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Derivative Instruments | 12 Months Ended
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Dec. 31, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments | Derivative Instruments In the normal course of business, the Company is exposed to global market risks, including the effects of changes in foreign currency exchange rates and interest rates. The Company uses derivative instruments to manage its exposure to such risks and may elect to designate certain derivatives as hedging instruments under ASC 815, Derivatives and Hedging. The Company formally documents all relationships between designated hedging instruments and hedged items as well as its risk management objectives and strategies for undertaking the hedge transactions. The Company does not hold or issue derivatives for trading or speculative purposes. In accordance with ASC 815, Derivative and Hedging, the Company recognizes derivative instruments as either assets or liabilities on the Consolidated Balance Sheets and measures them at fair value. The following table presents the fair value of its derivative instruments (in millions):
| Asset (Liability) Derivatives
| Consolidated Balance Sheets Classification |  | Fair Value
|  |  | December 31
|  |  | 2017 |  | 2016
Derivative instruments designated as hedges: |  |  |  |  |
Foreign exchange contracts | Prepaid expenses and other current assets |  | $ | — |  |  | $ | 12 |
Foreign exchange contracts | Accrued liabilities |  | (9 | ) |  | — |
Forward interest rate swaps | Accrued liabilities |  | (2 | ) |  | (3 | )
Forward interest rate swaps | Other long-term liabilities |  | (8 | ) |  | (13 | )
Total derivative instruments designated as hedges |  |  | $ | (19 | ) |  | $ | (4 | )
Derivative instruments not designated as hedges: |  |  |  |  |
Foreign exchange contracts | Prepaid expenses and other current assets |  | $ | — |  |  | $ | 11 |
Foreign exchange contracts | Accrued liabilities |  | (2 | ) |  | — |
Forward interest rate swaps | Accrued liabilities |  | (1 | ) |  | (1 | )
Forward interest rate swaps | Other long-term liabilities |  | (7 | ) |  | (10 | )
Total derivative instruments not designated as hedges |  |  | (10 | ) |  | — |
Total Net Derivative Liability |  |  | $ | (29 | ) |  | $ | (4 | )
The following table presents the net (losses) gains from changes in fair values of derivatives that are not designated as hedges (in millions):
| Net (Loss) Gain Recognized in Income
|  |  | Year Ended December 31,
| Consolidated Statements of Operations Classification |  | 2017 |  | 2016 |  | 2015
Derivative instruments not designated as hedges: |  |  |  |  |  |  |
Foreign exchange contracts | Foreign exchange (loss) gain |  | $ | (24 | ) |  | $ | 5 |  |  | $ | 11 |
Forward interest rate swaps | Interest expense and other, net |  | 2 |  |  | — |  |  | 4 |
Total net (loss) gain from derivative instruments not designated as hedges |  |  | $ | (22 | ) |  | $ | 5 |  |  | $ | 15 |
Credit and Market Risk Management Financial instruments, including derivatives, expose the Company to counterparty credit risk of nonperformance and to market risk related to currency exchange rate and interest rate fluctuations. The Company manages its exposure to counterparty credit risk by establishing minimum credit standards, diversifying its counterparties, and monitoring its concentrations of credit. The Company’s credit risk counterparties are commercial banks with expertise in derivative financial instruments. The Company evaluates the impact of market risk on the fair value and cash flows of its derivative and other financial instruments by considering reasonably possible changes in interest rates and currency exchange rates. The Company continually monitors the creditworthiness of the customers to which it grants credit terms in the normal course of business. The terms and conditions of the Company’s credit sales are designed to mitigate or eliminate concentrations of credit risk with any single customer. Foreign Currency Exchange Risk Management The Company conducts business on a multinational basis in a wide variety of foreign currencies. Exposure to market risk for changes in foreign currency exchange rates arises from euro denominated external revenues, cross-border financing activities between subsidiaries, and foreign currency denominated monetary assets and liabilities. The Company realizes its objective of preserving the economic value of non-functional currency denominated cash flows by initially hedging transaction exposures with natural offsets to the fullest extent possible and, once these opportunities have been exhausted, through foreign exchange forward and option contracts. The Company manages the exchange rate risk of anticipated euro denominated sales by using put options, forward contracts, and participating forwards, all of which typically mature within twelve months of execution. The Company designates these derivative contracts as cash flow hedges. Unrealized gains and losses on these contracts are deferred in Accumulated other comprehensive loss on the Consolidated Balance Sheets until the contract is settled and the hedged sale is realized. The realized gain or loss is then recorded as an adjustment to Net sales on the Consolidated Statement of Operations. Realized (losses) or gains were $(8) million, $(7) million, and $14 million for the periods ending December 31, 2017, 2016 and 2015, respectively. As of December 31, 2017 and 2016, the notional amounts of the Company’s foreign exchange cash flow hedges were €389 million and €341 million, respectively. The Company has reviewed its cash flow hedges for effectiveness and determined they are highly effective. The Company uses forward contracts, which are not designated as hedging instruments, to manage its exposures related to its Brazilian real, British pound, Canadian dollar, Czech koruna, euro, Australian dollar, Swedish krona, Japanese yen and Singapore dollars denominated net assets. These forward contracts typically mature within three months after execution. Monetary gains and losses on these forward contracts are recorded in income each quarter and are generally offset by the foreign exchange gains and losses related to their net asset positions. The notional values of these outstanding contracts are as follows:
