Financial Instruments

3 Months Ended

Mar. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Financial Instruments

Financial Instruments

Interest Rate Risk Management

We use interest rate swap and interest rate cap 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. At March 31, 2022, there was one interest rate cap contract outstanding.

Foreign Exchange Risk Management

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:

•Foreign currency-denominated assets and liabilities

•Forecasted purchases and sales in foreign currency

At March 31, 2022 and December 31, 2021, we had outstanding forward exchange and purchased option contracts with gross notional values of $1,126 and $1,113 respectively, with terms of less than 12 months. Approximately 77% of the contracts at March 31, 2022 mature within three months, 13% mature in three to six months and 10% in six to twelve months. There have not been any material changes in our hedging strategy.

Foreign Currency Cash Flow Hedges

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 liability fair value of these contracts were $18 and $3 as of March 31, 2022 and December 31, 2021, respectively.

Summary of Derivative Instruments Fair Value

The following table provides a summary of the fair value amounts of our derivative instruments:

Designation of Derivatives	Balance Sheet Location	March 31, 2022		December 31, 2021
Derivatives Designated as Hedging Instruments
Foreign exchange contracts - forwards	Other current assets	$	1	$	3
	Accrued expenses and other current liabilities	(19)		(6)
Interest rate cap	Other long-term assets	3		1
	Net designated derivative liabilities	$	(15)	$	(2)
Derivatives NOT Designated as Hedging Instruments
Foreign exchange contracts – forwards	Other current assets	$	3	$	1
	Accrued expenses and other current liabilities	(13)		(5)
	Net undesignated derivative liabilities	$	(10)	$	(4)
Summary of Derivatives	Total Derivative assets	$	7	$	5
	Total Derivative liabilities	(32)		(11)
	Net Derivative liabilities	$	(25)	$	(6)

Summary of Derivative Instruments Gains (Losses)

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).

Designated Derivative Instruments Gains (Losses)

The following table provides a summary of gains (losses) on derivative instruments:

	Three Months Ended March 31,
Loss on Derivative Instruments	2022		2021
Cash Flow Hedges - Foreign Exchange Forward Contracts and Options
Derivative loss recognized in OCI (effective portion)	$	(15)	$	(10)
Derivative loss reclassified from AOCL to income - Cost of sales (effective portion)	(2)		(1)

During the three months ended March 31, 2022 and 2021, 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, 2022, a net after-tax loss of $13 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 Gains (Losses)

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.

The following table provides a summary of gains and (losses) on non-designated derivative instruments:

Derivatives NOT Designated as Hedging Instruments	Location of Derivative Gain (Loss)	Three Months Ended March 31,
		2022		2021
Foreign exchange contracts – forwards	Other expense – Currency losses, net	$	(9)	$	(18)

Currency losses, net were $0 and $2 for three months ended March 31, 2022 and 2021, respectively. Net currency gains and losses include the mark-to-market adjustments of the derivatives not designated as hedging instruments and the related cost of those derivatives as well as the remeasurement of foreign currency-denominated assets and liabilities and are included in Other expenses, net.