XML 38 R22.htm IDEA: XBRL DOCUMENT
v3.22.4

Derivative and Other Financial Instruments | 12 Months Ended
--- | ---
Dec. 31, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative and Other Financial Instruments | Derivative and Other Financial Instruments Fair Value Measurements Under U.S. GAAP a framework exists for measuring fair value, providing a three-tier hierarchy of pricing inputs used to report assets and liabilities that are adjusted to fair value. Level 1 includes inputs such as quoted prices which are available in active markets for identical assets or liabilities as of the report date. Level 2 includes inputs other than those available in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 3 includes unobservable pricing inputs that are not corroborated by market data or other objective sources. The Company has no recurring items valued using Level 3 inputs other than certain pension plan assets. The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of assets and liabilities measured at fair value and their placement within the fair value hierarchy. The Company applies a market approach to value its commodity price hedge contracts. Prices from observable markets are used to develop the fair value of these financial instruments and they are reported under Level 2. The Company uses an income approach to value its foreign exchange forward contracts. These contracts are valued using a discounted cash flow model that calculates the present value of future cash flows under the terms of the contracts using market information as of the reporting date, such as foreign exchange spot and forward rates, and are reported under Level 2 of the fair value hierarchy. Fair value disclosures for financial assets and liabilities that were accounted for at fair value on a recurring basis are provided below. In addition, see Note M for fair value disclosures related to debt. Derivative Financial Instruments In the normal course of business the Company is subject to risk from adverse fluctuations in currency exchange rates, interest rates and commodity prices. The Company manages these risks through a program that includes the use of derivative financial instruments, primarily swaps and forwards. Counterparties to these contracts are major financial institutions. The Company is exposed to credit loss in the event of nonperformance by these counterparties. The Company does not use derivative instruments for trading or speculative purposes. The Company’s objective in managing exposure to market and interest rate risk is to limit the impact on earnings and cash flow. The extent to which the Company uses such instruments is dependent upon its access to these contracts in the financial markets and its success using other methods, such as netting exposures in the same currencies to mitigate foreign exchange risk, using sales agreements that permit the pass-through of commodity price and foreign exchange rate risk to customers and borrowing both fixed and floating debt instruments to manage interest rate risk. For derivative financial instruments accounted for in hedging relationships, the Company formally designates and documents, at inception, the financial instrument as a hedge of a specific underlying exposure, the risk management objective and the manner in which effectiveness will be assessed. The Company formally assesses, both at inception and at least quarterly thereafter, whether the hedging relationships are effective in offsetting changes in fair value or cash flows of the related underlying exposures. When a forecasted transaction is reasonably possible, but not probable of occurring, the hedge no longer qualifies for hedge accounting and the change in fair value from the date of the last effectiveness test is recognized in earnings. Any gain or loss which has accumulated in other comprehensive income at the date of the last effectiveness test is reclassified into earnings at the same time of the underlying exposure or when the forecasted transaction becomes probable of not occurring. Cash Flow Hedges The Company designates certain derivative financial instruments as cash flow hedges. No components of the hedging instruments are excluded from the assessment of hedge effectiveness. Changes in fair value of outstanding derivatives accounted for as cash flow hedges are recorded in accumulated other comprehensive income until earnings are impacted by the hedged transaction. Classification of the gain or loss in the Consolidated Statements of Operations upon reclassification from accumulated other comprehensive income is the same as that of the underlying exposure. Contracts outstanding at December 31, 2022 mature between one and twenty-four months. The Company uses commodity forward contracts to hedge anticipated purchases of various commodities, including natural gas and electricity, and these exposures are hedged by a central treasury unit. The Company also designates certain foreign exchange contracts as cash flow hedges of anticipated foreign currency denominated sales or purchases. The Company manages these risks at the operating unit level. Often, foreign currency risk is hedged together with the related commodity price risk. The Company may also uses interest rate swaps to convert interest on floating rate debt to a fixed-rate. The following tables set forth financial information about the impact on other comprehensive income ("OCI"), accumulated other comprehensive income ("AOCI") and earnings from changes in the fair value related to derivative instruments designated as cash flow hedges.