| December 31,
| 2017 |  | 2016
Notional balance of outstanding contracts (in millions): |  |  |
British Pound/US dollar | £ | 13 |  |  | £ | 3 |
Euro/US dollar | € | 108 |  |  | € | 148 |
British Pound/Euro | £ | 5 |  |  | £ | 8 |
Canadian Dollar/US dollar | $ | 12 |  |  | $ | 13 |
Czech Koruna/US dollar | Kč | 361 |  |  | Kč | 147 |
Brazilian Real/US dollar | R$ | 34 |  |  | R$ | 56 |
Malaysian Ringgit/US dollar | RM | — |  |  | RM | 16 |
Australian Dollar/US dollar | $ | 55 |  |  | $ | 50 |
Swedish Krona/US dollar | kr | 13 |  |  | kr | 7 |
Japanese Yen/US dollar | ¥ | 151 |  |  | ¥ | 48 |
Singapore Dollar/US dollar | S$ | 4 |  |  | S$ | 15 |
Net fair value (liability) asset of outstanding contracts (in millions) | $ | (2 | ) |  | $ | 11 |
Interest Rate Risk Management On July 26, 2017, the Company entered into an Amended and Restated Credit Agreement (the “A&R Credit Agreement”), which amended, modified and added provisions to the Company’s previous credit agreement, provided for an additional term loan of $687.5 million (“Term Loan A”) and increased the existing revolving credit facility (“Revolving Credit Facility”) from $250 million to $500 million. See Note 8, Long-Term Debt. Borrowings under the existing term loan (“Term Loan B”), the new Term Loan A, the Revolving Credit Facility and the receivables financing facility bear interest at a variable rate plus an applicable margin. As a result, the Company is exposed to market risk associated with the variable interest rate payments on both term loans. The Company manages its exposure to changes in interest rates by utilizing interest rate swaps to hedge this exposure and to achieve a desired proportion of fixed versus floating-rate debt, based on current and projected market conditions. The Company does not enter into derivative instruments for trading or speculative purposes. In December 2017, the Company entered into an $800 million forward long-term interest rate swap agreement to lock into a fixed LIBOR interest rate base for debt facilities subject to monthly interest payments, including Term Loan A, the Revolving Credit Facility and receivables financing facility. Under the terms of the agreement, $800 million in variable-rate debt will be swapped for a fixed interest rate with net settlement terms due effective in December 2018. The changes in fair value of these swaps are not designated as hedges and are recognized immediately as Interest expense, net on the Consolidated Statement of Operations. The Company has a floating-to-fixed interest rate swap, which was designated as a cash flow hedge. This swap was terminated and the hedge accounting treatment was discontinued in 2014. This swap has $4 million to be amortized through Accumulated other comprehensive loss on the Consolidated Balance Sheets and into Interest expense, net on the Consolidated Statements of Operations through June 2021, of which $2 million will be amortized during 2018. The Company has three interest rate swaps previously entered into with the purpose of converting floating-to-fixed rate debt. The first swap was entered into with a syndicated group of commercial banks for the purpose of moving from floating-to-fixed rate debt. The second swap largely offsets the first swap, moving from fixed-to-floating rate debt. Both of these instruments are not designated as hedges and the changes in fair value are recognized in Interest expense, net on the Consolidated Statements of Operations. The third swap entered into was an interest rate swap converting floating-to-fixed rate debt which was designated as a cash flow hedge and receives hedge accounting treatment. All three swaps have a termination date in June 2021. The changes in fair value of the active swap designated as a cash flow hedge are recognized in Accumulated other comprehensive loss on the Consolidated Balance Sheets, with any ineffectiveness immediately recognized in earnings. At December 31, 2017, the Company estimated that approximately $4 million in losses on the forward interest rate swap designated as a cash flow hedge will be reclassified from Accumulated other comprehensive loss on the Consolidated Balance Sheets into earnings during the next four quarters. The Company’s master netting and other similar arrangements with the respective counterparties allow for net settlement under certain conditions, which are designed to reduce credit risk by permitting net settlement with the same counterparty. The following table presents the gross fair values and related offsetting counterparty fair values as well as the net fair value amounts for interest rates swaps at December 31, 2017 (in millions):
| Gross Fair Value |  | Offsetting Counterparty Fair Value |  | Net Fair Value in the Consolidated Balance Sheets
Counterparty A | $ | 8 |  |  | $ | 4 |  |  | $ | 4 |
Counterparty B | 3 |  |  | 1 |  |  | 2 |
Counterparty C | 3 |  |  | 1 |  |  | 2 |
Counterparty D | 5 |  |  | 3 |  |  | 2 |
Counterparty E | 3 |  |  | 1 |  |  | 2 |
Counterparty F | 3 |  |  | 1 |  |  | 2 |
Counterparty G | 4 |  |  | — |  |  | 4 |
Total | $ | 29 |  |  | $ | 11 |  |  | $ | 18 |
The notional amount of the designated interest rate swaps effective in each year of the cash flow hedge relationships does not exceed the principal amount of the Term Loan, which is hedged. The Company has reviewed its interest rate swap hedges for effectiveness and determined they are all 100% effective. The interest rate swaps have the following notional amounts per year (in millions):
Year 2018 | $ | 544 |
Year 2019 | 1,344 |
Year 2020 | 1,072 |
Year 2021 | 1,072 |
Remainder | 800 |
Notional balance of outstanding contracts | $ | 4,832 |

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- References No definition available. + Details
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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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