We use interest rate swap agreements to manage our interest rate exposure and to achieve a desired proportion of variable and fixed rate debt. These derivatives may be designated as fair value hedges or cash flow hedges depending on the nature of the risk being hedged.

During the first quarter 2020, we terminated our remaining pay variable/receive fixed interest rate swaps with notional amounts of $200 and net asset fair value of $4 prior to termination. The swaps had been designated and accounted for as fair value hedges prior to termination. The swaps were structured to hedge the fair value of related debt by converting them from fixed rate instruments to variable rate instruments. No ineffective portion was recorded to earnings for the three months ended March 31, 2020 prior to termination. The corresponding net fair value adjustment to the hedged debt of $(4) will be amortized to interest expense over the remaining term of the related notes.

We are a global company and we are exposed to foreign currency exchange rate fluctuations in the normal course of our business. As a part of our foreign exchange risk management strategy, we use derivative instruments, primarily forward contracts and purchased option contracts, to hedge the following foreign currency exposures, thereby reducing volatility of earnings or protecting fair values of assets and liabilities:

At March 31, 2020 and December 31, 2019, we had outstanding forward exchange and purchased option contracts with gross notional values of $1,131 and $1,091 respectively, with terms of less than 12 months. Approximately 81% of the contracts at March 31, 2020 mature within three months, 9% mature in three to six months and 10% in six to twelve months. The associated currency exposures being hedged at March 31, 2020 were materially consistent with our year-end currency exposures. There has not been any material change in our hedging strategy.

We designate a portion of our foreign currency derivative contracts as cash flow hedges of our foreign currency-denominated inventory purchases, sales and expenses. The net asset (liability) fair value of these contracts were $3 and $(4) as of March 31, 2020 and December 31, 2019, respectively.


Designation of Derivatives	Balance Sheet Location	March 31, 2020		December 31, 2019
Derivatives Designated as Hedging Instruments
Foreign exchange contracts - forwards	Other current assets	$	5	$	1
	Accrued expenses and other current liabilities	(2)		(5)


Interest rate swaps	Other long-term assets	—		1

	Net designated derivative asset (liability)	$	3	$	(3)

Derivatives NOT Designated as Hedging Instruments
Foreign exchange contracts – forwards	Other current assets	$	5	$	1
	Accrued expenses and other current liabilities	(10)		(3)
	Net undesignated derivative liability	$	(5)	$	(2)

Summary of Derivatives	Total Derivative assets	$	10	$	3
	Total Derivative liabilities	(12)		(8)
	Net Derivative liability	$	(2)	$	(5)

Derivative gains and (losses) affect the income statement based on whether such derivatives are designated as hedges of underlying exposures. The following is a summary of derivative gains (losses).


	Three Months Ended March 31,
Gain (Loss) on Derivative Instruments	2020		2019
Fair Value Hedges - Interest Rate Contracts
Derivative (loss) gain recognized in interest expense	$	(1)	$	2
Hedged item gain (loss) recognized in interest expense	1		(2)

Cash Flow Hedges - Foreign Exchange Forward Contracts and Options
Derivative gain recognized in OCI (effective portion)	$	7	$	3
Derivative (loss) gain reclassified from AOCL to income - Cost of sales (effective portion)	(1)		1

During the three months ended March 31, 2020 and 2019, no amount of ineffectiveness was recorded in the Condensed Consolidated Statements of (Loss) Income for these designated cash flow hedges and all components of each derivative’s gain or (loss) were included in the assessment of hedge effectiveness. In addition, no amount was recorded for an underlying exposure that did not occur or was not expected to occur.

As of March 31, 2020, a net after-tax gain of $3 was recorded in Accumulated other comprehensive loss associated with our cash flow hedging activity. The entire balance is expected to be reclassified into net income within the next 12 months, providing an offsetting economic impact against the underlying anticipated transactions.

Non-designated derivative instruments are primarily instruments used to hedge foreign currency-denominated assets and liabilities. They are not designated as hedges since there is a natural offset for the remeasurement of the underlying foreign currency-denominated asset or liability.


Derivatives NOT Designated as Hedging Instruments			Three Months Ended March 31,
		Location of Derivative Gain (Loss)			2020		2019
Foreign exchange contracts – forwards	Other expense – Currency gain (loss), net		$	14	$	(5)