|  |  |  | Amount of gain / (loss) recognized in AOCI |  |
Derivatives in cash flow hedges |  |  |  |  |  | 2022 |  | 2021 |  |
Foreign exchange |  |  |  |  |  | $ | (1) |  |  | $ | (5) |  |  |
Interest rate |  |  |  |  |  | — |  |  | 2 |  |  |
Commodities |  |  |  |  |  | (27) |  |  | 74 |  |  |
|  |  |  |  |  | $ | (28) |  |  | $ | 71 |  |  |
|  |  |  | Amount of gain / (loss) reclassified from AOCI into income |  |
Derivatives in cash flow hedges |  |  |  |  |  | 2022 |  | 2021 |  | Affected line item in the Statements of Operations
Foreign exchange |  |  |  |  |  | $ | (7) |  |  | $ | (4) |  |  | Net sales
Commodities |  |  |  |  |  | (6) |  |  | (54) |  |  | Net sales
Foreign exchange |  |  |  |  |  | 3 |  |  | 2 |  |  | Cost of products sold, excluding depreciation and amortization
Commodities |  |  |  |  |  | 29 |  |  | 147 |  |  | Cost of products sold, excluding depreciation and amortization
|  |  |  |  |  | 19 |  |  | 91 |  |  | Income / (loss) from continuing operations before income taxes and equity in net earnings of affiliates
|  |  |  |  |  | (4) |  |  | (23) |  |  | Provision for / (benefit from) income taxes
|  |  |  |  |  | 15 |  |  | 68 |  |  | Net income / (loss) from continuing operations
Commodities |  |  |  |  |  | — |  |  | 5 |  |  | Net (loss) / income from discontinued operations
Total reclassified |  |  |  |  |  | $ | 15 |  |  | $ | 73 |  |  | Net income / (loss)
For the year ending December 31, 2023, a net loss of $13 ($11, net of tax) is expected to be reclassified to earnings for commodity and foreign exchange contracts. No material amounts were reclassified during the years ended December 31, 2022 and 2021 in connection with anticipated transactions that were no longer considered probable. Fair Value Hedges and Contracts Not Designated as Hedges The Company designates certain derivative financial instruments as fair value hedges of recognized foreign-denominated assets and liabilities, generally trade accounts receivable and payable and unrecognized firm commitments. The notional values and maturity dates of the derivative instruments coincide with those of the hedged items. Changes in fair value of the derivative financial instruments, excluding time value, are offset by changes in fair value of the related hedged items. For the years ended December 31, 2022, and December 31, 2021, the Company recorded a loss of $19 and a gain of $3 from foreign exchange contracts designated as fair value hedges. These adjustments were reported within foreign exchange in the Consolidated Statements of Operations. Certain derivative financial instruments, including foreign exchange contracts related to intercompany debt, were not designated or did not qualify for hedge accounting; however, they are effective economic hedges as the changes in their fair value, except for time value, are offset by changes from re-measurement of the related hedged items. The Company’s primary use of these derivative instruments is to offset the earnings impact that fluctuations in foreign exchange rates have on certain monetary assets and liabilities denominated in nonfunctional currencies. Changes in fair value of these derivative instruments are immediately recognized in earnings as foreign exchange adjustments. The following table sets forth the impact on earnings from derivatives not designated as hedges.
|  |  |  | Pre-tax amount of gain / (loss) recognized in earnings |  |
Derivatives not designated as hedges |  |  |  |  |  | 2022 |  | 2021 |  | Affected line item in the Statements of Operations
Foreign exchange |  |  |  |  |  | $ | (2) |  |  | $ | (3) |  |  | Net sales
Foreign exchange |  |  |  |  |  | 7 |  |  | (1) |  |  | Cost of products sold
Foreign exchange |  |  |  |  |  | (14) |  |  | (29) |  |  | Foreign exchange
|  |  |  |  |  | $ | (9) |  |  | $ | (33) |  |  |
Net Investment Hedges The Company designates certain debt and derivative instruments as net investment hedges to manage foreign currency risk relating to net investments in subsidiaries denominated in foreign currencies. For the years ended December 31, 2022 and 2021, the Company recorded a gain of $32 ($19, net of tax) and a gain of $103 ($103, net of tax) in other comprehensive income for certain debt instruments that are designated as hedges of its net investment in a euro-based subsidiary. As of December 31, 2022 and December 31, 2021, cumulative gains of $101 ($111, net of tax) and $69 ($92, net of tax) were recognized in accumulated other comprehensive income related to these net investment hedges and the carrying amount of the hedging instrument was approximately €538 ($576) at December 31, 2022. The following tables set forth financial information about the impact on accumulated other comprehensive income from changes in the fair value of derivative instruments designated as net investment hedges.
