Derivatives and Hedging

9 Months Ended

Sep. 30, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The Company is exposed to various risks arising from business operations and market conditions, including fluctuations in interest rates and certain foreign currencies. When deemed appropriate, the Company uses derivative and non-derivative instruments as risk management tools to mitigate the potential impact of interest rate and foreign exchange rate risks. The objective of using these tools is to reduce fluctuations in the Company’s earnings and cash flows associated with changes in these rates. Derivative financial instruments are not used for trading or other speculative purposes. The Company has not historically incurred, and does not expect to incur in the future, any losses as a result of counterparty default related to derivative instruments.

The Company formally documents relationships between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the designated derivative and non-derivative instruments that are used in hedging transactions are highly effective in offsetting changes in the cash flows of the hedged items. When a designated instrument is determined not to be highly effective as a hedge or the underlying hedged transaction is no longer probable, hedge accounting is discontinued prospectively.

Cash Flow Hedges

In 2020, the Company terminated its interest rate swaps and settled the outstanding balances through cash payments totaling $41,000. The remaining amount in AOCL is being amortized to interest expense on a straight-line basis over the remaining life of the previously hedged instrument.

Net Investment Hedges

The Company has designated certain derivative instruments and a portion of its foreign currency denominated debt, a non-derivative financial instrument, as hedges of the foreign currency exchange rate exposure of the Company's Euro-denominated net investment in a European subsidiary. The Company applies the spot method to assess the hedge effectiveness of the derivative instruments and this assessment for each instrument excludes the initial value related to the difference at contract inception between the foreign exchange spot rate and the forward rate (i.e., the forward points). The initial value of this excluded component is recognized as a reduction to interest expense in a systematic and rational manner over the term of the derivative instrument. All other changes in value for the net investment hedges are included in AOCL within foreign currency translation and would only be reclassified to earnings if the European subsidiary were liquidated, or otherwise disposed.

The following table summarizes the location and carrying amounts of the derivative instruments and the foreign currency denominated debt, a non-derivative financial instrument, that are designated and qualify as part of hedging relationships:


		September 30, 2021				December 31, 2020
Instrument	Balance Sheet Location	Notional		Balance		Notional		Balance
Net investment hedges:
Forward contracts	Prepaid expenses and other current assets	$	925,810	$	59,397	$	800,000	$	7,668
Forward contracts	Other current liabilities	$	235,180	$	6,306	$	360,990	$	19,442
Foreign currency debt	Long-term debt	€	700,000	$	811,790	€	700,000	$	861,070

The tables below presents gains and losses related to designated cash flow hedges and net investment hedges:


	Gain (Loss) Recognized in AOCL Before Reclassifications				Gain Recognized in Interest Expense For Excluded Components
	2021		2020		2021		2020
Three Months Ended September 30,
Cash flow hedges:
Interest rate contracts	$	—	$	(277)	$	—	$	—
Net investment hedges:
Forward contracts	20,958		(49,660)		6,574		6,574
Foreign currency debt	21,000		(35,140)		—		—
Total	$	41,958	$	(85,077)	$	6,574	$	6,574


	Gain (Loss) Recognized in AOCL Before Reclassifications				Gain Recognized in Interest Expense For Excluded Components
	2021		2020		2021		2020
Nine Months Ended September 30,
Cash flow hedges:
Interest rate contracts	$	—	$	(29,107)	$	—	$	—
Net investment hedges:
Forward contracts	45,143		(33,959)		19,722		20,572
Foreign currency debt	49,280		(38,080)		—		—
Total	$	94,423	$	(101,146)	$	19,722	$	20,572