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Financial Instruments and Fair Value Measurements
 3 Months Ended
Mar. 31, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Financial Instruments and Fair Value Measurements

NOTE 9. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

 

Derivative Financial Instruments

 

In the normal course of business, our operations are exposed to market risks, including the effect of changes in foreign currency exchange rates and interest rates. We may enter into derivative financial instruments to offset these underlying market risks. There have been no significant changes in our policy and strategy from what was disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

 

The following table presents the fair value of our derivative financial instruments recognized within Other Assets and Other Liabilities in the Consolidated Balance Sheets (in thousands):

 

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

Asset

 

 

Liability

 

 

Asset

 

 

Liability

 

Undesignated derivatives

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency contracts

 

 

 

 

 

 

 

 

 

 

 

 

     Forwards

 

 

 

 

 

 

 

 

 

 

 

 

          Brazilian real

 

$

-

 

 

$

-

 

 

$

-

 

 

$

291

 

          British pound sterling

 

 

8,926

 

 

 

7,453

 

 

 

9,608

 

 

 

9,862

 

          Canadian dollar

 

 

6,916

 

 

 

183

 

 

 

4,480

 

 

 

1,225

 

          Chinese renminbi

 

 

2,158

 

 

 

-

 

 

 

1,630

 

 

 

50

 

          Euro

 

 

22,522

 

 

 

3,232

 

 

 

19,252

 

 

 

8,229

 

          Japanese yen

 

 

61,338

 

 

 

133

 

 

 

45,149

 

 

 

589

 

          Swedish krona

 

 

4,617

 

 

 

633

 

 

 

3,304

 

 

 

2,279

 

     Options

 

 

 

 

 

 

 

 

 

 

 

 

          Mexican peso

 

 

1,306

 

 

 

-

 

 

 

1,263

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Designated derivatives

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency contracts

 

 

 

 

 

 

 

 

 

 

 

 

     Net investment hedges

 

 

 

 

 

 

 

 

 

 

 

 

          British pound sterling

 

 

976

 

 

 

4,317

 

 

 

1,759

 

 

 

7,030

 

          Canadian dollar

 

 

68

 

 

 

1,045

 

 

 

756

 

 

 

5,608

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

 

 

 

 

 

 

 

 

 

 

 

     Cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

          Euro

 

 

-

 

 

 

20,835

 

 

 

118

 

 

 

27,034

 

          U.S. dollar

 

 

-

 

 

 

-

 

 

 

-

 

 

 

31,964

 

Total fair value of derivatives

 

$

108,827

 

 

$

37,831

 

 

$

87,319

 

 

$

94,161

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Undesignated Derivative Financial Instruments

 

Foreign Currency Contracts

 

The following table summarizes the activity of our undesignated foreign currency contracts for the three months ended March 31 (in millions, except for weighted average forward rates and number of active contracts):

 

 

2024

 

 

2023

 

 

CAD

 

 

EUR

 

 

GBP

 

 

JPY

 

 

Other

 

 

Total

 

 

CAD

 

 

EUR

 

 

GBP

 

 

JPY

 

Other

 

 

Total

 

Notional amounts at January 1 ($)

 

213

 

 

 

524

 

 

 

442

 

 

 

384

 

 

 

56

 

 

 

1,619

 

 

 

283

 

 

 

601

 

 

 

349

 

 

 

331

 

 

81

 

 

 

1,645

 

New contracts ($)

 

51

 

 

 

88

 

 

 

46

 

 

 

59

 

 

 

8

 

 

 

252

 

 

 

6

 

 

 

9

 

 

 

49

 

 

 

27

 

 

41

 

 

 

132

 

Matured, expired or settled contracts ($)

 

(7

)

 

 

(25

)

 

 

(39

)

 

 

(61

)

 

 

(9

)

 

 

(141

)

 

 

(54

)

 

 

(43

)

 

 

(22

)

 

 

(21

)

 

(7

)

 

 

(147

)

Notional amounts at March 31 ($)

 

257

 

 

 

587

 

 

 

449

 

 

 

382

 

 

 

55

 

 

 

1,730

 

 

 

235

 

 

 

567

 

 

 

376

 

 

 

337

 

 

115

 

 

 

1,630

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average forward rate at March 31

 

1.30

 

 

 

1.16

 

 

 

1.27

 

 

 

118.16

 

 

 

 

 

 

 

 

 

1.29

 

 

 

1.18

 

 

 

1.30

 

 

 

110.58

 

 

 

 

 

 

Active contracts at March 31

 

92

 

 

 

84

 

