v3.25.2
Fair Value Measurements and Interest Rate Swaps
 6 Months Ended
Jun. 30, 2025
Fair Value Disclosures [Abstract]  
Fair Value Measurements and Interest Rate Swaps Fair Value Measurements and Interest Rate Swaps
Recurring Fair Value Measurements

Our assets and liabilities that are measured at fair value on a recurring basis include the unrealized gains or losses on our interest rate swap contracts and our deferred compensation plan asset and liability. The three levels of the fair value hierarchy under the accounting guidance are described below:

Level 1    Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.
Level 2     Inputs to the valuation methodology include:
•quoted prices for similar assets or liabilities in active markets;
•quoted prices for identical or similar assets or liabilities in inactive markets;
•inputs other than quoted prices that are observable for the asset or liability; or
•inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3    Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The table below presents our assets and liabilities measured and recorded at fair value on a recurring basis (in thousands):
 
Fair Value at June 30,
Input LevelClassification20252024
Assets
Unrealized gains on interest rate swapsLevel 2Prepaid expenses and other current assets$— $3,795 
Unrealized gains on interest rate swapsLevel 2Other assets13,791 23,091 
Deferred compensation plan assetLevel 1Other assets18,832 17,148 
Liabilities
Deferred compensation plan liabilityLevel 1Other long-term liabilities$18,832 $17,148 
Interest Rate Swaps

We utilize interest rate swap contracts to reduce our exposure to fluctuations in variable interest rates for future interest payments on a portion of our variable rate borrowings. 

We use significant other observable market data or assumptions (Level 2 inputs) in determining the fair value of our interest rate swap contracts that we believe market participants would use in pricing similar assets or liabilities, including assumptions about counterparty risk.  Our fair value estimates reflect an income approach based on the terms of the interest rate swap contracts and inputs corroborated by observable market data including interest rate curves.

We recognize any differences between the variable interest rate in effect and the fixed interest rates per our swap contracts as an adjustment to interest expense over the life of the swaps. To the extent our derivatives are effective in offsetting the variability of the hedged cash flows, we record the changes in the estimated fair value of our interest rate swap contracts to Accumulated other comprehensive loss on the Consolidated Balance Sheets.

Our interest rate swaps in effect during the first six months of 2025 were previously forward-starting and converted the variable interest rate to a fixed interest rate on a portion of our variable rate borrowings. Interest expense related to the notional amounts under our swap contracts was based on the fixed rates plus the applicable margin on our variable rate borrowings. We recorded changes in the estimated fair value of these interest rate swap contracts to Accumulated other comprehensive loss on the Consolidated Balance Sheets.
One of our interest rate swap contracts terminated on February 28, 2025. The following table provides additional details related to this former swap contract:
DerivativeInception DateEffective DateTermination DateNotional Amount
(in millions)		Fixed Interest Rate
Interest rate swap 1February 5, 2020February 26, 2021February 28, 2025$150.01.3260 %

We currently have two swap contracts in place. The following table provides additional details related to these swap contracts:
DerivativeInception DateEffective DateTermination DateNotional Amount
(in millions)		Fixed Interest Rate
Interest rate swap 2March 9, 2020September 29, 2022February 26, 2027$150.00.6690 %
Interest rate swap 3March 9, 2020February 28, 2025February 26, 2027$150.00.7630 %

For the interest rate swap contracts in effect at June 30, 2025, a portion of the change in the estimated fair value between periods relates to future interest expense. Recognition of the change in fair value between periods attributable to accrued interest is reclassified from Accumulated other comprehensive loss on the Consolidated Balance Sheets to Interest and other non-operating expenses, net on the Consolidated Statements of Income. These amounts were not material in the three and six-month periods ended June 30, 2025 or June 30, 2024.

Failure of any of our swap counterparties would result in the loss of any potential benefit to us under our swap agreements. In this case, we would still be obligated to pay the variable interest payments underlying our debt agreements.  Additionally, failure of our swap counterparties would not eliminate our obligation to continue to make payments under our existing swap agreements if we were in a net pay position.

Our interest rate swap contracts are subject to master netting arrangements. According to our accounting policy, we do not offset the fair values of assets with the fair values of liabilities related to these contracts.

Other

Our deferred compensation plan asset represents investments in securities (primarily mutual funds) traded in an active market (Level 1 inputs) held for the benefit of certain employees as part of our deferred compensation plan. We record an equal and offsetting deferred compensation plan liability, which represents our obligation to participating employees. Changes in the fair value of the plan asset and liability are reflected in Selling and administrative expenses on the Consolidated Statements of Income.
The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities approximate fair value due to the short maturity of those instruments. The carrying value of our long-term debt approximates its fair value.  Our determination of the estimated fair value reflects a discounted cash flow model using our estimates, including assumptions related to borrowing rates (Level 3 inputs).