QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
−Removed: Our operations expose us to a variety of market risks, including the effects of changes in interest rates.
+Added: Our operations expose us to a variety of market risks, including the effects of changes in interest rates as we have both fixed-rate and variable-rate debt.
We monitor and manage these financial exposures as an integral part of our overall risk management program.
−Removed: While our policies allow for the use of specified financial instruments for hedging purposes only, the use of derivatives for speculation purposes is prohibited.
+Added: Our policies allow for the use of specified financial instruments for hedging purposes only.
+Added: The use of derivatives for speculation purposes is prohibited.
Interest Rate Risk
We manage interest rate exposure on our variable-rate debt through interest rate swap contracts.
−Removed: Certain of our variable-rate debt instruments are subject to a LIBOR-based floor on interest payments, which was 0.75% and 1.00% as of December 31, 2021 and 2020, respectively, while our interest rate swap contracts are not subject to the same floor.
+Added: As of December 31, 2022, the principal balance of our debt, excluding finance leases, that was subject to a variable-rate was approximately 3% (including the impact of interest rate swaps) and approximately 30% (excluding the impact of interest rate swaps) of the total carrying amount of our debt.
+Added: As of December 31, 2022 and 2021, certain of our variable-rate debt instruments are subject to a LIBOR-based floor on interest payments of 0.75%, while our interest rate swap contracts are not subject to the same floor.
If current LIBOR increases above the floor, the increase in our debt service obligations on the majority of our variable-rate indebtedness will be neutralized as our interest rate swaps hedge any increase in current LIBOR above the floor.
1 unchanged sentence
Including the impact of our interest rate swaps, any 0.125% decrease in LIBOR below the floor would not result in a material increase in annualized interest expense on our variable-rate debt.
−Removed: A hypothetical 10% change in interest rates would change the fair value of our debt and interest rate swap contracts as follows:
+Added: The impact of a hypothetical 10% change in interest rates on the fair value of our long-term debt (excluding finance leases) and interest rate swap contracts would be:
As of December 31,
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Notional value $ 2.8 billion $ 3.2 billion
−Removed: Fair value (2)
+Added: Fair value - net asset / liability (2)
$ 184 million $ 118 million
3 unchanged sentences
The carrying amounts of debt outstanding, if any, under the Company’s revolving credit facility and receivables facility approximate fair values as interest rates on these borrowings approximate current market rates.
−Removed: (2) Fair value of interest rate swaps contracts is based on discounted cash flow analyses and was in a net liability position as of December 31, 2021 and 2020.
+Added: (2) Fair value of interest rate swaps contracts is based on discounted cash flow analyses and was in a net asset position as of December 31, 2022 and a net liability position as of December 31, 2021.
In 2020, we de-designated interest rate swap contracts as cash flow hedges with an aggregate notional amount of $3.0 billion, as they were no longer highly effective beginning in March 2020.
−Removed: We reclassified $61 million and $54 million of accumulated unrealized losses in accumulated other comprehensive income (loss) (“AOCI”) to interest expense, net, during 2021 and 2020, respectively, as any unrealized losses previously recognized as a component of AOCI prior to de-designation are reclassified into interest expense, net, in the same period in which the related interest on variable-rate debt affects earnings through the maturity dates of the interest rate swap contracts as the forecasted cash flows are probable or reasonably possible of occurring.
−Removed: Unrealized gains and losses for periods in which these cash flow hedges are no longer highly effective are recognized in interest expense, net, in the Consolidated Statements of Operations and included a $158 million gain and a $60 million loss during 2021 and 2020, respectively.
+Added: Unrealized gains (losses) for periods in which these cash flow hedges are no longer highly effective are recognized in interest expense, net, and were $302 million and $158 million during 2022 and 2021, respectively.
+Added: By June 2023, SOFR will replace the forward LIBOR as the applicable benchmark rate for all existing and future issuances of our debt instruments with a variable rate component, including our interest rate swap contracts.
+Added: As of December 31, 2022, we do not anticipate any material impacts from the SOFR Transition.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.