Vertiv Holdings Co

In accordance with ASC 820, the Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. Observable inputs are from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. These tiers include the following:

Level 1 — inputs include observable unadjusted quoted prices in active markets for identical assets or liabilities

Level 2 — inputs include other than quoted prices in active markets that are either directly or indirectly observable

Level 3 — inputs include unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions

In determining fair value, the Company uses various valuation techniques and prioritizes the use of observable inputs. The availability of observable inputs varies from instrument to instrument and depends on a variety of factors including the type of instrument, whether the instrument is actively traded and other characteristics particular to the instrument. For many financial instruments, pricing inputs are readily observable in the market, the valuation methodology used is widely accepted by market participants and the valuation does not require significant management judgment. For other financial instruments, pricing inputs are less observable in the marketplace and may require management judgment.

Recurring Fair Value Measurements

A summary of the Company’s financial instruments recognized at fair value, and the fair value measurements used, are as follows:

Contingent consideration —In conjunction with the PurgeRite acquisition, the Company records contingent consideration at fair value based on the estimated discounted contingent payments expected to be made, and may increase or decrease based on the financial performance of PurgeRite for the year ended December 31, 2026. The Company estimates the fair value of contingent consideration utilizing Monte Carlo simulations in a risk-neutral framework. Key assumptions include certain projected post-closing performance metrics, discount rate and volatility associated with the relevant metric. Contingent consideration is classified as Level 3 due to the reliance on unobservable inputs. For the year ended December 31, 2025, the Company recognized a loss of$4.9 within "Other operating expense (income)" of the Consolidated Statement of Earnings (Loss). Refer to "Note 2 - Acquisitions" for additional information on this acquisition.

Interest rate swaps —From time to time the Company may enter into derivative financial instruments designed to hedge the variability in interest expense on floating rate debt. Derivatives are recognized as assets or liabilities in the Consolidated Balance Sheets at their fair value. When the derivative instrument qualifies as a cash flow hedge, changes in the fair value are deferred through other comprehensive income, depending on the nature and effectiveness of the offset.

The Company uses interest rate swaps to manage the interest rate mix of its total debt portfolio and related overall cost of borrowing. At December 31, 2025 and December 31, 2024, interest rate swap agreements designated as cash flow hedges effectively swapped a notional amount of $1,000.0 of SOFR based floating rate debt for fixed rate debt. Our interest rate swaps mature in March 2027. The Company recognized $32.4, $41.7, and $38.9 in earnings for the years ended December 31, 2025, 2024 and 2023, respectively, within “Interest expense, net” on the Consolidated Statement of Earnings (Loss). At December 31, 2025, the Company expects that approximately $23.4 of pre-tax net gains on cash flow hedges will be reclassified from accumulated other comprehensive (loss) income into earnings during the next twelve months.

The interest rate swaps are valued using the SOFR yield curves at the reporting date and are classified in Level 2. Counterparties to these contracts are highly rated financial institutions. The fair values of the Company’s interest rate swaps are adjusted for nonperformance risk and creditworthiness of the counterparty through the Company’s credit valuation adjustment (“CVA”). The CVA is calculated at the counterparty level utilizing the fair value exposure at each payment date and applying a weighted probability of the appropriate survival and marginal default percentages.

Foreign currency exchange forwards — The Company may enter into derivative financial instruments designed to hedge the exposure to changes in foreign currency exchange rates. Derivatives are recognized as assets or liabilities in the Consolidated Balance Sheets at their fair value. The duration of the derivatives are generally less than one year. The Company values foreign currency exchange swaps using broker quotations or market transactions on the listed or over-the-counter market; as such, these derivative instruments are classified in Level 2. When the derivative instrument qualifies as a cash flow hedge changes in the fair value are deferred through other comprehensive income depending on the effectiveness of the instrument. The Company reclassifies the gain or loss associated with the cash flow hedges into earnings when the underlying exposure is recognized. At December 31, 2025 and 2024, we had derivative instruments which hedge our exposure to certain foreign currency exchange rates with notional amounts of $149.8 and $129.0. For the years ended December 31, 2025 and 2024, there were $2.0 and $2.8 realized losses associated with the foreign currency exchange swaps within "Cost of sales - products" on the Consolidated Statements of Earnings (Loss).

Economic hedges — At December 31, 2025 and 2024, we had derivative instruments which hedge our purchases of aluminum and copper with notional amounts of 10,310.0,8,754.8 and 10,730.0,7,330.0 metric tons, respectively. The Company values these instruments using broker quotations, market transactions or option pricing model based on observable market inputs, as such, these derivative instruments are classified in Level 2. These derivative instruments were treated as economic hedges and for the year ended December 31, 2025 and 2024, the Company recognized a mark-to-market gain of $9.5 and $0.8 within "Other operating expense (income)" on the Consolidated Statement of Earnings (Loss).

Net investment hedge —During the years ended December 31, 2025, 2024, and 2023, the Company designated certain intercompany debt to hedge a portion of its investment in foreign subsidiaries and affiliates. Realized and unrealized translation adjustments from these hedges were $(2.6), $5.1 and $6.8, and are included in “Foreign currency translation” in the Consolidated Statements of Comprehensive Income (Loss). As of December 31, 2025 and 2024 approximately $104.7 and $24.0 of the Company’s intercompany debt was designated to hedge investments in certain foreign subsidiaries and affiliates.

Other Fair Value Measurements

The Company determines the fair value of debt using Level 2 inputs based on quoted market prices. The following table presents the estimated fair value and carrying value of long-term debt, including the current portion of long-term debt as of December 31, 2025 and 2024.

(1)See “Note 6 — Debt” for additional information