Derivative Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments | Note 12 — Derivative Instruments We use derivatives as part of the normal business operations to manage our exposure to fluctuations in interest rates associated with variable interest rate debt and fluctuations in foreign currency translation associated with our global business presence. These derivatives can help decrease the volatility of cash flows affected by changes in interest rates and foreign currency exchange rates. On January 31, 2019, the Company entered into a business combination contingent interest rate swap in a notional amount of $200.0 million (the “January 2019 Swap”) to hedge part of the floating interest rate exposure under the First Lien Dollar Term Facility. The January 2019 Swap became effective on June 3, 2019 and will terminate on June 3, 2022. The January 2019 Swap economically converts a portion of the variable rate debt to fixed rate debt. The Company receives floating interest payments monthly based on one-month LIBOR and pays a fixed rate of 2.56% to the counterparty. Prior to September 25, 2019, the Company did not apply hedge accounting to the January 2019 Swap. Changes in fair value were recorded to interest expense. On September 25, 2019, the Company amended the January 2019 Swap to extend its term to mature on June 1, 2023 and lower the rate to 2.31% (the “Amended January 2019 Swap”). We concurrently entered into an incremental $50.0 million notional swap at 1.5% and maturing on June 1, 2023 (the “September 2019 Swap”). Additionally, on September 25, 2019, we designated as cash flow hedges the Amended January 2019 Swap and the September 2019 Swap and applied hedge accounting. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for us making fixed-rate payments over the life of the contract agreements without exchange of the underlying notional amount. Changes in fair value are recorded in accumulated other comprehensive income and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings. On March 27, 2020, we entered into an interest rate swap that amended the Amended January 2019 Swap to a lower rate of 2.1% and extended the maturity to June 1, 2024 (the “Second Amended January 2019 Swap”). We designated the Second Amended January 2019 Swap as a cash flow hedge and applied hedge accounting. A summary of our interest rate swaps is as follows:
The Second Amended January 2019 Swap contains an insignificant financing element that is amortized over the term of the hedging relationship. As of December 31, 2022, we anticipate having to reclassify $6.3 million from accumulated other comprehensive income (loss) into earnings during the next twelve months to offset the variability of the hedged items during this period. On September 1, 2021, we entered into a cross-currency swap (the “September 2021 Swap”) to protect our net investment in a European subsidiary and hedge against the risk of adverse changes in the exchange rate of the Euro and USD. On September 1, 2021, we designated the September 2021 Swap as a net investment hedge. The September 2021 Swap involves the receipt of fixed-rate amounts from a counterparty in exchange for us making fixed-rate payments over the life of the contract without exchange of the underlying notional amounts. At a spot exchange rate of 1.1835, we converted notional amounts of approximately $80.0 million at 5.84% for €67.6 million at 5.02%. The change in fair value of the September 2021 Swap is recorded in currency translation in other comprehensive income (loss) and accumulated other comprehensive income (loss). Components of the September 2021 Swap excluded from the assessment of effectiveness are amortized out of accumulated other comprehensive income (loss) and into interest expense over the life of the September 2021 Swap to maturity on June 1, 2024. In February 2022, we terminated the September 2021 Swap. The resulting cash inflow of approximately $2.1 million is recorded within other comprehensive income. We simultaneously entered into another cross-currency swap (the “February 2022 Swap”) and designated it as a net investment hedge. The February 2022 Swap involves the receipt of fixed-rate amounts from a counterparty in exchange for us making fixed-rate payments over the life of the contract without exchange of the underlying notional amounts. At a spot exchange rate of 1.1345, we converted notional amounts of approximately $80.0 million at 5.84% for €70.5 million at 4.37%. The change in fair value of the February 2022 Swap is recorded in currency translation in other comprehensive income (loss) and accumulated other comprehensive income. Components of the February 2022 Swap excluded from the assessment of effectiveness are amortized out of accumulated other comprehensive income and into interest expense over the life of the February 2022 Swap to maturity on June 1, 2024. In April 2022, we terminated the February 2022 Swap, resulting in a cash inflow of approximately $2.8 million, which is recorded within other comprehensive income. We simultaneously entered into another cross-currency swap (the “April 2022 Swap”) and designated it as a net investment hedge. The April 2022 Swap involves the receipt of fixed-rate amounts from a counterparty in exchange for us making fixed-rate payments over the life of the contract without exchange of the underlying notional amounts. At a spot exchange rate of 1.0827, we converted notional amounts of approximately $80.0 million at 5.84% for €73.9 million at 3.93%. The change in fair value of the April 2022 Swap is recorded in currency translation in other comprehensive income (loss) and accumulated other comprehensive income. Components of the April 2022 Swap excluded from the assessment of effectiveness are amortized out of accumulated other comprehensive income and into interest expense over the life of the April 2022 Swap to maturity on June 1, 2024. In July 2022, we terminated the April 2022 Swap, resulting in a cash inflow of aoximately $5.1 million, which is recorded within other comprehensive income. In November 2022, we entered into a cross currency swap (the “November 2022 Swap”) and designated it as a net investment hedge. The November 2022 Swap involves the receipt of fixed-rate amounts from a counterparty in exchange for us making fixed-rate payments over the life of the contract without exchange of the underlying notional amounts. At a spot exchange rate of 1.0205, we converted notional amounts of approximately $80.0 million at 5.84% for €78.4 million at 3.95%. The change in fair value of the November 2022 Swap is recorded in currency translation in other comprehensive income (loss) and accumulated other comprehensive income (loss). Components of the November 2022 Swap excluded from the assessment of effectiveness are amortized out of accumulated other comprehensive income (loss) and into interest expense over the life of the November 2022 Swap to maturity on June 1, 2024. The following table summarizes the total fair value of derivative assets and liabilities and the respective classification in the Consolidated Balance Sheets as of December 31, 2022 and December 31, 2021. The net amount of derivatives can be reconciled to the tabular disclosure of fair value in Note 14, “Fair Value Measurement”:
The following table presents the effect of our derivative financial instruments on our Consolidated Statements of Operations. The income effects of our derivative activities are reflected in interest expense:
The activity of our derivative financial instruments is reflected in cash flows from operating activities in our Consolidated Statements of Cash Flows. The cash inflow of $10.0 million from the settlements of net investment hedges in 2022 in reflected in cash flows from investing activities in our Consolidated Statements of Cash Flows. |