|  | Amount of gain / (loss) recognized in AOCI |  |
Derivatives designated as net investment hedges |  | 2022 |  | 2021 |  |
Foreign exchange |  | $ | 32 |  |  | $ | 47 |  |  |
Gains and losses representing components excluded from the assessment of effectiveness on derivatives designated as net investment hedges are recognized in accumulated other comprehensive income. Gains or losses on net investment hedges remain in accumulated other comprehensive income until disposal of the underlying assets. Fair Values of Derivative Financial Instruments and Valuation Hierarchy The following table sets forth the Company's financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2022 and December 31, 2021, respectively. The fair value of these financial instruments were reported under Level 2 of the fair value hierarchy.
|  | Balance Sheet classification |  | December 31, 2022 |  | December 31, 2021 |  | Balance Sheet classification |  | December 31, 2022 |  | December 31, 2021
Derivatives designated as hedging instruments |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts cash flow |  | Prepaid expenses and other current assets |  | $ | 3 |  |  | $ | 3 |  |  | Accrued liabilities |  | $ | 2 |  |  | $ | 10 |
|  | Other non-current assets |  | 1 |  |  | — |  |  | Other non-current liabilities |  | — |  |  | — |
Foreign exchange contracts fair value |  | Prepaid expenses and other current assets |  | 4 |  |  | 1 |  |  | Accrued liabilities |  | 4 |  |  | 2 |
Commodities contracts cash flow |  | Prepaid expenses and other current assets |  | 11 |  |  | 53 |  |  | Accrued liabilities |  | 27 |  |  | 17 |
|  | Other non-current assets |  | — |  |  | 2 |  |  | Other non-current liabilities |  | — |  |  | 1 |
Net investment hedge |  | Other non-current assets |  | 90 |  |  | 49 |  |  | Other non-current liabilities |  | — |  |  | — |
|  | $ | 109 |  |  | $ | 108 |  |  |  |  | $ | 33 |  |  | $ | 30 |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts |  | Prepaid expenses and other current assets |  | $ | 8 |  |  | $ | 3 |  |  | Accrued liabilities |  | $ | 2 |  |  | $ | 3 |
Total derivatives |  | $ | 117 |  |  | $ | 111 |  |  |  |  | $ | 35 |  |  | $ | 33 |
Fair Value Hedge Carrying Amounts
|  | Carrying amount of the hedged assets and liabilities
Line item in the Balance Sheet in which the hedged item is included |  | December 31, 2022 |  | December 31, 2021
Cash and cash equivalents |  | 22 |  |  | 38 |
Receivables, net |  | 16 |  |  | 21 |
Accrued liabilities |  | 111 |  |  | 116 |
As of December 31, 2022 and 2021, the cumulative amounts of fair value hedging adjustments included in the carrying amount of the hedged assets and liabilities were net gains of $1, respectively. Offsetting of Derivative Assets and Liabilities Certain derivative financial instruments are subject to agreements with counterparties similar to master netting arrangements and are eligible for offset. The Company has made an accounting policy election not to offset the fair values of these instruments. In the table below, the aggregate fair values of the Company's derivative assets and liabilities are presented on both a gross and net basis, where appropriate.
|  | Gross amounts recognized in the Balance Sheet |  | Gross amounts not offset in the Balance Sheet |  | Net amount
Balance at December 31, 2022 |  |  |  |  |  |
Derivative assets |  | $ | 117 |  |  | $ | 13 |  |  | $ | 104 |
Derivative liabilities |  | 35 |  |  | 13 |  |  | 22 |
Balance at December 31, 2021 |  |  |  |  |  |
Derivative assets |  | $ | 111 |  |  | $ | 19 |  |  | $ | 92 |
Derivative liabilities |  | 33 |  |  | 19 |  |  | 14 |
Notional Values of Outstanding Derivative Instruments The aggregate U.S. dollar-equivalent notional values of outstanding derivative instruments in the Consolidated Balance Sheets at December 31, 2022 and December 31, 2021 were:
| December 31, 2022 |  | December 31, 2021
Derivatives designated as cash flow hedges: |  |  |
Foreign exchange | $ | 287 |  |  | $ | 241 |
Commodities | 230 |  |  | 261 |
Derivatives designated as fair value hedges: |  |  |
Foreign exchange | 201 |  |  | 229 |
Derivatives designated as net investment hedges: |  |  |
Foreign exchange | 875 |  |  | 875 |
Derivatives not designated as hedges: |  |  |
Foreign exchange | 512 |  |  | 617 |

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI https://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI https://asc.fasb.org/extlink&oid=126731327&loc=d3e90205-114008 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration