Financial Instruments

3 Months Ended

Mar. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

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.

Cash Flow Hedges

We use interest rate swaps and caps to manage the exposure to variability in the interest rate payments on our secured loan agreements entered into over the last two years. The interest rate swaps convert the interest paid on certain loans to a fixed amount while the caps limit the maximum amount of interest paid. At March 31, 2023 there were four interest rate derivatives outstanding as follows:


Secured Borrowing	Derivative Type	Principal Debt (1)		Notional Amount		Expected Maturity	Pre-Hedged Rate		Hedged Rate		Net Fair Value
United States	N/A	$	345	$	—	2024	6.33	%	—	%	$	—
United States	Cap	105		101		2024	6.06	%	0.50	%	3
United States	Cap	232		216		2025	7.79	%	4.50	%	1
Canada	Swap	49		43		2025	5.86	%	2.57	%	1
France	Cap	162		182		2025	4.14	%	3.00	%	1
Total		$	893	$	542						$	6

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(1)Excludes debt issuance costs of $4 at March 31, 2023.

No amount of ineffectiveness was recorded in the Condensed Consolidated Statements of Income (Loss) for these designated cash flow hedges and all components of each derivative's gain or loss were included in the assessment of hedge effectiveness.

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, 2023 and December 31, 2022, we had outstanding forward exchange and purchased option contracts with gross notional values of $1,301 and $1,541 respectively, with terms of less than 12 months. At March 31, 2023, approximately 87% of the contracts mature within three months, 7% mature in three to six months and 6% in six to twelve months.

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. No amount of ineffectiveness was recorded in the Condensed Consolidated Statements of Income (Loss) for these designated cash flow hedges for all periods presented, 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. The net liability fair value of these contracts was $2 and $4 as of March 31, 2023 and December 31, 2022, 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, 2023		December 31, 2022
Derivatives Designated as Hedging Instruments
Foreign exchange contracts - forwards	Other current assets	$	3	$	5
	Accrued expenses and other current liabilities	(5)		(9)

Interest rate cap	Other long-term assets	5		6
Interest rate swap	Other long-term assets	1		1

	Net designated derivative assets	$	4	$	3

Derivatives NOT Designated as Hedging Instruments
Foreign exchange contracts – forwards	Other current assets	$	4	$	14
	Accrued expenses and other current liabilities	(3)		(2)
Interest rate cap	Other long-term assets	1		—
	Net undesignated derivative assets	$	2	$	12

Summary of Derivatives	Total Derivative assets	$	14	$	26
	Total Derivative liabilities	(8)		(11)
	Net Derivative assets	$	6	$	15

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) Gain on Derivative Instruments		2023		2022




Cash Flow Hedges - Foreign Exchange Forward Contracts and Options
Derivative loss recognized in OCI (effective portion)		$	(2)	$	(15)
Derivative loss reclassified from AOCL to income - Cost of sales (effective portion)		(6)		(2)
Derivative gain reclassified from AOCL to income - Interest (effective portion)		1		—

As of March 31, 2023, no net after-tax gain or loss was recorded in Accumulated other comprehensive loss associated with our cash flow hedging activity.

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,
			2023		2022
Foreign exchange contracts – forwards	Other expense – Currency gains (losses), net		$	(5)	$	(9)

Currency losses, net were $11 and $0 for three months ended March 31, 2023 and 2022, 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.