Accumulated Other Comprehensive Income

3 Months Ended

Mar. 31, 2023

10. Accumulated Other Comprehensive Income

Accumulated other comprehensive income (loss) (“AOCI”) refers to certain gains and losses that under GAAP are included in comprehensive income but are excluded from net earnings as these amounts are initially recorded as an adjustment to stockholders’ equity. Amounts in AOCI may be reclassified to net earnings upon the occurrence of certain events.

Our AOCI is comprised of foreign currency translation adjustments, unrealized gains and losses on cash flow hedges and unrecognized prior service costs and gains and losses in actuarial assumptions related to our defined benefit plans. Foreign currency translation adjustments are reclassified to net earnings upon sale or upon a complete or substantially complete liquidation of an investment in a foreign entity. In the three-month period ended March 31, 2022, due to the spinoff of ZimVie, certain foreign entities were completely liquidated. In a pro rata spinoff of consolidated subsidiaries’ assets and liabilities, the distribution of these net assets is recognized through equity instead of net earnings. Therefore, the foreign currency translation adjustments of those entities that were completely liquidated were reclassified to retained earnings. Similarly, we had entered into instruments designated as net investment hedges against certain of these same foreign entities. We reclassified the portion of the net investment hedge gains (losses) deferred in foreign currency translation adjustments related to those entities to retained earnings. Unrealized gains and losses on cash flow hedges are reclassified to net earnings when the hedged item affects net earnings. Amounts related to defined benefit plans that are in AOCI are reclassified over the service periods of employees in the plan.

The following table shows the changes in the components of AOCI gains (losses), net of tax (in millions):


	Foreign			Cash			Defined
	Currency			Flow			Benefit			Total
	Translation			Hedges			Plan Items			AOCI
Balance at December 31, 2022	$	(169.3	)	$	69.6		$	(79.6	)	$	(179.3	)
AOCI before reclassifications		12.4			8.8			-			21.2
Reclassifications to statements of earnings		-			(19.0	)		(0.9	)		(19.9	)
Balance at March 31, 2023	$	(156.9	)	$	59.4		$	(80.5	)	$	(178.0	)

The following table shows the reclassification adjustments from AOCI (in millions):


	Amount of Gain (Loss)
	Reclassified from AOCI
	Three Months Ended
	March 31,						Location on
Component of AOCI	2023			2022			Statements of Earnings
Cash flow hedges
Foreign exchange forward contracts	$	23.1		$	5.2		Cost of products sold
Forward starting interest rate swaps		(0.2	)		(0.2	)	Interest expense, net
		22.9			5.0		Total before tax
		3.9			0.7		Provision for income taxes
	$	19.0		$	4.3		Net of tax
Defined benefit plans
Prior service cost and unrecognized actuarial loss	$	1.0		$	(1.3	)	Other income (expense), net
		0.1			(0.4	)	Provision for income taxes
	$	0.9		$	(0.9	)	Net of tax
Total reclassifications	$	19.9		$	3.4		Net of tax

The following table shows the tax effects on each component of AOCI recognized in our condensed consolidated statements of comprehensive income (in millions):


	Three Months Ended March 31, 2023
	Before Tax			Tax			Net of Tax
Foreign currency cumulative translation adjustments	$	7.5			(4.9	)	$	12.4
Unrealized cash flow hedge gains		11.1			2.3			8.8
Reclassification adjustments on cash flow hedges		(22.9	)		(3.9	)		(19.0	)
Adjustments to prior service cost and unrecognized actuarial assumptions		(1.0	)		(0.1	)		(0.9	)
Total Other Comprehensive (Loss) Income	$	(5.3	)	$	(6.6	)	$	1.3


	Three Months Ended March 31, 2022
	Before Tax			Tax			Net of Tax
Foreign currency cumulative translation adjustments	$	(1.1	)	$	(2.4	)	$	1.3
Unrealized cash flow hedge gains		21.0			7.3			13.7
Reclassification adjustments on cash flow hedges		(5.0	)		(0.7	)		(4.3	)
Adjustments to prior service cost and unrecognized actuarial assumptions		1.3			0.4			0.9
Total Other Comprehensive Income	$	16.2		$	4.6		$	11.6