 

 

96

 

 

 

98

 

 

 

 

 

 

 

 

 

88

 

 

 

94

 

 

 

100

 

 

 

97

 

 

 

 

 

 

 

The following table summarizes the undesignated derivative financial instruments exercised and associated realized and unrealized gains (losses), respectively, in Foreign Currency, Derivative and Other Gains and Other Income, Net in the Consolidated Statements of Income (in millions, except for number of exercised contracts):

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Exercised contracts

 

 

45

 

 

 

52

 

Realized gains on the matured, expired or settled contracts

 

$

18

 

 

$

14

 

Unrealized gains (losses) on the change in fair value of outstanding contracts

 

$

29

 

 

$

(14

)

 

Designated Derivative Financial Instruments

 

Changes in the fair value of derivatives that are designated as net investment hedges ("NIHs") of our foreign operations and cash flow hedges ("CFHs") are recorded in Accumulated Other Comprehensive Income (Loss) (“AOCI/L”) in the Consolidated Balance Sheets and reflected within the AOCI/L table below.

 

Foreign Currency Contracts

 

The following table summarizes the activity of our foreign currency contracts designated as NIHs for the three months ended March 31 (in millions, except for weighted average forward rates and number of active contracts):

 

 

 

2024

 

 

2023

 

 

 

CAD

 

 

GBP

 

 

Total

 

 

CAD

 

 

CNH

 

 

GBP

 

 

Total

 

Notional amounts at January 1 ($)

 

 

516

 

 

 

432

 

 

 

948

 

 

 

534

 

 

 

-

 

 

 

440

 

 

 

974

 

New contracts ($)

 

 

47

 

 

 

92

 

 

 

139

 

 

 

119

 

 

 

100

 

 

 

-

 

 

 

219

 

Matured, expired or settled contracts ($)

 

 

(400

)

 

 

(93

)

 

 

(493

)

 

 

(124

)

 

 

-

 

 

 

-

 

 

 

(124

)

Notional amounts at March 31 ($)

 

 

163

 

 

 

431

 

 

 

594

 

 

 

529

 

 

 

100

 

 

 

440

 

 

 

1,069

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average forward rate at
     March 31

 

 

1.36

 

 

 

1.25

 

 

 

 

 

 

1.30

 

 

 

6.72

 

 

 

1.28

 

 

 

 

Active contracts at March 31

 

 

2

 

 

 

4

 

 

 

 

 

 

6

 

 

 

1

 

 

 

4

 

 

 

 

 

Interest Rate Contracts

 

The following table summarizes the activity of our interest rate contracts designated as CFHs for the three months ended March 31 (in millions):

 

 

 

2024

 

 

2023

 

 

 

 

EUR

 

 

USD

 

 

Total

 

 

EUR

 

 

USD

 

 

Total

 

 

Notional amounts at January 1 ($)

 

 

700

 

 

 

550

 

 

 

1,250

 

 

 

447

 

 

 

150

 

 

 

597

 

 

New contracts ($)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

434

 

 

 

550

 

 

 

984

 

 

Matured, expired or settled
     contracts ($)

 

 

(171

)

 

 

(550

)

 

 

(721

)

 

 

(709

)

 

 

(700

)

 

 

(1,409

)

 

Notional amounts at March 31 ($)

 

 

529

 

 

 

-

 

 

 

529

 

 

 

172

 

 

 

-

 

 

 

172

 

 

Designated Nonderivative Financial Instruments

The following table summarizes our debt and accrued interest, designated as a hedge of our net investment in international subsidiaries at the quarter ended (in millions):

 

 

 

March 31, 2024

 

 

December 31, 2023

 

British pound sterling

 

$

1,307

 

 

$

1,305

 

Canadian dollar

 

$

369

 

 

$

373

 

The following table summarizes the unrealized gains (losses) in Foreign Currency, Derivative and Other Gains and Other Income, Net in the Consolidated Statements of Income on the remeasurement of the unhedged portion of our euro-denominated and Chinese renminbi-denominated debt and accrued interest (in millions):

 

 

 

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Unrealized gains (losses) on the unhedged portion

 

$

10

 

 

$

(4

)

 

Accumulated Other Comprehensive Income (Loss) ("AOCI/L")

 

The change in AOCI/L in the Consolidated Statements of Equity during the periods presented was due to the following: i) the currency translation adjustments ("CTA") that we recognize due to the translation of the financial statements of our consolidated subsidiaries, whose functional currency is not the U.S. dollar, into U.S. dollars; and ii) the change in the fair value of the effective portion of our derivative financial instruments that have been designated as NIHs and CFHs and the translation of the hedged portion of our debt.

