 million out of AOCI into earnings during the next 12 months.

Losses on derivatives designated as cash flow hedges included in the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six month periods ended June 30, 2022 and 2021 are as presented in the table below.


	For the Three Month Period Ended June 30,				For the Six Month Period Ended June 30,
	2022		2021		2022		2021

Loss recognized in OCI on derivatives	$	(6.6)	$	—	$	(6.6)	$	—
Loss reclassified from AOCI into income (effective portion)(1)	(0.1)		—		(0.1)		—

As of June 30, 2022, the Company was the fixed rate payor on two cross-currency interest rate swap contracts that replace a fixed rate of 3.2% on a total of $528.5 million with a fixed rate of 1.6% on a total of €500.0 million. These contracts expire in 2025. These contracts have been designated as net investment hedges of our Euro denominated subsidiaries and require an exchange of the notional amounts at maturity.

As of June 30, 2022, the Company entered into three cross-currency interest rate swap contracts where we receive SOFR on a total of $525.7 million and pay EURIBOR on a total of €500.0 million. These contracts expire in 2025. These contracts have been designated as net investment hedges of our Euro denominated subsidiaries and require an exchange of the notional amounts at maturity.

Gains on derivatives designated as net investment hedges included in the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six month periods ended June 30, 2022 and 2021 are as presented in the table below.


	For the Three Month Period Ended June 30,				For the Six Month Period Ended June 30,
	2022		2021		2022		2021
Gain recognized in OCI on derivatives	$	6.0	$	—	$	6.0	$	—
Gain reclassified from AOCI into income (effective portion)(1)	0.1		—		0.1		—

The Company had three foreign currency forward contracts outstanding as of June 30, 2022 with notional amounts ranging from $7.3 million to $14.2 million. These contracts are used to hedge the change in fair value of recognized foreign currency denominated assets or liabilities caused by changes in currency exchange rates. The changes in the fair value of these contracts generally offset the changes in the fair value of a corresponding amount of the hedged items, both of which are included within “Other operating expense, net” in the Condensed Consolidated Statements of Operations. The Company’s foreign currency forward contracts are subject to master netting arrangements or agreements between the Company and each counterparty for the net settlement of all contracts through a single payment in a single currency in the event of default on or termination of any one contract with that certain counterparty. It is the Company’s practice to recognize the gross amounts in the Condensed Consolidated Balance Sheets. The amount available to be netted is not material.


	For the Three Month Period Ended June 30,				For the Six Month Period Ended June 30,
	2022		2021		2022		2021
Foreign currency forward contracts gains (losses)	$	4.1	$	0.7	$	3.1	$	(0.1)
Total foreign currency transaction gains (losses), net	1.8		(3.4)		5.6		14.7

In February 2020, the Company designated its Euro Term Loan, which had a principal balance at that time of €601.2 million, as a hedge of the Company's net investment in subsidiaries with a functional currency of euro. This loan was repaid in June 2022 and the hedge has been discontinued. See Note 9 “Debt” for further discussion of the repayment of the Euro Term Loan.

A financial instrument is defined as cash or cash equivalents, evidence of an ownership interest in an entity, or a contract that creates a contractual obligation or right to deliver or receive cash or another financial instrument from another party. The Company’s financial instruments consist primarily of cash and cash equivalents, trade accounts receivables, trade accounts payables, deferred compensation assets and obligations, derivatives and debt instruments. The carrying values of cash and cash equivalents, trade accounts receivables, trade accounts payables, and variable rate debt instruments are a reasonable estimate of their respective fair values.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or more advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value as follows.

Level 2 Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities as of the reporting date.


	June 30, 2022
	Level 1		Level 2		Level 3		Total
Financial Assets
Trading securities held in deferred compensation plan(1)	$	11.4	$	—	$	—	$	11.4
Interest rate caps(2)	—		9.5		—		9.5
Cross-currency interest rate swaps(3)	—		21.4		—		21.4
Foreign currency forwards(4)	—		—		—		—
Total	$	11.4	$	30.9	$	—	$	42.3
Financial Liabilities
Deferred compensation plans(1)	$	18.7	$	—	$	—	$	18.7
Interest rate swaps(5)	—		2.6		—		2.6
Cross-currency interest rate swaps(3)	—		15.4		—		15.4
Foreign currency forwards(4)	—		—		—		—
Total	$	18.7	$	18.0	$	—	$	36.7


	December 31, 2021
	Level 1		Level 2		Level 3		Total
Financial Assets
Trading securities held in deferred compensation plan(1)	$	12.0	$	—	$	—	$	12.0


Foreign currency forwards(4)	—		—		—		—
Total	$	12.0	$	—	$	—	$	12.0
Financial Liabilities
Deferred compensation plan(1)	$	22.4	$	—	$	—	$	22.4


Foreign currency forwards(4)	—		0.2		—		0.2
Total	$	22.4	$	0.2	$	—	$	22.6

(2)Measured as the present value of all expected future cash flows that would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observable market volatilities and interest rate curves.

(3)Measured as the present value of all expected future cash flows on each leg of the contracts. The model utilizes inputs of observable market data including interest yield curves and foreign currency exchange rates. The present value calculation uses cross-currency basis-adjusted discount factors that have been adjusted to reflect the credit quality of the Company and its counterparties.

(5)Measured as the present value of all expected future cash flows based on the SOFR-based swap yield curves as of June 30, 2022. The present value calculation uses discount rates that have been adjusted to reflect the credit quality of the Company and its counterparties.