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DERIVATIVE FINANCIAL INSTRUMENTS | 6 Months Ended
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Jun. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE FINANCIAL INSTRUMENTS | DERIVATIVE FINANCIAL INSTRUMENTS The Company is exposed to, among other risks, the impact of changes in commodity prices, foreign currency exchange rates, and interest rates in the normal course of business. The Company’s risk management program is designed to manage the exposure and volatility arising from these risks, and utilizes derivative financial instruments to offset a portion of these risks. The Company uses derivative financial instruments only to the extent necessary to hedge identified business risks, and does not enter into such transactions for trading purposes. The Company generally does not require collateral or other security with counterparties to these financial instruments and is therefore subject to credit risk in the event of nonperformance; however, the Company monitors credit risk and currently does not anticipate nonperformance by other parties. Contracts with counterparties generally contain right of offset provisions. These provisions effectively reduce the Company’s exposure to credit risk in situations where the Company has gain and loss positions outstanding with a single counterparty. It is the Company’s policy to offset on the Consolidated Balance Sheets the amounts recognized for derivative instruments with any cash collateral arising from derivative instruments executed with the same counterparty under a master netting agreement. As of June 30, 2023 and December 31, 2022, the Company did not have any amounts on deposit with any of its counterparties, nor did any of its counterparties have any amounts on deposit with the Company. Derivative Fair Values Our derivatives consist of natural gas forward swaps and foreign exchange forward contracts, all of which are over-the-counter and not traded through an exchange. The Company uses widely accepted valuation tools to determine fair value, such as discounting cash flows to calculate a present value for the derivatives. The models use Level 2 inputs, such as forward curves and other commonly quoted observable transactions and prices. The fair value of our derivatives and hedging instruments are all classified as Level 2 investments within the three-tier hierarchy. The following table presents the fair value of derivatives and hedging instruments and the respective location on the Consolidated Balance Sheets (in millions):
|  |  | Fair Value at
| Location |  | June 30, 2023 |  | December 31, 2022
Derivative assets designated as hedging instruments: |  |  |  |  |
Cash flow hedges: |  |  |  |  |
Natural gas forward swaps | Other current assets |  | $ | — |  |  | $ | 2 |
Derivative liabilities designated as hedging instruments: |  |  |  |  |
Cash flow hedges: |  |  |  |  |
Natural gas forward swaps | Other current liabilities |  | $ | 22 |  |  | $ | 32 |
Derivative assets not designated as hedging instruments: |  |  |  |  |
Foreign exchange forward contracts | Other current assets |  | $ | 1 |  |  | $ | 1 |
Derivative liabilities not designated as hedging instruments: |  |  |  |  |
Foreign exchange forward contracts | Other current liabilities |  | $ | 1 |  |  | $ | 2 |
Consolidated Statements of Earnings Activity The following table presents the impact and respective location of derivative activities on the Consolidated Statements of Earnings (in millions):
|  | Three Months Ended June 30, | Six Months Ended June 30,
| Location | 2023 | 2022 | 2023 | 2022
Derivative activity designated as hedging instruments: |  |  |  |  |
Natural gas cash flow hedges: |  |  |  |  |
Amount of loss (gain) reclassified from AOCI (as defined below) into earnings (a) | Cost of sales | $ | 14 |  | $ | (16) |  | $ | 32 |  | $ | (26) |
Cross-currency swap net investment hedges: |  |  |  |  |
Amount of gain recognized in earnings on derivative amounts excluded from effectiveness testing | Interest expense, net | $ | — |  | $ | — |  | $ | — |  | $ | (1) |
Derivative activity not designated as hedging instruments: |  |  |  |  |
Foreign currency: |  |  |  |  |
Amount of (gain) loss recognized in earnings (b) | Other expense (income), net | $ | (2) |  | $ | (23) |  | $ | 4 |  | $ | (28) |
(a)Accumulated Other Comprehensive Earnings (Deficit) (“AOCI”) (b)Gains related to foreign currency derivatives were substantially offset by net revaluation impacts on foreign currency denominated balance sheet exposures, which were also recorded in Other expense (income), net. Please refer to the “Other Derivatives” section below for additional detail. Consolidated Statements of Comprehensive Earnings Activity The following table presents the impact of derivative activities on the Consolidated Statements of Comprehensive Earnings (in millions):
|  | Amount of (Gain) Loss Recognized in Comprehensive Earnings
|  | Three Months Ended June 30, | Six Months Ended June 30,
Hedging Type | Derivative Financial Instrument | 2023 | 2022 | 2023 | 2022
Net investment hedge | Cross-currency swaps | $ | — |  | $ | (3) |  | $ | — |  | $ | (5) |
Cash flow hedge | Natural gas forward swaps | $ | (9) |  | $ | 10 |  | $ | (8) |  | $ | (13) |
Cash flow hedge | Treasury interest rate lock | $ | — |  | $ | (9) |  | $ | — |  | $ | (19) |
Cash Flow Hedges The Company uses a combination of derivative financial instruments, which qualify as cash flow hedges, and physical contracts to manage forecasted exposure to electricity and natural gas prices. As of June 30, 2023, the notional amounts of these natural gas forward swaps was 8 million MMBtu (or MMBtu equivalent) based on U.S. and European indices. The Company has designated these natural gas forward swaps as cash flow hedges, with the last hedge maturing no later than August 2024. A net unrecognized loss of $22 million related to these natural gas forward swaps was included in AOCI as of June 30, 2023, $22 million of which is expected to be reclassified into earnings within the next twelve months. In 2020, the Company entered into a $175 million forward U.S. Treasury rate lock agreement to manage the U.S. Treasury portion of its interest rate risk associated with the anticipated issuance of certain 10-year fixed rate senior notes. The Company designated this forward U.S. Treasury rate lock agreement, which expired on December 15, 2022, as a cash flow hedge. The locked fixed rate of this agreement was 0.994%. In September 2022, a gain of $6 million was recognized as a result of a change in the forecasted issuance of certain senior notes. In December 2022, the Company received cash of $37 million upon the settlement of the rate lock agreement, of which $31 million will be amortized as a component of interest expense upon the future issuance of senior notes. This unrecognized gain of $31 million was included in AOCI as of June 30, 2023. Net Investment Hedges The Company has translation exposure resulting from translating the financial statements of foreign subsidiaries into United States Dollars, which is recognized in Currency translation adjustment (a component of AOCI). In the second quarter of 2022, the Company terminated the remaining cross-currency forward contracts related to the hedged portions of the net investment in foreign subsidiaries, resulting in cash proceeds of $11 million. Other Derivatives The Company uses forward currency exchange contracts to manage existing exposures to foreign exchange risk related to assets and liabilities recorded on the Consolidated Balance Sheets. As of June 30, 2023, the Company had notional amounts of $132 million for non-designated derivative financial instruments related to foreign currency exposures in United States Dollars primarily related to the Brazilian Real, Chinese Yuan, Indian Rupee, Hong Kong Dollar, South Korean Won, and Japanese Yen. In addition, the Company had notional amounts of $32 million for non-designated derivative financial instruments related to foreign currency exposures in European Euro primarily related to the Polish Złoty and the British Pound Sterling.

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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/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//815/tableOfContent + Details
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