Derivative Financial Instruments

The Company’s derivative financial instruments include foreign currency forward contracts and treasury lock contracts, which are entered into for risk management purposes.

Foreign Currency Forward Contracts. The Company’s U.S. and foreign businesses enter into contracts with customers, subcontractors or vendors that are denominated in currencies other than their functional currencies. To protect the functional currency equivalent cash flows associated with certain of these contracts, the Company enters into foreign currency forward contracts. The Company’s activities involving foreign currency forward contracts are designed to hedge the changes in the functional currency equivalent cash flows due to movements in foreign exchange rates compared to the functional currency. The foreign currencies hedged are primarily the U.S. dollar, the Canadian dollar, the Euro, the British pound, the United Arab Emirates dirham and the New Zealand dollar. The Company manages exposure to counterparty non-performance credit risk by entering into foreign currency forward contracts only with major financial institutions that are expected to fully perform under the terms of such contracts. Foreign currency forward contracts are recorded in the Company’s condensed consolidated balance sheets at fair value and are generally designated and accounted for as cash flow hedges in accordance with the accounting standards for derivative instruments and hedging activities. Gains and losses on designated foreign currency forward contracts that are highly effective in offsetting the corresponding change in the cash flows of the hedged transactions are recorded net of income taxes in AOCI and then recognized in income when the underlying hedged transaction affects income. Gains and losses on foreign currency forward contracts that do not meet hedge accounting criteria are recognized in income immediately. Notional amounts are used to measure the volume of foreign currency forward contracts and do not represent exposure to foreign currency losses. The table below presents the notional amounts of the Company’s outstanding foreign currency forward contracts by currency at March 29, 2019.



Currency	Notional Amounts
	(in millions)
U.S. dollar	$	197
Canadian dollar	85
Euro	75
British pound	11
United Arab Emirates dirham	9
New Zealand dollar	9
Total	$	386

At March 29, 2019, the Company’s foreign currency forward contracts had maturities through 2023.

Treasury Lock Contracts. The Company uses treasury lock contracts principally to reduce its exposure to market risks from changes in interest rates. The Company does not enter into or hold interest rate swap contracts for speculative or trading purposes. The Company is exposed to the impact of interest rate changes primarily through its borrowing activities. The Company’s treasury lock contracts are designated for hedge accounting.

In January 2019, the Company entered into two treasury lock contracts to fix the treasury yield component of the interest cost of forecasted refinancing associated with the $650 million of 4.95% Senior Notes due 2021. The treasury lock contracts are scheduled to terminate on February 12, 2021.

The Company has designated these treasury lock contracts as cash flow hedges of an anticipated transaction. Any unrealized gains and losses associated with the treasury locks are recorded as a component of accumulated other comprehensive income. Unrealized gains occur when interest rates increase, conversely, any unrealized losses occur when interest rates decline. Upon termination of the treasury lock contracts, the Company will recognize any unrealized gains or losses over the life of the related financing arrangement. As of March 29, 2019 the Company recorded unrealized hedging losses of $12 million, net of taxes due to a decline in the 10-year treasury rate.

The table below presents the location of the Company’s derivative instruments recorded at fair value on the condensed consolidated balance sheets.



	March 29, 2019								December 31, 2018
	Other Current Assets		Other Assets		Other Current Liabilities		Other Liabilities		Other Current Assets		Other Assets		Other Current Liabilities		Other Liabilities
	(in millions)
Derivatives designated as hedging instruments:
Foreign currency forward contracts⁽¹⁾	$	2	$	1	$	7	$	2	$	1	$	—	$	13	$	4
Treasury lock contracts⁽¹⁾	—		—		—		16		—		—		—		—
Total derivative instruments	$	2	$	1	$	7	$	18	$	1	$	—	$	13	$	4

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⁽¹⁾	See Note 14 for a description of the fair value hierarchy related to the Company’s foreign currency forward contracts and treasury lock contracts.

The effects from foreign currency forward contracts on the unaudited condensed consolidated statements of operations were a pre-tax gain of $1 million for each of the quarterly periods ended March 29, 2019 and March 30, 2018. At March 29, 2019, the estimated net amount of existing losses that are expected to be reclassified into income within the next 12 months was $5 million.