QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
−Removed: We are exposed to market risk that may impact our Condensed Consolidated Financial Statements due primarily to variable rate long-term debt obligations and fluctuations in certain foreign currencies.
−Removed: To reduce our exposure to market risk associated with interest and foreign currency exchange rate risks, we enter into various derivative instruments.
−Removed: There have been no material changes to our exposure to market risk for the six months ended June 30,
−Removed: 2024, from those previously disclosed in “Quantitative and Qualitative Disclosures About Market Risk” contained in Part II, Item 7A of our Form 10-K for the year ended December 31, 2023.
+Added: We are exposed to market risk from, among other things, changes in interest rates and foreign exchange rates.
+Added: To reduce our exposure to market risk associated with interest rates and foreign currency exchange rates risks, we enter into various derivative instruments.
+Added: Interest Rate Risk
+Added: As of September 30, 2024, our long-term debt portfolio, excluding finance leases and other debt, consisted of $1.9 billion fixed-rate notes and $585 million variable-rate term loans based on the Secured Overnight Financing Rate (“SOFR”).
+Added: For our variable-rate debt, we entered into interest rate swap agreements to convert $250 million of variable-rate U.S.
+Added: dollar (“USD”) denominated debt into USD-denominated fixed-rate debt.
+Added: Additionally, we entered into cross-currency swap agreements to convert $250 million of variable-rate debt from SOFR to the Euro Interbank Offered Rate (“Euribor”).
+Added: As of September 30, 2024, a hypothetical 1% increase in SOFR and Euribor would have increased our interest expense by approximately $3 million.
+Added: Foreign Currency Exchange Rate Risk
+Added: A significant proportion of our net assets and income are in non-USD currencies, primarily the British pound sterling (“GBP”) and the Euro (“EUR”).
+Added: We are exposed to currency risk from potential changes in functional currency values of our foreign currency-denominated assets, liabilities and cash flows.
+Added: Consequently, the depreciation of the EUR or the GBP relative to the USD could adversely impact our financial results.
+Added: We entered into cross-currency swap and forward agreements to manage our foreign currency exchange risk by effectively converting a portion of the fixed-rate USD-denominated debt, including the interest payments, to fixed-rate EUR-denominated debt and a portion of the floating-rate USD-denominated loans, including the interest payments, to floating-rate EUR-denominated debt.
+Added: We use foreign currency options and forward contracts to mitigate the risk of a reduction in the value of earnings from our operations that use the EUR or GBP as their functional currency.
+Added: As of September 30, 2024, a uniform 10% strengthening in the value of the USD relative to the EUR would have decreased our net assets by approximately $121 million, net of hedging.
+Added: As of September 30, 2024, a uniform 10% strengthening in the value of the USD relative to the GBP would have decreased our net assets by approximately $81 million, net of hedging.
+Added: These theoretical calculations assume that an instantaneous, parallel shift in exchange rates occurs, which is not consistent with the history of foreign currency markets.
+Added: “Fair Value Measurements and Financial Instruments” to the Condensed Consolidated Financial Statements for additional information.
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