Derivative Instruments

9 Months Ended

Sep. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Note 4. Derivative Instruments

The Company uses derivative instruments to manage a variety of risks, including risks related to fluctuations in foreign currency exchange rates and interest rates on debt instruments. The Company does not use derivative financial instruments for speculative purposes.

The notional amount of the Company's derivative instruments is summarized as follows (in millions):

	As of
	September 30, 2023		December 31, 2022
Designated derivatives:
Cash flow hedges:
Foreign currency contracts	$	934.8	$	775.9
Interest rate lock contracts	—		650.0
Fair value hedges:
Interest rate swap contracts	600.0		600.0
Total designated derivatives	1,534.8		2,025.9
Non-designated derivatives	196.9		163.5
Total	$	1,731.7	$	2,189.4

The fair value of derivative instruments on the Condensed Consolidated Balance Sheets was as follows:

		As of
	Balance Sheet Classification	September 30, 2023		December 31, 2022
Derivative assets:
Derivatives designated as hedging instruments:
Foreign currency contracts	Other current assets	$	1.5	$	0.7
Foreign currency contracts	Other long-term assets	1.1		0.5
Interest rate lock contracts	Other long-term assets	—		125.4
Total derivatives designated as hedging instruments		$	2.6	$	126.6
Derivatives not designated as hedging instruments	Other current assets	0.1		0.1
Total derivative assets		$	2.7	$	126.7
Derivative liabilities:
Derivatives designated as hedging instruments:
Foreign currency contracts	Other accrued liabilities	$	18.9	$	32.3
Foreign currency contracts	Other long-term liabilities	5.9		5.1
Interest rate swap contracts	Other long-term liabilities	101.5		87.4
Total derivatives designated as hedging instruments		$	126.3	$	124.8
Derivatives not designated as hedging instruments	Other accrued liabilities	0.1		0.2
Total derivative liabilities		$	126.4	$	125.0

Offsetting of Derivative Instruments

The Company presents its derivative instruments at gross fair values in the Condensed Consolidated Balance Sheets. As of September 30, 2023 and December 31, 2022, the potential effects of set-off associated with the derivative contracts would be a reduction to both derivative assets and derivative liabilities by $2.7 million and $73.8 million, respectively.

Designated Derivatives

The Company uses foreign currency forward contracts or options contracts to hedge the Company's planned cost of revenues and operating expenses denominated in foreign currencies. These derivatives are designated as cash flow hedges and typically have maturities of thirty-six months or less.

The Company enters into interest rate swaps, designated as fair value hedges, to convert the fixed interest rates of certain Senior Notes ("Notes") to floating interest rates. In April 2021, the Company entered into swaps for an aggregate notional amount of $300.0 million for its fixed-rate Notes maturing in December 2030 in addition to the swaps entered in 2019 for an aggregate notional amount of $300.0 million for its fixed-rate Notes maturing in March 2041. The interest rate swaps will expire within seven years.

In 2020, the Company entered into interest rate lock contracts with large financial institutions, which fix the benchmark interest rates of future debt issuances for an aggregate notional amount of $650.0 million. These contracts are designated as cash flow hedges for a forecasted debt issuance which is expected to occur within the next two years. During the three and nine months ended September 30, 2023, the Company terminated the interest rate locks, resulting in a deferred gain of $133.9 million recognized in accumulated other comprehensive income, which will be deferred and amortized to interest expense over the term of the anticipated debt unless it becomes probable that the debt will not be issued with the terms anticipated at the hedge's inception. The Company classifies the cash flow in the same section as the underlying item resulting in the proceeds from sale being presented as operating activities.

Effect of Derivative Instruments on the Condensed Consolidated Statements of Operations

For cash flow hedges, the Company recognized an unrealized loss of $5.5 million and an unrealized gain of $1.7 million in accumulated other comprehensive income for the effective portion of its derivative instruments during the three and nine months ended September 30, 2023, respectively. The Company recognized an unrealized loss of $39.0 million and $3.7 million in accumulated other comprehensive loss for the effective portion of its derivative instruments for the three and nine months ended September 30, 2022, respectively.

For foreign currency contracts, the Company reclassified a loss of $6.0 million and $21.0 million out of accumulated other comprehensive income to cost of revenues and operating expenses in the Condensed Consolidated Statements of Operations during the three and nine months ended September 30, 2023, respectively, and a loss of $8.8 million and $11.9 million for the comparable periods ended September 30, 2022, respectively. As of September 30, 2023, an estimated $17.3 million of unrealized net loss within accumulated other comprehensive income is expected to be reclassified into earnings within the next twelve months.

Non-Designated Derivatives

The Company also uses foreign currency forward contracts to mitigate variability in gains and losses generated from the remeasurement of certain monetary assets and liabilities denominated in foreign currencies. These foreign exchange forward contracts typically have maturities of approximately one to four months. The outstanding non-designated derivative instruments are carried at fair value. Changes in the fair value of these derivatives, which were recorded in Other expense, net within the Condensed Consolidated Statements of Operations, were not material during the three and nine months ended September 30, 2023 and September 30, 2022.