Financial Instruments

12 Months Ended

Dec. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The Company does not hold or issue derivative financial instruments for trading or speculative purposes. The Company’s indebtedness creates interest rate risk on its variable-rate debt. The Company may use derivative financial instruments to manage its exposure to interest rate risk. For additional information, see Note 9 (Debt).

From time to time, the Company may execute interest rate cap agreements that entitle it to payments from the counterparty of the amount, if any, by which the interest rate, of an underlying variable rate debt, exceeds the strike rates of the caps during the agreement period in exchange for an upfront premium. During 2022, the Company did not enter into new interest rate cap agreements. The total notional amount of $1.3 billion in interest rate cap agreements matured on December 31, 2022. As such, there were no outstanding interest rate cap agreements on the Consolidated Balance Sheet as of December 31, 2022. As of December 31, 2021, the Company had a total notional amount of $1.3 billion in interest rate cap agreements with a fair value of less than $1 million, which were classified within Other assets on the Consolidated Balance Sheet.

The fair value of the Company’s interest rate cap agreements is classified as Level 2 in the fair value hierarchy. The valuation of the interest rate cap agreements is derived by using a discounted cash flow analysis on the expected cash receipts that would occur if variable interest rates rise above the strike rates of the caps. This analysis reflects the contractual terms of the interest rate cap agreements, including the period to maturity, and uses observable market-based inputs, including LIBOR curves and implied volatilities. The Company also incorporates insignificant credit valuation adjustments to appropriately reflect the respective counterparty’s nonperformance risk in the fair value measurements. The counterparty credit spreads are based on publicly available credit information obtained from a third-party credit data provider.

Since inception, the total notional amount of $1.3 billion in interest rate cap agreements were designated as cash flow hedges. As a result of a prepayment on the senior unsecured term loan facility, the Company dedesignated a notional amount of $350 million, which did not result in a material impact to the Consolidated Financial Statements for the year ended December 31, 2022. The changes in the fair value of derivatives that qualify as cash flow hedges are recorded in Accumulated other comprehensive loss (“AOCL”) and are subsequently reclassified into Interest expense in the period when the hedged forecasted transaction affects earnings. The following tables provide the activity in AOCL, net of tax, for the years ended December 31, 2022, 2021 and 2020.


	Year Ended December 31,
	2022		2021		2020
Change in fair value recorded to AOCL	$	(0.1)	$	—	$	(0.6)
Reclassification from AOCL to Interest expense, net	$	3.6	$	2.5	$	6.0