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.

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 June 30, 2023 there were three 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	$	277	$	—	2024	6.52	%	—	%	$	—
United States	Cap	75		75		2024	6.49	%	0.50	%	2

Canada	Swap	42		36		2025	5.86	%	2.57	%	1
France	Cap	132		158		2025	4.69	%	3.00	%	1
Total		$	526	$	269						$	4

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.

A cash flow hedge of an interest rate cap with an asset value of $2 associated with the December 2022 U.S. Secured Borrowing was dedesignated during second quarter 2023 as a result of the early repayment of that debt in the second quarter 2023. The dedesignation resulted in the release of the deferred gain in Accumulated Other Comprehensive Loss and was recorded as part of the Early Extinguishment of Debt. See Secured Borrowings and Collateral in Note 13 – Debt for additional information.

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 June 30, 2023 and December 31, 2022, we had outstanding forward exchange and purchased option contracts with gross notional values of $1,285 and $1,541 respectively, with terms of less than 12 months. At June 30, 2023, approximately 90% of the contracts mature within three months, 6% mature in three to six months and 4% in six to twelve months.

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 (Loss) Income 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. The net liability fair value of these contracts was $9 and $4 as of June 30, 2023 and December 31, 2022, respectively.

During second quarter 2023, as a result of a change in the currency terms included in a supplier inventory contract, forecasted purchases of inventory in YEN were no longer expected. This change resulted in several YEN/USD designated cash flow hedges, with a liability value of approximately $2, being dedesignated since the underlying forecasted purchases were no longer probable. Accordingly, the $2 deferred loss in Accumulated Other Comprehensive Loss was reclassified to earnings and recorded in Currency losses, net in the second quarter 2023.


Designation of Derivatives	Balance Sheet Location	June 30, 2023		December 31, 2022
Derivatives Designated as Hedging Instruments
Foreign exchange contracts - forwards	Other current assets	$	—	$	5
	Accrued expenses and other current liabilities	(9)		(9)

Interest rate cap	Other long-term assets	3		6
Interest rate swap	Other long-term assets	1		1

	Net designated derivative (liabilities) assets	$	(5)	$	3

Derivatives NOT Designated as Hedging Instruments
Foreign exchange contracts – forwards	Other current assets	$	6	$	14
	Accrued expenses and other current liabilities	(14)		(2)
Interest rate cap	Other long-term assets	3		—
	Net undesignated derivative assets	$	(5)	$	12

Summary of Derivatives	Total Derivative assets	$	13	$	26
	Total Derivative liabilities	(23)		(11)
	Net Derivative (liabilities) assets	$	(10)	$	15

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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022




Derivative Loss Recognized in OCI (Effective Portion)
Foreign exchange contracts - forwards and options	$	(13)	$	(23)	$	(15)	$	(38)
Interest rate contracts	—		—		—		—
Total	$	(13)	$	(23)	$	(15)	$	(38)

Location of Derivative Losses Reclassified from AOCL to Income (Effective Portion)
Cost of sales	$	(8)	$	(4)	$	(14)	$	(6)
Interest expense	1		—		2		—
Total	$	(7)	$	(4)	$	(12)	$	(6)

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	Location of Derivative Gain (Loss)	Three Months Ended June 30,				Six Months Ended June 30,
		2023		2022		2023		2022
Foreign exchange contracts – forwards	Other expenses, net – Currency losses, net	$	(28)	$	(14)	$	(33)	$	(23)