XML 40 R29.htm IDEA: XBRL DOCUMENT v3.20.2
Derivative Financial Instruments
 6 Months Ended
Jun. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments DERIVATIVE FINANCIAL INSTRUMENTS
For purposes of mitigating the effect of changes in exchange rates, we hold derivative financial instruments to hedge the risks of certain identifiable and anticipated transactions and recorded assets and liabilities in our consolidated balance sheets. The types of risks hedged are those relating to the variability of future earnings and cash flows caused by movements in foreign currency exchange rates. Our policy is to hold derivatives only for the purpose of hedging risks associated with anticipated foreign currency purchases and sales created in the normal course of business, and not for trading purposes where the objective is solely to generate profit.
Generally, we enter into hedging relationships such that changes in the fair values or cash flows of the transactions being hedged are expected to be offset by corresponding changes in the fair value of the derivatives. For derivative instruments that qualify as a cash flow hedge, the effective portion of the gain or loss of the derivative, which does not include the time value component of a forward currency rate, is reported as a component of other comprehensive income (“OCI”) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. For derivative instruments not designated as hedging instruments, any change in the fair value of those instruments is reflected in earnings in the period such change occurs.
We hold the following types of derivative instruments:
Foreign exchange rate forward contracts - The purpose of these instruments is to hedge the risk of changes in future cash flows of anticipated purchase or sale commitments denominated in foreign currencies and recorded assets and liabilities in our consolidated balance sheets. At June 30, 2020, we held the following material net positions:
Net Notional Amount
Bought (Sold)
(In millions)USD Equivalent
Euro1,915.9  2,144.9  
Brazilian real7,480.0  1,365.9  
British pound644.3  790.8  
Norwegian krone1,796.3  184.3  
Malaysian ringgit485.6  113.3  
Singapore dollar106.7  76.3  
Indian rupee2,072.5  27.4  
Japanese yen2,157.7  20.0  
Colombian peso51,238.2  13.6  
Hong Kong dollar(94.5) (12.2) 
Mexican peso(460.7) (19.9) 
Australian dollar(29.7) (20.3) 
Canadian dollar(89.8) (65.6) 
U.S. dollar(2,337.4) (2,337.4) 
Foreign exchange rate instruments embedded in purchase and sale contracts - The purpose of these instruments is to match offsetting currency payments and receipts for particular projects or comply with government restrictions on the currency used to purchase goods in certain countries. At June 30, 2020, our portfolio of these instruments included the following material net positions:
Net Notional Amount
Bought (Sold)
(In millions)USD Equivalent
Brazilian real76.5  14.0  
Euro(6.4) (7.2) 
Norwegian krone(103.0) (10.6) 
U.S. dollar1.7  1.7  
Fair value amounts for all outstanding derivative instruments have been determined using available market information and commonly accepted valuation methodologies. See Note 21 for further details. Accordingly, the estimates presented may not be indicative of the amounts that we would realize in a current market exchange and may not be indicative of the gains or losses we may ultimately incur when these contracts are settled.
The following table presents the location and fair value amounts of derivative instruments reported in the consolidated balance sheets:
June 30, 2020December 31, 2019
(In millions)AssetsLiabilitiesAssetsLiabilities
Derivatives designated as hedging instruments
Foreign exchange contracts
Current - Derivative financial instruments$184.9  $298.3  $94.3  $125.0  
Long-term - Derivative financial instruments77.1  67.0  34.8  48.0  
Total derivatives designated as hedging instruments262.0  365.3  129.1  173.0  
Derivatives not designated as hedging instruments
Foreign exchange contracts
Current - Derivative financial instruments17.0  10.2  7.6  16.3  
Long-term - Derivative financial instruments—  0.1  0.4  0.4  
Total derivatives not designated as hedging instruments17.0  10.3  8.0  16.7  
Long-term - Derivative financial instruments - Synthetic Bonds - Call Option Premium0.1  —  4.3  —  
Long-term - Derivative financial instruments - Synthetic Bonds - Embedded Derivatives—  0.1  —  4.3  
Total derivatives$279.1  $375.7  $141.4  $194.0  
Cash flow hedges of forecasted transactions qualifying for hedge accounting, net of tax, resulted in accumulated other comprehensive losses of $55.8 million and $5.8 million at June 30, 2020 and December 31, 2019, respectively. We expect to transfer an approximate $33.6 million loss from accumulated OCI to earnings during the next 12 months when the anticipated transactions actually occur. All anticipated transactions currently being hedged are expected to occur by the second half of 2023.
