XML 36 R17.htm IDEA: XBRL DOCUMENT
v3.21.1

Derivatives | 3 Months Ended
--- | ---
Mar. 31, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives | Derivatives From time to time, the Company enters into derivative transactions to hedge its exposures to interest rate, foreign currency rate and commodity price fluctuations. The Company does not enter into derivative transactions for trading purposes. Interest Rate Contracts The Company manages its fixed and floating rate debt mix using interest rate swaps. The Company may use fixed and floating rate swaps to alter its exposure to the impact of changing interest rates on its consolidated results of operations and future cash outflows for interest. Floating rate swaps would be used, depending on market conditions, to convert the fixed rates of long-term debt into short-term variable rates. Fixed rate swaps would be used to reduce the Company’s risk of the possibility of increased interest costs. The cash paid and received from the settlement of interest rate swaps is included in interest expense. Fair Value Hedges At March 31, 2021, the Company had approximately $100 million notional amount of interest rate swaps that exchange a fixed rate of interest for variable rate (LIBOR) of interest plus a weighted average spread. These floating rate swaps are designated as fair value hedges against $100 million of principal on the 4.00% senior notes due 2024 for the remaining life of the note. The effective portion of the fair value gains or losses on these swaps is offset by fair value adjustments in the underlying debt. Cross-Currency Contracts The Company uses cross-currency swaps to hedge foreign currency risk on certain financing arrangements. The Company previously entered into two cross-currency swaps with an aggregate notional amount of $900 million, which were designated as net investment hedges of the Company's foreign currency exposure of its net investment in certain Euro-functional currency subsidiaries with Euro-denominated net assets. With these cross-currency swaps, which mature in January and February 2025, respectively, the Company pays a fixed rate of Euro-based interest and receives a fixed rate of U.S. dollar interest. The Company has elected the spot method for assessing the effectiveness of these contracts. During the three months ended March 31, 2021, the Company recognized income of $4 million in interest expense, net, related to the portion of cross-currency swaps excluded from hedge effectiveness testing. Foreign Currency Contracts The Company uses forward foreign currency contracts to mitigate the foreign currency exchange rate exposure on the cash flows related to forecasted inventory purchases and sales and have maturity dates through December 2021. The derivatives used to hedge these forecasted transactions that meet the criteria for hedge accounting are accounted for as cash flow hedges. The effective portion of the gains or losses on these derivatives is deferred as a component of AOCL until it is recognized in earnings at the same time that the hedged item affects earnings and is included in the same caption in the statements of operations as the underlying hedged item. At March 31, 2021, the Company had approximately $397 million notional amount outstanding of forward foreign currency contracts that are designated as cash flow hedges of forecasted inventory purchases and sales. The Company also uses foreign currency contracts, primarily forward contracts, to mitigate the exposure of foreign currency transactions. At March 31, 2021, the Company had approximately $879 million notional amount outstanding of these foreign currency contracts that are not designated as effective hedges for accounting purposes and have maturity dates through December 2021. Fair market value gains or losses are included in the results of operations and are classified in other (income) expense, net. The following table presents the fair value of derivative financial instruments at the dates indicated (in millions):
|  |  | Fair Value of Derivatives
|  |  | Assets (Liabilities)
| Balance Sheet Location |  | March 31, 2021 |  | December 31, 2020
Derivatives designated as effective hedges: |  |  |  |
Cash Flow Hedges |  |  |  |  |
Foreign currency contracts | Prepaid expenses and other current assets |  | $ | 3 |  |  | $ | 1 |
Foreign currency contracts | Other accrued liabilities |  | (11) |  |  | (19) |
Fair Value Hedges |  |  |  |  |
Interest rate swaps | Other assets |  | 5 |  |  | 7 |
Net Investment Hedges |  |  |  |  |
Cross-currency swaps | Prepaid expenses and other current assets |  | 7 |  |  | 10 |
Cross-currency swaps | Other noncurrent liabilities |  | (63) |  |  | (102) |
Derivatives not designated as effective hedges: |  |  |  |
Foreign currency contracts | Prepaid expenses and other current assets |  | 13 |  |  | 10 |
Foreign currency contracts | Other accrued liabilities |  | (5) |  |  | (17) |
Total |  |  | $ | (51) |  |  | $ | (110) |
The following table presents gain and (loss) activity (on a pre-tax basis) related to derivative financial instruments designated or previously designated, as effective hedges (in millions):
|  |  | Three Months Ended March 31, 2021 |  | Three Months Ended March 31, 2020
|  |  | Gain/(Loss) |  | Gain/(Loss)
| Location of gain/(loss) recognized in income |  | Recognized in OCI (effective portion) |  | Reclassified from AOCL to Income |  | Recognized in OCI (effective portion) |  | Reclassified from AOCL to Income
Interest rate swaps | Interest expense, net |  | $ | — |  |  | $ | (2) |  |  | $ | — |  |  | $ | (2) |
Foreign currency contracts | Net sales and cost of products sold |  | 3 |  |  | (2) |  |  | 35 |  |  | 1 |
Cross-currency swaps | Other (income) expense, net |  | 36 |  |  | — |  |  | 21 |  |  | — |
Total |  |  | $ | 39 |  |  | $ | (4) |  |  | $ | 56 |  |  | $ | (1) |
At March 31, 2021, net deferred losses of approximately $14 million within AOCL are expected to be reclassified to earnings over the next twelve months. During the three months ended March 31, 2021 and 2020, the Company recognized income of $7 million and $12 million, respectively, in other (income) expense, net, related to derivatives that are not designated as hedging instruments. Gains and losses on these derivatives are mostly offset by foreign currency movement in the underlying exposure.

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 http://asc.fasb.org/topic&trid=2229140 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration