We are exposed to various market risks relating to our ongoing business operations. The primary market risks, which are managed using derivative instruments, are foreign currency exchange rate risk and interest rate risk. In certain circumstances, we enter into foreign currency forward exchange contracts and cross-currency swaps to reduce the effects of fluctuating foreign currency exchange rates on our cash flows denominated in foreign currencies. Our exposure to market risk for changes in interest rates relates primarily to our long-term debt obligations. We have historically managed interest rate risk through the use of a combination of fixed and variable rate borrowings.

We use cross currency swaps, forward contracts and a portion of our foreign currency denominated debt, a non-derivative financial instrument, to protect the value of our net investments in certain of our foreign subsidiaries. For derivative instruments that are designated and qualify as hedges of our net investments in foreign operations, the changes in fair values of the derivative instruments are recognized in foreign currency translation, a component of accumulated other comprehensive income (“AOCI”), to offset the changes in the values of the net investments being hedged. For non-derivative financial instruments that are designated and qualify as hedges of net investments in foreign operations, the change in the carrying value of the designated portion of the non-derivative financial instrument due to changes in foreign currency exchange rates is also recorded in foreign currency translation.

The €400.0 ($442.7) notes due June 2027 and the €500.0 ($555.5) notes due June 2026 were designated as a hedge of our net investment in our foreign subsidiaries with a Euro-functional currency as of September 30, 2024.

In September 2022, we entered into a cross currency swap agreement that net converts fixed-rate Swiss franc (“CHF”) payments to fixed-rate United States dollar payments. This swap was designated as a net investment hedge of our foreign subsidiary with CHF functional currency.

The effect of our net investment hedges on AOCI for the three and nine months ended September 30, 2024 and 2023 was as follows:


	Gain (Loss) Recognized in Other Comprehensive Income
	Three Months Ended September 30,					Nine Months Ended September 30,
Instrument	2024			2023		2024			2023
Euro Notes	$	(37.8	)	$	30.6	$	(8.8	)	$	11.9
Cross-currency swaps		(26.8	)		6.5		1.9			(10.6	)

We use forward currency exchange contracts to hedge the changes in cash flows of certain operational expenses denominated in foreign currency due to changes in foreign currency exchange rates. The changes in fair value of the forward currency exchange contracts derivatives are recorded in AOCI and reclassified into earnings when the underlying operating expense is recognized in earnings.

On June 9, 2022, we entered into a forward starting interest rate swap agreement with a notional amount of €300.0 and a fixed rate of 1.936%, which was accounted for as a cash flow hedge, to hedge the interest rate exposure related to our anticipated issuance of €400.0 notes to repay our existing €400.0 notes maturing in September 2022. Upon the issuance of the notes on June 30, 2022, we settled this forward starting interest rate swap, resulting in a gain of $2.0, which was recorded in AOCI and is being amortized over the term of the notes as an offset to interest expense.

The following tables present the impact that changes in the fair values of derivatives designated as cash flow hedges had on other comprehensive income (“OCI”), AOCI and earnings for the three and nine months ended September 30, 2024 and 2023:


	Gain (Loss) Recognized in OCI					Gain (Loss) Reclassified from AOCI into Income
	Three Months Ended September 30,				Location of Gain (Loss) Reclassified	Three Months Ended September 30,
Instrument	2024		2023		from AOCI into Income	2024		2023
Forward starting interest swap	$	—	$	—	Interest and other expenses, net	$	0.1	$	0.1

	Gain (Loss) Recognized in OCI					Gain (Loss) Reclassified from AOCI into Income
	Nine Months Ended September 30,				Location of Gain (Loss) Reclassified	Nine Months Ended September 30,
Instrument	2024		2023		from AOCI into Income	2024		2023
Forward starting interest swap		—		—	Interest and other expenses, net		0.3		0.3

We expect the net amount of pre-tax derivative gains included in AOCI at September 30, 2024 to be reclassified into earnings within the next 12 months will not be significant. The actual amount that will be reclassified to earnings over the next 12 months will vary due to future currency exchange rates.

We account for derivatives as fair value hedges when the hedged item is a recognized asset, liability, or firm commitment. We use cross currency swaps to hedge the changes in cash flows of certain of our foreign currency denominated intercompany notes due to changes in foreign currency exchange rates. We record the change in carrying value of the foreign currency denominated notes due to changes in exchange rates into earnings each period. The changes in fair value of the cross-currency swap derivatives are recorded in other comprehensive income (“OCI”) with an immediate reclassification into earnings for the change in fair value attributable to fluctuations in foreign currency exchange rates.

In March 2022, we entered into a cross currency swap agreement to hedge an intercompany fixed-rate CHF denominated note, including the annual interest payment, to a fixed-rate Euro denominated note. On April 18, 2024, we settled the swaps at maturity for a net cash inflow of $14.9 and entered into a new cross currency swap with a maturity date of April 2027. The cross currency swaps convert our intercompany fixed-rate CHF denominated note, including the annual interest payment and the payment of remaining principal at maturity, to a fixed-rate Euro denominated note. The economic effect of the swaps is to eliminate the uncertainty of cash flows in CHF associated with the note by fixing the principal at €236.9 with a fixed annual interest rate of 3.45%.

In September 2022, we entered into a cross currency swap agreement to hedge an intercompany fixed-rate CHF denominated note, including the annual interest payment, to a fixed-rate Euro denominated note. On September 26, 2024, we settled the swaps at maturity for a net cash inflow of $1.6 and entered into a new cross currency swap with a maturity date of September 2027. The economic effect of the swaps is to eliminate the uncertainty of cash flows in CHF associated with the note by fixing the principal at €63.6 with a fixed annual interest rate of 3.27%.

The following tables present the impact that the fair value hedges had on OCI and earnings for the three and nine months ended September 30, 2024 and 2023:


	Gain (Loss) Recognized in OCI							Gain (Loss) Recognized in Income
	Three Months Ended September 30,						Location of Gain (Loss)	Three Months Ended September 30,
Instrument	2024			2023			Recognized in Income	2024			2023
Intercompany CHF notes	$	—		$	—		Interest and other expenses, net	$	(7.4	)	$	(3.3	)
Cross-currency swaps		(2.6	)		(0.5	)	Interest and other expenses, net		7.4			3.3


	Gain (Loss) Recognized in OCI							Gain (Loss) Recognized in Income
	Nine Months Ended September 30,						Location of Gain (Loss)	Nine Months Ended September 30,
Instrument	2024			2023			Recognized in Income	2024			2023
Intercompany CHF notes	$	—		$	—		Interest and other expenses, net	$	4.5		$	(7.4	)
Cross-currency swaps		(2.1	)		(2.2	)	Interest and other expenses, net		(4.5	)		7.4

We assessed the hedging relationship at the inception of the hedges in order to determine whether the derivatives that are used in the transaction are highly effective in offsetting the cash flows of the hedged item, and will continue to assess the relationship on an ongoing basis. We use the hypothetical derivative method in conjunction with regression analysis using a third-party valuation to measure effectiveness of our cross-currency swap agreements and our forward currency exchange contracts.

We also use certain derivatives, which are not designated as hedging instruments, as economic hedges of foreign currency and interest rate exposure. For our forward contracts that are not designated as hedges, any gain or loss resulting from the change in fair value is recognized in current period earnings. These gains or losses are offset by the exposure related to receivables and payables with our foreign subsidiaries and to interest due on our Euro-denominated notes, which is paid annually in June and September. The effect of our forward contracts that are not designated as hedging instruments on the consolidated statements of operations for the three and nine months ended September 30, 2024 and 2023 was as follows:


		Gain (Loss) Recognized in Income
	Location of Gain (Loss)	Three Months Ended September 30,					Nine Months Ended September 30,
Instrument	Recognized in Income	2024		2023			2024			2023
Foreign currency forward contracts	Interest and other expenses, net	$	9.2	$	(7.3	)	$	(0.6	)	$	(4.3	)

The following tables present the fair value of derivative and non-derivative assets and liabilities on the Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023:


	Assets
		September 30,		December 31,
	Balance Sheet Location	2024		2023
Instruments designated as fair value hedges:
Cross-currency swaps	Accounts Receivable, net		7.3		31.7
Instruments not designated as hedges:
Foreign currency forward contracts	Accounts Receivable, net		0.1		6.7
Total instruments		$	7.4	$	38.4


	Liabilities
		September 30,		December 31,
	Balance Sheet Location	2024		2023
Instruments designated as net investment hedges:
Euro Notes due in 2026	Long-term debt		555.5		550.0
Euro Notes due in 2027	Long-term debt		442.7		438.2
Cross-currency swaps	Accrued liabilities		71.1		73.3
Instruments not designated as hedges:
Foreign currency forward contracts	Accrued liabilities		0.4		2.3
Total instruments		$	1,069.7	$	1,063.8

The carrying value of the long-term debt approximates fair value, except for the Euro-denominated notes, because the interest rates are variable and reflect current market rates. The fair value of the Euro-denominated notes, as observable at commonly quoted intervals (Level 2 inputs), was $999.9 and $977.6 as of September 30, 2024 and December 31, 2023, respectively, compared to a carrying value of $998.2 and $988.2, respectively.

Our deferred compensation plan assets, included in other assets on the Consolidated Balance Sheets, were $168.1 and $144.2 as of September 30, 2024 and December 31, 2023, respectively. We determine the fair value of these assets, comprised of publicly traded securities, by using market quotes as of the last day of the period (Level 1 inputs).

We measure the fair value of the foreign currency forward contracts and cross-currency swaps at the value based on either directly or indirectly observable inputs from third parties (Level 2 inputs).