The following table presents the gains (losses) recognized in other comprehensive income related to derivative instruments designated as cash flow hedges:
Gain (Loss) Recognized in OCI
Three Months EndedSix Months Ended
June 30,June 30,
(In millions)2020201920202019
Foreign exchange contracts$41.7  $(13.6) $(70.3) $3.0  
The following represents the effect of cash flow hedge accounting on the consolidated statements of income for the three and six months ended June 30, 2020 and 2019:

(In millions)Three Months Ended June 30, 2020Three Months Ended June 30, 2019
Total amount of income (expense) presented in the consolidated statements of income associated with hedges and derivativesRevenueCost of salesSelling,
general
and
administrative
expense		Other income (expense), netRevenueCost of salesSelling,
general
and
administrative
expense		Other income (expense), net
Cash Flow hedge gain (loss) recognized in income
Foreign Exchange Contracts
Amounts reclassified from accumulated OCI to income$(11.3) $10.2  $(0.4) $(2.2) $(13.2) $2.3  $—  $1.0  
Amounts excluded from effectiveness testing0.2  (0.5) (0.1) 19.8  (0.8) 1.9  —  (12.5) 
Total cash flow hedge gain (loss) recognized in income(11.1) 9.7  (0.5) 17.6  (14.0) 4.2  —  (11.5) 
Total hedge gain (loss) recognized in income$(11.1) $9.7  $(0.5) $17.6  $(14.0) $4.2  $—  $(11.5) 
Gain (loss) recognized in income on derivatives not designated as hedging instruments(0.5) 0.2  —  (13.4) (0.1) (0.1) —  8.3  
Total$(11.6) $9.9  $(0.5) $4.2  $(14.1) $4.1  $—  $(3.2) 

(In millions)Six Months Ended June 30, 2020Six Months Ended June 30, 2019
Total amount of income (expense) presented in the consolidated statements of income associated with hedges and derivativesRevenueCost of salesSelling,
general
and
administrative
expense		Other income (expense), netRevenueCost of salesSelling,
general
and
administrative
expense		Other income (expense), net
Cash Flow hedge gain (loss) recognized in income
Foreign Exchange Contracts
Amounts reclassified from accumulated OCI to income$(22.4) $20.0  $(0.4) $(1.2) $(12.5) $4.9  $0.1  $(1.4) 
Amounts excluded from effectiveness testing1.4  (2.7) (0.1) 8.2  (1.1) (2.2) —  (22.1) 
Total cash flow hedge gain (loss) recognized in income(21.0) 17.3  (0.5) 7.0  (13.6) 2.7  0.1  (23.5) 
Total hedge gain (loss) recognized in income$(21.0) $17.3  $(0.5) $7.0  $(13.6) $2.7  $0.1  $(23.5) 
Gain (loss) recognized in income on derivatives not designated as hedging instruments(0.6) 0.8  —  (22.1) (1.1) (0.1) —  5.0  
Total$(21.6) $18.1  $(0.5) $(15.1) $(14.7) $2.6  $0.1  $(18.5) 
Balance Sheet Offsetting - We execute derivative contracts with counterparties that consent to a master netting agreement, which permits net settlement of the gross derivative assets against gross derivative liabilities. Each instrument is accounted for individually and assets and liabilities are not offset. As of June 30, 2020 and December 31, 2019, we had no collateralized derivative contracts. The following tables present both gross information and net information of recognized derivative instruments:
June 30, 2020December 31, 2019
(In millions)Gross Amount RecognizedGross Amounts Not Offset, Permitted Under Master Netting AgreementsNet AmountGross Amount RecognizedGross Amounts Not Offset, Permitted Under Master Netting AgreementsNet Amount
Derivative assets$279.1  $(187.9) $91.2  $141.4  $(112.5) $28.9  
Derivative liabilities$375.7  $(187.9) $187.8  $194.0  $(112.5) $81.5