Derivative Instruments and Hedging Activities

6 Months Ended

Jun. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

Derivative instruments we are party to include: (i) interest rate swap agreements (which are designated as cash flow hedges) and (ii) cross-currency swap agreements (which are designated as net investment hedges).

Interest Rate Swap Agreements Designated as Cash Flow Hedges

In March 2018, we entered into interest rate swap agreements to limit our exposure to changes in interest rates on a portion of our floating rate indebtedness. As of June 30, 2020 and December 31, 2019, we had $350,000 in notional value of interest rate swap agreements outstanding, which expire in March 2022. Under the interest rate swap agreements, we receive variable rate interest payments associated with the notional amount of each interest rate swap, based upon one-month LIBOR, in exchange for the payment of fixed interest rate payments (at the fixed interest rate specified in the interest rate swap agreements).

In July 2019, we entered into forward-starting interest rate swap agreements to limit our exposure to changes in interest rates on a portion of our floating rate indebtedness once our current interest rate swap agreements expire in March 2022. The forward-starting interest rate swap agreements have $350,000 in notional value, commence in March 2022 and expire in March 2024. Under the swap agreements we will receive variable rate interest payments based upon one-month LIBOR, in exchange for the payment of fixed interest rate payments at the rates specified in the interest rate swap agreements.

We have designated these interest rate swap agreements, including the forward-starting interest rate swap agreements, as cash flow hedges. Unrealized gains are recognized as assets while unrealized losses are recognized as liabilities. At June 30, 2020 and December 31, 2019, we had a derivative liability of $24,404 and $8,774, respectively, which was recorded as a component of Other long-term liabilities in our Condensed Consolidated Balance Sheets. We have recorded the change in fair value of the interest rate swap agreements as a component of Accumulated other comprehensive items, net in our Condensed Consolidated Balance Sheets.

Unrealized losses associated with these cash flow hedges for the three and six months ended June 30, 2020 and 2019 are as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Unrealized losses associated with cash flow hedges	$	898	$	4,931	$	15,630	$	7,605

As of June 30, 2020, cumulative net losses of $24,404 are recorded within Accumulated other comprehensive items, net associated with these cash flow hedges.

Net Investment Hedges

a. Cross-Currency Swap Agreements Designated as a Hedge of Net Investment

In August 2019, we entered into cross-currency swap agreements to hedge the variability of exchange rate impacts between the United States dollar and the Euro. Under the terms of the cross-currency swap agreements, we notionally exchanged approximately $110,000 at an interest rate of 6.0% for approximately 99,055 Euros at a weighted average interest rate of approximately 3.65%. The cross-currency swap agreements, which expire in August 2023, are designated as a hedge of net investment against certain of our Euro denominated subsidiaries and require an exchange of the notional amounts at maturity. The cross-currency swaps are marked to market at each reporting period and any changes in fair value are recognized as a component of Accumulated other comprehensive items, net. Unrealized gains are recognized as assets while unrealized losses are recognized as liabilities. At June 30, 2020, we had a derivative asset of $3,326, which was recorded as a component of Other within Other assets, net and at December 31, 2019, we had a derivative liability of $982, which was recorded as a component of Other long-term liabilities, net in our Condensed Consolidated Balance Sheets. These amounts represent the fair value of the cross-currency swap agreements.

Unrealized losses (gains) associated with these cross-currency swap agreements for the three and six months ended June 30, 2020 is as follows:



	Three Months Ended June 30, 2020		Six Months Ended June 30, 2020
Unrealized losses (gains) associated with cross-currency swaps	$	2,062	$	(4,308	)

As of June 30, 2020, cumulative net gains of $3,326 are recorded within Accumulated other comprehensive items, net associated with this net investment hedge.

b. Euro Notes Designated as a Hedge of Net Investment

In addition, we have designated a portion of our Euro Notes as a hedge of net investment of certain of our Euro denominated subsidiaries. For the six months ended June 30, 2020 and 2019, we designated, on average, 300,000 and 274,161 Euros, respectively, of our Euro Notes as a hedge of net investment of certain of our Euro denominated subsidiaries. As a result, we record foreign exchange (gains) losses related to the change in fair value of such debt due to currency translation adjustments as a component of Accumulated other comprehensive items, net.

Foreign exchange losses (gains) associated with this hedge of net investment for the three and six months ended June 30, 2020 and 2019 is as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Foreign exchange losses (gains) associated with net investment hedge	$	6,854	$	4,280	$	401	$	(1,861	)

As of June 30, 2020, cumulative net gains of $19,860, net of tax, are recorded in Accumulated other comprehensive items, net associated with this net investment hedge.