Derivatives |
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| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivatives | Derivatives Interest Rate Risk Management The Company has entered into interest rate swaps for purposes of managing its exposure to interest rate fluctuations. The Company does not enter into interest rate swaps for investment or speculative purposes. On January 3, 2023, the Company entered into interest rate swaps with a combined notional value of $1,000 million in an effort to limit its exposure to changes in the variable interest rate on its Senior Secured Credit Facilities (see Note 10 for additional information). Interest on the swaps began accruing on December 30, 2022 and the swaps expired on December 31, 2025. The Company paid a fixed rate of 4.10% and received a variable rate of interest equal to one-month Term SOFR on the swaps. On November 17, 2023, the Company entered into interest rate swaps with a combined notional value of $1,500 million in an effort to limit its exposure to changes in the variable interest rate on its Senior Secured Credit Facilities (see Note 10 for additional information). Interest on the swaps began accruing on November 28, 2023 and the swaps expire on January 2, 2031. The Company pays a fixed rate of 6.11% and receives a variable rate of interest equal to three-month Term SOFR plus 2.00% on the swaps. The critical terms of the interest rate swaps noted above are substantially the same as the underlying borrowings. These interest rate swaps are accounted for as cash flow hedges as these transactions were executed to hedge the Company's interest payments and for accounting purposes are considered highly effective. As such, changes in the fair value of the interest rate swaps are recorded as unrealized gains (losses) on derivatives included in AOCI. The fair value of these interest rate swaps represents the present value of the anticipated net payments the Company will make to the counterparties, which, when they occur, are reflected as interest expense on the consolidated statements of income. These interest rate swaps result in a total debt mix of approximately 73% fixed rate debt and 27% variable rate debt. Foreign Exchange Risk Management The Company transacts business in more than 100 countries and is subject to risks associated with fluctuating foreign exchange rates. Accordingly, the Company enters into foreign currency forward contracts to hedge certain forecasted foreign exchange cash flows arising from service contracts (“Service Contract Hedging”). It is the Company’s policy to enter into foreign currency forward contracts only to the extent necessary to reduce earnings and cash flow volatility associated with foreign exchange rate movements. The Company does not enter into foreign currency forward contracts for investment or speculative purposes. The principal currency hedged in 2025 was the British Pound. Service Contract Hedging contracts are designated as cash flow hedges and are carried at fair value, with changes in the fair value recorded to AOCI. The change in fair value is reclassified from AOCI to earnings in the period in which the hedged transaction occurs. These contracts have various expiration dates through September 2026. As of December 31, 2025 and 2024, the Company had open Service Contract Hedging contracts to hedge certain forecasted foreign currency cash flow transactions occurring in 2026 and 2025 with notional amounts totaling $127 million and $108 million, respectively. For accounting purposes these hedges are considered highly effective. As of December 31, 2025 and 2024, the Company had recorded gross unrealized gains (losses) of $— million and $— million, and $— million and $(2) million, respectively, related to these contracts. Upon expiration of the hedge instruments in 2025, the Company reclassified the unrealized holding gains and losses on the derivative instruments included in AOCI into earnings. The unrealized losses are included in other current liabilities on the accompanying consolidated balance sheet as of December 31, 2024. Net Investment Risk Management, Euro Denominated Notes As of December 31, 2025, the portion of the Company's foreign currency denominated debt balance that was designated as a hedge of its net investment in certain foreign subsidiaries totaled approximately €2,955 million ($3,469 million). The amount of foreign exchange (losses) gains related to this net investment hedge included in the cumulative translation adjustment component of AOCI was $(394) million, $186 million, and $(102) million for the years ended December 31, 2025, 2024 and 2023, respectively. Net Investment Risk Management, Cross-Currency Swaps On November 15, 2023, in connection with the issuance of the 2029 Senior Secured Notes (see Note 10 for additional information), the Company entered into cross-currency swaps with a combined notional value of $1,250 million to effectively convert $1,250 million of the 2029 Senior Secured Notes into euro-denominated borrowings at prevailing euro interest rates through February 2029. The Company designated these agreements as a hedge of its net investment in certain foreign subsidiaries. These cross-currency swaps expire in February 2029. The Company will receive semiannual interest payments on February 1 and August 1 from the counterparties based on a fixed interest rate until maturity of these agreements. The effective net borrowing rate to the Company is approximately 4.8555%, inclusive of the yield on the notes and the impact of the cross-currency swaps. On November 17, 2023, in connection with the allocation of the Term B-4 Dollar Loans (see Note 10 for additional information), the Company entered into cross-currency swaps with a combined notional value of $1,500 million to effectively convert $1,500 million of the Term B-4 Dollar Loans into euro-denominated borrowings at prevailing euro interest rates through January 2031. These cross-currency swaps expire in January 2031. The Company will receive quarterly interest payments from the counterparties based on a fixed interest rate until maturity of these agreements. The effective net borrowing rate to the Company is approximately 4.9015%, inclusive of the yield on the loans, the impact of the cross-currency swaps and of the interest rate swaps entered on November 17, 2023 as noted above. On February 3, 2025, the Company terminated its existing cross-currency swap agreements and entered into new cross-currency swap agreements for the same purpose and with substantially similar terms as the previous swaps. The new $1,250 million swaps expire in February 2029 at the time of the senior secured notes to which they are related, and the Company will receive semiannual interest payments on February 1 and August 1 from the counterparties based on a fixed interest rate until maturity of these agreements. The effective net borrowing rate to the Company is approximately 4.1071%, inclusive of the yield on the notes and the beneficial impact of the cross-currency swaps. The new $1,485 million swaps expire in January 2031 at the time of the term loans to which they are related, and the Company will receive quarterly interest payments from the counterparties based on a fixed interest rate until maturity of these agreements. The notional amount of the $1,485 million swaps will decrease over time in connection with the related term loans. The effective net borrowing rate to the Company is approximately 4.0610%, inclusive of the yield on the notes, the beneficial impact of the cross-currency swaps and of the interest rate swaps entered on November 17, 2023 as noted above. The Company designated these new cross-currency swap agreements as a hedge of its net investment in certain foreign subsidiaries. The Company does not enter into cross-currency swaps for investment or speculative purposes. For the years ended December 31, 2025, 2024 and 2023, the Company recorded (losses) gains of $(361) million, $147 million, and $(108) million, respectively, within AOCI as a result of these cross-currency swaps. The Company recognized $44 million, $36 million, and $3 million related to the excluded component as a reduction of interest expense for the years ended December 31, 2025, 2024 and 2023, respectively. The fair values of the Company’s derivative instruments, on a gross basis, and the line items on the accompanying consolidated balance sheets to which they were recorded are summarized in the following table:
The pre-tax effect of the Company’s cash flow hedging instruments on other comprehensive income is summarized in the following table:
The Company expects $7 million of pre-tax unrealized losses related to its foreign exchange contracts and interest rate derivatives included in AOCI as of December 31, 2025 to be reclassified into earnings within the next twelve months. The total amount, net of income taxes, of the cash flow hedge effect on the accompanying consolidated statements of income was $8 million, $31 million, and $51 million for the years ended December 31, 2025, 2024 and 2023, respectively. |
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