 

The following tables presents these changes in AOCI/L (in thousands):

 

 

 

Unrealized gains (losses) on CFHs (1)

 

 

Our share of derivatives from unconsolidated entities

 

 

Derivative NIHs

 

 

Debt designated as nonderivative NIHs (2)

 

 

CTA

 

 

Total AOCI/L

 

Balance at
     January 1, 2024

 

$

(45,744

)

 

$

8,414

 

 

$

310,526

 

 

$

254,102

 

 

$

(1,041,499

)

 

$

(514,201

)

Other comprehensive
     income (loss), net

 

 

19,096

 

 

 

5,149

 

 

 

16,162

 

 

 

14,369

 

 

 

174,030

 

 

 

228,806

 

Balance at
     March 31, 2024

 

$

(26,648

)

 

$

13,563

 

 

$

326,688

 

 

$

268,471

 

 

$

(867,469

)

 

$

(285,395

)

 

 

 

Unrealized gains (losses) on CFHs

 

 

Our share of derivatives from unconsolidated entities

 

 

Derivative NIHs

 

 

Debt designated as nonderivative NIHs (2)

 

 

CTA

 

 

Total AOCI/L

 

Balance at
     January 1, 2023

 

$

30,545

 

 

$

22,584

 

 

$

332,973

 

 

$

329,983

 

 

$

(1,159,694

)

 

$

(443,609

)

Other comprehensive
     income (loss), net

 

 

(18,693

)

 

 

(6,527

)

 

 

(8,163

)

 

 

(41,500

)

 

 

22,068

 

 

 

(52,815

)

Balance at
     March 31, 2023

 

$

11,852

 

 

$

16,057

 

 

$

324,810

 

 

$

288,483

 

 

$

(1,137,626

)

 

$

(496,424

)

 

(1)
We estimate an additional expense of $3.4 million will be reclassified to Interest Expense in the Consolidated Statements of Income over the next 12 months from March 31, 2024, due to the amortization of settled derivatives designated as cash flow hedges.

 

(2)
Reclassification of amounts out of AOCI/L due to the remeasurement of the unhedged portion of our euro-denominated and Chinese renminbi-denominated debt and accrued interest is included herein.

 

Fair Value Measurements

 

There have been no significant changes in our policy from what was disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

 

Fair Value Measurements on a Recurring Basis

 

At March 31, 2024 and December 31, 2023, other than the derivatives discussed previously, we had no significant financial assets or financial liabilities that were measured at fair value on a recurring basis in the Consolidated Financial Statements. All of our derivatives held at March 31, 2024 and December 31, 2023, were classified as Level 2 of the fair value hierarchy.

 

Fair Value Measurements on Nonrecurring Basis

 

Acquired properties and assets we expect to sell or contribute are significant nonfinancial assets that met the criteria to be measured at fair value on a nonrecurring basis. At March 31, 2024 and December 31, 2023, we estimated the fair value of our properties using Level 2 or Level 3 inputs from the fair value hierarchy. See more information on our acquired properties in Note 2 and assets held for sale or contribution in Note 4.

 

Fair Value of Financial Instruments

 

At March 31, 2024 and December 31, 2023, the carrying amounts of certain financial instruments, including cash and cash equivalents, accounts and notes receivable, accounts payable and accrued expenses were representative of their fair values.

 

The differences in the fair value of our debt from the carrying value in the table below were the result of differences in interest rates or borrowing spreads that were available to us at March 31, 2024 and December 31, 2023, as compared with those in effect when the debt was issued or assumed, including lower borrowing spreads due to our credit ratings. See Note 5 for more information on our debt activity.

 

The following table reflects the carrying amounts and estimated fair values of our debt (in thousands):

 

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

Carrying Value

 

 

Fair Value

 

 

Carrying Value

 

 

Fair Value

 

Credit facilities

 

$

1,031,266

 

 

$

1,031,266

 

 

$

979,313

 

 

$

979,313

 

Senior notes

 

 

26,500,864

 

 

 

24,067,338

 

 

 

25,311,647

 

 

 

23,121,936

 

Term loans and unsecured other

 

 

1,737,132

 

 

 

1,725,043

 

 

 

2,330,520

 

 

 

2,322,827

 

Secured mortgage

 

 

288,405

 

 

 

268,125

 

 

 

379,021

 

 

 

357,731

 

Total

 

$

29,557,667

 

 

$

27,091,772

 

 

$

29,000,501

 

 

$

26,781,807