DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

3 Months Ended

Mar. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company is exposed to global market risks, including risks from changes in FX rates and changes in interest rates. Accordingly, the Company uses derivatives in certain instances to manage the aforementioned financial exposures that occur in the normal course of business. The Company does not hold or issue derivatives for speculative purposes.

Derivatives and non-derivative instruments designated as accounting hedges:

Fair Value Hedges

Interest Rate Swaps

The Company has entered into interest rate swaps to convert the fixed interest rate on certain of its long-term debt to a floating interest rate based on the SOFR. The purpose of these hedges is to mitigate the risk associated with changes in the fair value of the long-term debt, thus the Company has designated these swaps as fair value hedges. The fair value of the swaps is adjusted quarterly with a corresponding adjustment to the carrying value of the debt. The changes in the fair value of the swaps and the underlying hedged item generally offset and the net cash settlements on the swaps are recorded each period within interest expense, net in the Company’s consolidated statements of operations.

The following table summarizes the Company’s interest rate swaps designated as fair value hedges:

		As of March 31, 2023			As of December 31, 2022
Hedged Item	Nature of Swap	Notional Amount		Floating Interest Rate (1)	Notional Amount		Floating Interest Rate
2017 Senior Notes due 2028	Pay Floating/Receive Fixed	$	500	SOFR	$	500	3-month LIBOR
2020 Senior Notes due 2025	Pay Floating/Receive Fixed	300		SOFR	300		6-month LIBOR
2014 Senior Notes due 2044	Pay Floating/Receive Fixed	300		SOFR	300		3-month LIBOR
2018 Senior Notes due 2048	Pay Floating/Receive Fixed	300		SOFR	300		3-month LIBOR
2018 Senior Notes due 2029	Pay Floating/Receive Fixed	400		SOFR	400		SOFR
2022 Senior Notes due 2052	Pay Floating/Receive Fixed	500		SOFR	500		SOFR
2022 Senior Notes due 2032	Pay Floating/Receive Fixed	250		SOFR	250		SOFR
Total		$	2,550		$	2,550

(1) Contractual terms of instruments using the 3-month or 6-month LIBOR at December 31, 2022 were modified to the SOFR reference rate in the first quarter of 2023.

Refer to Note 14 for information on the cumulative amount of fair value hedging adjustments included in the carrying amount of the above hedged items.

The following table summarizes the impact to the statements of operations of the Company’s interest rate swaps designated as fair value hedges:

Total amounts of financial statement line item presented in the statements of operations in which the effects of fair value hedges are recorded		Amount of income/(loss) recognized in the consolidated statements of operations
		Three Months Ended March 31,
		2023		2022
Interest expense, net		$	(48)	$	(53)
Descriptions	Location on Consolidated Statements of Operations
Net interest settlements and accruals on interest rate swaps	Interest expense, net	$	(18)	$	6
Fair value changes on interest rate swaps	Interest expense, net	$	46	$	(85)
Fair value changes on hedged debt	Interest expense, net	$	(46)	$	85

Net investment hedges

Debt designated as net investment hedges

The Company has designated €500 million of the 2015 Senior Notes Due 2027 and €750 million of the 2019 Senior Notes due 2030 as net investment hedges to mitigate FX exposure related to a portion of the Company’s euro net investment in certain foreign subsidiaries against changes in euro/USD exchange rates. These hedges are designated as accounting hedges under the applicable sections of ASC Topic 815 and will end upon the repayment of the notes in 2027 and 2030, respectively, unless terminated early at the discretion of the Company.

Cross currency swaps designated as net investment hedges

The Company enters into cross-currency swaps to mitigate FX exposure related to a portion of the Company’s euro net investment in certain foreign subsidiaries against changes in euro/USD exchange rates. The following table provides information on the cross-currency swaps designated as net investment hedges under ASC Topic 815:

March 31, 2023
	Pay			Receive
Nature of Swap	Notional Amount		Weighted Average Interest Rate	Notional Amount		Weighted Average Interest Rate
Pay Fixed/Receive Fixed	€	765	3.67%	$	800	5.25%
Pay Floating/Receive Floating	2,138		Based on ESTR	2,250		Based on SOFR
Total	€	2,903		$	3,050

December 31, 2022
	Pay			Receive
Nature of Swap	Notional Amount		Weighted Average Interest Rate	Notional Amount		Weighted Average Interest Rate
Pay Fixed/Receive Fixed	€	765	3.67%	$	800	5.25%
Pay Floating/Receive Floating	450		Based on 3-month EURIBOR	500		Based on 3-month USD LIBOR
Pay Floating/Receive Floating	1,688		Based on ESTR	1,750		Based on SOFR
Total	€	2,903		$	3,050

As of March 31, 2023 these hedges will expire and the notional amounts will be settled as follows unless terminated early at the discretion of the Company:

Years Ending December 31,
2026	€	450
2027	€	531
2028	€	588
2029	€	373
2031	€	481
2032	€	480
Total	€	2,903

The following tables provide information on the gains/(losses) on the Company’s net investment and cash flow hedges:

Derivative and Non-Derivative Instruments in Net Investment Hedging Relationships	Amount of Gain/(Loss) Recognized in AOCL on Derivative, net of Tax				Amount of Loss Reclassified from AOCL into Income, net of Tax				Gain Recognized in Income on Derivative (Amount Excluded from Effectiveness Testing)
	Three Months Ended March 31,				Three Months Ended March 31,				Three Months Ended March 31,
	2023		2022		2023		2022		2023		2022
Cross currency swaps	$	(39)	$	24	$	—	$	—	$	16	$	10
Long-term debt	(18)		23		—		—		—		—
Total net investment hedges	$	(57)	$	47	$	—	$	—	$	16	$	10
Derivatives in Cash Flow Hedging Relationships
Interest rate contracts	$	—	$	—	$	(1)	$	(1)	$	—	$	—
Total cash flow hedges	$	—	$	—	$	(1)	$	(1)	$	—	$	—
Total	$	(57)	$	47	$	(1)	$	(1)	$	16	$	10

The cumulative amount of net investment hedge and cash flow hedge gains (losses) remaining in AOCL is as follows:

	Cumulative Gains/(Losses), net of tax
	March 31, 2023		December 31, 2022
Net investment hedges
Cross currency swaps	$	79	$	118
FX forwards	29		29
Long-term debt	20		38
Total net investment hedges	$	128	$	185
Cash flow hedges
Interest rate contracts	$	(46)	$	(47)
Cross currency swaps	2		2
Total cash flow hedges	(44)		(45)
Total net gain in AOCL	$	84	$	140

Derivatives not designated as accounting hedges:

Foreign exchange forwards

The Company also enters into foreign exchange forward contracts to mitigate the change in fair value on certain assets and liabilities denominated in currencies other than a subsidiary’s functional currency. These forward contracts are not designated as accounting hedges under the applicable sections of ASC Topic 815. Accordingly, changes in the fair value of these contracts are recognized immediately in other non-operating income (expense), net in the Company’s consolidated statements of operations along with the FX gain or loss recognized on the assets and liabilities denominated in a currency other than the subsidiary’s functional currency. These contracts have expiration dates at various times through May 2023.

The following table summarizes the notional amounts of the Company’s outstanding foreign exchange forwards:

	March 31, 2023				December 31, 2022
Notional amount of currency pair:	Sell		Buy		Sell		Buy
Contracts to sell USD for GBP	$	295	£	241	$	170	£	146
Contracts to sell USD for Japanese yen	$	15	¥	2,000	$	24	¥	3,500
Contracts to sell USD for Canadian dollars	$	78	C$	105	$	87	C$	120
Contracts to sell USD for Singapore dollars	$	52	S$	70	$	50	S$	70
Contracts to sell USD for euros	$	160	€	148	$	116	€	115
Contracts to sell USD for Indian rupee	$	23	₹	1,900	$	19	₹	1,600
Contracts to sell euros for USD	€	25	$	27	€	85	$	89

NOTE: € = euro, £ = British pound, $ = U.S. dollar, ¥ = Japanese yen, C$ = Canadian dollar, S$= Singapore dollars, ₹= Indian rupee

The following table summarizes the impact to the consolidated statements of operations relating to the net losses on the Company’s derivatives which are not designated as hedging instruments:

Derivatives not designated as accounting hedges	Location on Consolidated Statements of Operations	Three Months Ended March 31,
		2023		2022
FX forwards	Other non-operating income, net	$	5	$	(19)

The table below shows the classification between assets and liabilities on the Company’s consolidated balance sheets for the fair value of the derivative instrument as well as the carrying value of its non-derivative debt instruments designated and qualifying as net investment hedges:

	Derivative and Non-Derivative Instruments
	Balance Sheet Location	March 31, 2023		December 31, 2022
Assets:
Derivatives designated as accounting hedges:
Cross-currency swaps designated as net investment hedges	Other assets	$	12	$	27
Derivatives not designated as accounting hedges:
FX forwards on certain assets and liabilities	Other current assets	4		19
Total assets		$	16	$	46
Liabilities:
Derivatives designated as accounting hedges:
Cross-currency swaps designated as net investment hedges	Other liabilities	$	115	$	78
Interest rate swaps designated as fair value hedges	Other liabilities	192		239
Total derivatives designated as accounting hedges		307		317
Non-derivatives designated as accounting hedges:
Long-term debt designated as net investment hedge	Long-term debt	1,358		1,334
Derivatives not designated as accounting hedges:
FX forwards on certain assets and liabilities	Accounts payable and accrued liabilities	1		2
Total liabilities		$	1,666	$	1,653