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Derivative Instruments and Hedging Activities
 3 Months Ended
Mar. 31, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities Derivative Instruments and Hedging Activities
Interest Rate Contracts
The Company and certain of its businesses have in place variable-rate debt. Management believes that it is prudent to limit the variability of a portion of the business’ interest payments. To meet this objective, the Company enters into interest rate agreements, primarily using interest rate swaps and from time to time using interest rate caps, to manage fluctuations in cash flows resulting from interest rate risk on a portion of its debt with a variable-rate component. Interest rate swaps change the variable-rate cash flow exposure on the debt obligations to fixed cash flows. Under the terms of the interest rate swaps, the Company receives variable interest rate payments and makes fixed interest rate payments, thereby creating the equivalent of fixed-rate debt for the portion of the debt that is swapped.
At March 31, 2020, the Company had $3,592 million of current and long-term debt, of which $865 million was economically hedged with interest rate contracts, $1,103 million was fixed rate debt and $1,624 million was unhedged. The Company does not use hedge accounting. All movements in the fair value of the interest rate derivatives are recorded directly through earnings.
Commodity Price Contracts
The risks associated with fluctuations in the prices that Hawaii Gas, a business within the MIC Hawaii reportable segment, pays for liquefied petroleum gas (LPG) is principally a result of market forces reflecting changes in supply and demand for LPG and other energy commodities. Hawaii Gas’ gross margin (revenue less cost of product sales excluding depreciation and amortization) is sensitive to changes in LPG supply costs and Hawaii Gas may not always be able to pass through cost increases fully or on a timely basis, particularly when product costs rise rapidly. In order to reduce the volatility of the business’ LPG market price risk, Hawaii Gas has used and expects to continue to use over-the-counter commodity derivative instruments. Hawaii Gas does not use commodity derivative instruments for speculative or trading purposes. Over-the-counter derivative instruments used by Hawaii Gas to hedge forecasted purchases of LPG are generally settled at expiration of the contract.
Financial Statement Location Disclosure for Derivative Instruments
The Company measures derivative instruments at fair value using the income approach which discounts the future net cash settlements expected under the derivative contracts to a present value. These valuations use primarily observable (level 2) inputs, including contractual terms, interest rates and yield curves observable at commonly quoted intervals.
The Company’s fair value measurements of its derivative instruments and the related location of the assets and liabilities within the consolidated condensed balance sheets at March 31, 2020 and December 31, 2019 were ($ in millions):
 
 
Assets (Liabilities) at Fair Value
Balance Sheet Classification
 
March 31,
2020
 
December 31, 2019
Fair value of derivative instruments - other current assets
 
$
—

 
$
3

Fair value of derivative instruments - other noncurrent assets
 
—

 
2

Total derivative contracts - assets
 
$
—

 
$
5

Fair value of derivative instruments - current liabilities
 
$
(13
)
 
$
(7
)
Fair value of derivative instruments - other noncurrent liabilities
 
(2
)
 
—

Total derivative contracts – liabilities
 
$
(15
)
 
$
(7
)

The Company’s hedging activities for the quarters ended March 31, 2020 and 2019 and the related location within the consolidated condensed statements of operations were ($ in millions):
Income Statement Classification
 
Amount of (Loss) Gain Recognized in
Consolidated Condensed Statements of Operations for the Quarters Ended March 31,
 
2020
 
2019
Interest expense - interest rate caps
 
$
(3
)
 
$
(2
)
Interest expense - interest rate swaps
 
(6
)
 
(2
)
Cost of product sales - commodity swaps
 
(5
)
 
1

Total
 
$
(14
)
 
$
(3
)