Derivative Financial Instruments

3 Months Ended

Mar. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The Company's derivative financial instruments primarily consist of LIBOR-based interest rate swap contracts, which were entered into with the objective of managing exposure to variability in interest rates on the Company's debt. All interest rate swap contracts are reported in the Condensed Consolidated Balance Sheets at fair value. For the interest rate swap contracts that are not designated as hedges, changes in fair value are recognized in interest expense, net in the Condensed Consolidated Statements of Operations. For the interest rate swap contracts that are designated as cash flow hedges, changes in fair value are recognized as a component of accumulated other comprehensive income (“AOCI”) in the Condensed Consolidated Balance Sheets and are reclassified into interest expense, net in the same period in which the related interest on debt affects earnings. For interest rate swap contracts that were initially designated as cash flow hedges, however, have since been de-designated, the amounts recognized as a component of AOCI are reclassified into interest expense, net in the same period in which the related interest on variable-rate debt affects earnings through the original maturity date of the related interest rate swap contracts while changes in fair value are recognized in interest expense, net in the period in which the related interest rate swap contracts are no longer designated as cash flow hedges. The interest rate swap contracts entered into during October 2019 included a significant financing component at inception, and as

such, the related cash flows are reflected in cash flows from financing activities in the Condensed Consolidated Statements of Cash Flows.

As a result of changes in the interest rate environment in response to macroeconomic decline due to the ongoing COVID-19 Pandemic, the Company's interest rate swap contracts designated as cash flow hedges with an aggregate notional amount of $3 billion were no longer highly effective during March 2020 and as of March 31, 2020. Accordingly, the Company de-designated the cash flow hedges and the changes in fair value for the period in which these cash flow hedges were no longer highly effective were recognized in interest expense, net. Amounts recognized as a component of AOCI prior to de-designation will be reclassified into interest expense, net in the same period in which the related interest on variable-rate debt affects earnings through the maturity dates of the cash flow hedges.

Below is a summary of the Company’s interest rate swap contracts as of March 31, 2020 (in thousands):



Execution	Maturity	Designation	Notional Amount
January 2019	April 2022	Not designated	$	125,000
February 2019	April 2022	Not designated	300,000
October 2019	September 2026	Not designated	2,800,000
Total notional amount			$	3,225,000

The changes in fair value of interest rate swap contracts recognized in interest expense, net in the Condensed Consolidated Statements of Operations were losses of $70 million and $4 million during the three months ended March 31, 2020 and 2019, respectively. The interest rate swap contracts did not have a material impact to the Condensed Consolidated Statements of Cash Flows during the three months ended March 31, 2020 and 2019.

The fair value of the Company’s interest rate swap contracts and related classification in the Condensed Consolidated Balance Sheets for the periods presented were as follows:



(in thousands)	March 31, 2020		December 31, 2019
Accrued expenses and other current liabilities	$	55,804	$	15,334
Other liabilities	229,236		68,884
Fair value of interest rate swaps	$	285,040	$	84,218

As of March 31, 2020 and December 31, 2019, AOCI net of tax, related to cash flow hedges was $155 million and $59 million, respectively.