Risk Management

12 Months Ended

Dec. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Risk Management

Risk Management

Foreign Currency Risk

The Company had outstanding foreign exchange contracts with notional amounts totaling $1.3 billion and $1.1 billion at December 31, 2023 and December 31, 2022, respectively. The Company does not believe these financial instruments should subject it to undue risk due to foreign exchange movements because gains and losses on these contracts should generally offset gains and losses on the underlying assets, liabilities and transactions.

The following table shows the Company's five largest net notional amounts of the positions to buy or sell foreign currency as of December 31, 2023 and the corresponding positions as of December 31, 2022:

	Notional Amount
Net Buy (Sell) by Currency	2023		2022
Euro	$	322	$	185
British pound	252		290
Australian dollar	(140)		(130)
Canadian dollar	76		—
Chinese renminbi	(66)		(61)

 Counterparty Risk

The use of derivative financial instruments exposes the Company to counterparty credit risk in the event of non-performance by counterparties. However, the Company’s risk is limited to the fair value of the instruments when the derivative is in an asset position. The Company actively monitors its exposure to credit risk. As of December 31, 2023, all of the counterparties had investment grade credit ratings. As of December 31, 2023, the credit risk with all derivative counterparties was approximately $14 million.

Derivative Financial Instruments

The following tables summarize the fair values and location in the Consolidated Balance Sheet of all derivative financial instruments held by the Company at December 31, 2023 and 2022:

	Fair Values of Derivative Instruments
December 31, 2023	Other Current Assets		Accrued Liabilities
Derivatives designated as hedging instruments:
Foreign exchange contracts	$	1	$	3
Treasury rate lock	—		$	12
Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	12	$	1
Equity swap contracts	$	1	$	—
Total derivatives	$	14	$	16

	Fair Values of Derivative Instruments
December 31, 2022	Other Current Assets		Accrued Liabilities
Derivatives designated as hedging instruments:
Foreign exchange contracts	$	—	$	5
Derivatives not designated as hedging instruments:
Foreign exchange contracts	15		—
Total derivatives	$	15	$	5

The following table summarizes the effect of derivatives on the Company's consolidated financial statements for the years ended December 31, 2023, 2022 and 2021: 

	Financial Statement Location
		2023		2022		2021
Derivatives designated as hedging instruments:
Foreign exchange contracts	Accumulated other comprehensive income (loss)	$	(4)	$	12	$	13
Forward points recognized	Other income (expense)	$	3	$	2	$	1
Treasury rate lock	Accumulated other comprehensive income (loss)	$	(12)	$	—	$	—
Derivatives not designated as hedging instruments:
Foreign exchange contracts	Other income (expense)	$	20	$	(61)	$	(30)
Equity swap contracts	Selling, general and administrative expenses	$	1	$	—	$	—

Net Investment Hedges

The Company uses foreign exchange forward contracts to hedge against the effect of the British pound and the Euro exchange rate fluctuations against the U.S. dollar on a portion of its net investment in certain European operations. The Company recognizes changes in the fair value of the net investment hedges as a component of foreign currency translation adjustments within other comprehensive income to offset a portion of the change in translated value of the net investments being hedged, until the investments are sold or liquidated. As of December 31, 2023, the Company had €100 million of net investment hedges in certain Euro functional subsidiaries and £60 million of net investment hedges in certain British pound functional subsidiaries.

The Company excludes the difference between the spot rate and the forward rate of the forward contract from its assessment of hedge effectiveness. The effect of the forward points recognized is amortized on a straight line basis and recognized through interest expense within Other income (expense) in the Consolidated Statement of Operations.

Equity Swap Contracts

During the year ended December 31, 2023, the Company entered into equity swap contracts which serve as economic hedges against volatility within the equity markets, impacting the Company's deferred compensation plan obligations. These contracts are not designated as hedges for accounting purposes. Unrealized gains and losses on these contracts are included in Selling, general and administrative expenses in the Consolidated Statements of Operations. The notional amount of these contracts as of December 31, 2023 was $15 million.

Treasury Rate Lock

In order to manage interest rate exposure, during the year ended December 31, 2023, the Company entered into Treasury rate lock agreements to protect against unfavorable interest rate changes relating to forecasted debt transactions. These derivatives are designated as cash flow hedges with unrealized gains and losses deferred in other comprehensive income. The derivatives will be settled upon the issuance of the related debt and gains and losses generated from the derivatives will be recognized within interest expense over the same period that the hedged interest payments affect earnings. The Company entered into Treasury rate lock agreements in a cash flow hedging relationship with a notional amount of $200 million as of December 31, 2023 and did not enter into any such agreements as of December 31, 2022.