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Derivative Financial Instruments | 6 Months Ended
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Jun. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments | 15. Derivative Financial Instruments Our objective and strategy in using interest rate derivatives is to manage exposure to interest rate movements, thereby minimizing the effect of interest rate changes and the effect they could have on future cash outflows (forecasted interest payments), on a forecasted issuance of long-term debt, or on outstanding floating rate debt. We typically enter into treasury rate locks, interest rate swaps, and forward swaps to accomplish this objective. We do not enter into derivative instruments for speculative purposes. We recognize derivative instruments at fair value on a recurring basis on the Consolidated Balance Sheets and classify the derivatives within Level 2 of the fair value hierarchy. We adjust our Consolidated Balance Sheets on a quarterly basis to reflect the current fair market value of the derivative instruments. As of June 30, 2024 and December 31, 2023, we held 10 and 13 derivative contracts, which have each been designated as cash flow hedges under ASC Topic 815, "Derivatives and Hedging." The risks being hedged are the interest rate risk related to outstanding floating rate debt and forecasted debt issuance transactions, and the benchmark interest rates used are the SOFR and the SONIA Rate. The unrealized gains or losses on the derivative instruments are recorded in AOCI and are reclassified to Interest expense on the Consolidated Statements of Operations during the same period in which the hedged transaction affects earnings. We estimate that $14.2 million will be reclassified as a reduction to Interest expense over the next 12 months for all of our outstanding cash flow hedges. Cash flow from these derivative instruments is classified in the same category as the cash flow items being hedged on the Consolidated Statements of Cash Flows. Derivative Contract Activity During the six months ended June 30, 2024 and 2023, we entered into the following derivative contracts (with notional amounts in millions):
Period |  | Number of Contracts |  | Instrument Type |  | Currency |  | Notional Amount |  | Index Type |  |  |  |  |  |  |  | Hedged Item
Three months ended June 30, 2024 |  | 3 |  |  | Interest Rate Swap |  | USD |  | $ | 100.0 |  |  | SOFR |  |  |  |  |  |  |  | Future Debt Offering
Three months ended March 31, 2024 |  | 1 |  |  | Interest Rate Swap |  | USD |  | 25.0 |  |  | SOFR |  |  |  |  |  |  |  | Future Debt Offering
Total |  | 4 |  |  |  |  |  |  | $ | 125.0 |  |  |  |  |  |  |  |  |  |  |
Three months ended March 31, 2023 |  | 1 |  |  | Interest Rate Swap |  | GBP(1) |  | $ | 127.3 |  |  | SONIA |  |  |  |  |  |  |  | Term Loan Senior Credit Facility
Three months ended March 31, 2023 |  | 1 |  |  | Interest Rate Swap |  | USD |  | 50.0 |  |  | SOFR |  |  |  |  |  |  |  | Future Debt Offering
Total |  | 2 |  |  |  |  |  |  | $ | 177.3 |  |  |  |  |  |  |  |  |  |  |
(1) The notional amount of the swap contract in local currency is £100.0 million. The USD equivalent amount is converted as of December 31, 2023. During the six months ended June 30, 2024 and 2023, we terminated the following derivative contracts (amounts in millions):
Period |  | Type |  | Currency |  | Notional Amount |  | Cash Settlement Receipt / (Payment) |
Three months ended March 31, 2024 |  | Forward Swap |  | USD |  | $ | 255.0 |  |  | $ | (2.3) |  | (1)
Three months ended March 31, 2023 |  | Treasury Rate Locks & Forward Swap(2) |  | USD |  | $ | 250.0 |  |  | $ | 7.4 |  | (2)
(1) Includes seven forward swap contracts which were terminated in connection with the 2029 Notes issuance. (2) These include two $100.0 million treasury rate locks and one $50.0 million forward swap which were terminated in connection with the issuance of $400.0 million of senior unsecured notes with an interest rate of 5.7% and a 10-year term, due January 15, 2033. The following table presents the gross fair value amounts of our derivative financial instruments and the associated notional amounts (in millions):
|  | June 30, 2024 |  | December 31, 2023
Derivatives Designated as Cash Flow Hedges |  | Notional |  | Fair Value of Assets(1) |  | Fair Value of Liabilities(2) |  | Notional |  | Fair Value of Assets(1) |  | Fair Value of Liabilities(2)
Interest rate derivatives |  | $ | 907.2 |  |  | $ | 10.7 |  |  | $ | 0.5 |  |  | $ | 1,041.5 |  |  | $ | 11.7 |  |  | $ | 7.7 |
(1)Included within Other assets, net on the Consolidated Balance Sheets. (2)Included within Other liabilities on the Consolidated Balance Sheets. Refer to Note 16, "Fair Value Measurements," for additional information related to the fair value methodology used for derivative financial instruments. Refer to Note 20, "Subsequent Events," for information regarding additional derivative transactions subsequent to June 30, 2024. The following table presents the gains on derivatives in cash flow hedging relationships recognized in OCI (in millions):
|  | Three Months Ended |  | Six Months Ended
Derivatives Designated as Cash Flow Hedges |  | June 30, 2024 |  | June 30, 2023 |  | June 30, 2024 |  | June 30, 2023
Interest rate derivatives |  | $ | 2.6 |  |  | $ | 19.0 |  |  | $ | 11.4 |  |  | $ | 10.4 |
The following table presents the amount of gains on derivative instruments reclassified from AOCI into earnings (in millions):
Derivatives Designated as Cash Flow Hedges |  | Financial Statement Classification |  | Three Months Ended |  | Six Months Ended
|  | June 30, 2024 |  | June 30, 2023 |  | June 30, 2024 |  | June 30, 2023
Interest rate derivatives |  | Interest expense |  | $ | 5.0 |  |  | $ | 3.2 |  |  | $ | 9.9 |  |  | $ | 5.5 |

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/815/tableOfContent + Details
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