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In the ordinary course of business, we are exposed to various market risks, including changes in foreign currency exchange and interest rates, and we regularly evaluate the exposure to such changes.
−Removed: We address our exposure to market risks, principally the market risks associated with changes in foreign currency exchange rates and interest rates, through a controlled program of risk management that may include, from time to time, the use of derivative financial instruments such as foreign currency forward contracts, cross currency swaps and interest rate swap agreements in an effort to manage or hedge some of our risk.
+Added: We address our exposure to market risks, principally associated with changes in foreign currency exchange rates and interest rates, through a program of risk management that may include, from time to time, the use of derivative financial instruments such as foreign currency forward contracts, cross currency swaps and interest rate swap agreements in an effort to manage or hedge some of our risk.
We do not hold or issue derivative financial instruments for trading purposes.
−Removed: Refer to Note 11, Derivative Instruments and Hedging Activities to the consolidated and combined financial statements above for information on how the Company utilizes derivative financial instruments.
+Added: Refer to Note 12, “Derivative Instruments and Hedging Activities” to the audited consolidated and combined financial statements in Part II, Item 8 of this Annual Report on Form 10-K for information on how the Company utilizes derivative financial instruments.
Foreign Currency Exchange Rates
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Our financial statements are reported in USD and, accordingly, fluctuations in exchange rates will affect the translation of revenues and expenses denominated in foreign currencies into USD for purposes of reporting our consolidated and combined financial results.
−Removed: In the years 2023, 2022 and 2021, our most significant currency exchange rate exposures were to the Euro and British pound.
−Removed: Excluding the impacts from any outstanding or future hedging transactions, a hypothetical change of 10% in average exchange rates used to translate all foreign currencies to USD would have impacted income before income taxes for the years ended 2023 and 2022 by approximately $1.2 and $4.3, respectively.
+Added: In the years ended December 31, 2024, 2023 and 2022, the most significant currency exchange rate exposure was the Euro.
+Added: Excluding the impacts from any outstanding or future hedging transactions, a hypothetical change of 10% in average exchange rates used to translate all foreign currencies to USD would have impacted operating income (loss) for the years ended 2024, 2023 and 2022 by approximately $2.7, $(0.6) and $(3.6), respectively.
Gross accumulated currency translation adjustments recorded as a separate component of stockholders’ equity were $(69.3), $59.3 and $(126.1) at December 31, 2024, 2023 and 2022, respectively.
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We are also subject to foreign currency transaction risk for fluctuations in exchange rates during the period of time between the consummation and cash settlement of transactions.
−Removed: We entered into foreign currency forward contracts with external counterparties to hedge certain foreign currency transactions with exposure predominantly to the Euro and British Pound.
−Removed: These contracts do not qualify for hedge accounting and the changes in fair value are recorded directly to earnings.
−Removed: Prior to the Spin, the Former Parent entered into foreign currency forward contracts with external counterparties to hedge certain foreign currency transactions with exposure predominantly to the Euro and British Pound.
−Removed: These contracts did not qualify for hedge accounting and the changes in fair value were recorded directly to earnings.
−Removed: Earnings related to these contracts were included in the combined statements of operations as part of corporate allocations.
+Added: We enter into foreign currency forward contracts with external counterparties to hedge certain foreign currency transactions with exposure predominantly to the Euro and British Pound.
+Added: These contracts do not qualify for hedge accounting under U.S.
+Added: GAAP and the changes in fair value are recorded directly to earnings.
+Added: Prior to the Spin, these changes in fair value were included in the combined statements of operations as part of corporate allocations.
Interest Rate Risk
−Removed: We face the market risks associated with interest rate movements on our variable rate debt.
−Removed: We are significantly leveraged and incurred approximately $1,640 of long-term debt in connection with the Spin.
−Removed: A majority of this debt bears interest at a variable rate, and we entered into a floating-to-fixed interest rate swap with respect to some of our floating rate debt.
+Added: The level of our interest rate risk is dependent on our debt exposure and is sensitive to changes in the general level of interest rates.
+Added: Historical fluctuations in interest rates have not been significant for us;
+Added: however, this may vary in the future as we have incurred certain indebtedness concurrent with the Spin and may incur additional indebtedness in the future.
+Added: In particular, we face the market risks associated with interest rate movements on our variable rate debt.
+Added: We entered into a variable-to-fixed interest rate swap with respect to some of our floating rate debt in August 2023.
At December 31, 2024, we had $572.0 outstanding related to our variable rate debt.
−Removed: Excluding the impacts from any outstanding or future floating-to-fixed interest rate swap transactions, a hypothetical 1.00% increase in interest rates would result in increased interest expenses of $10.5.
−Removed: We expect to manage our interest rate risk but expect to be exposed to an element of market risk from changes to interest rates, including on any refinancing of debt.
+Added: Excluding the impacts from any outstanding or future variable-to-fixed interest rate swap transactions, a hypothetical 1% increase in interest rates would result in increased interest expenses of $5.7.
+Added: We expect to continue to be exposed to an element of market risk from changes to interest rates, including on any refinancing of debt.
We expect to regularly assess market risks and to establish policies and business practices to protect against the adverse effects of these exposures.
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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.