FINANCIAL INSTRUMENTS

At June 30, 2018, the company had $3,020 million ($5,205 million at December 31, 2017) of held-to-maturity securities (primarily time deposits and money market funds) classified as cash equivalents, as these securities had maturities of three months or less at the time of purchase; and $374 million ($952 million at December 31, 2017) of held-to-maturity securities (primarily time deposits) classified as marketable securities as these securities had maturities of more than three months to less than one year at the time of purchase. The company’s investments in held-to-maturity securities are held at amortized cost, which approximates fair value. These securities are included in cash and cash equivalents, marketable securities, and other current assets in the consolidated balance sheets.

Derivative Instruments

Objectives and Strategies for Holding Derivative Instruments

In the ordinary course of business, the company enters into contractual arrangements (derivatives) to reduce its exposure to foreign currency, interest rate and commodity price risks. The company has established a variety of derivative programs to be utilized for financial risk management. These programs reflect varying levels of exposure coverage and time horizons based on an assessment of risk.

Derivative programs have procedures and controls and are approved by the Corporate Financial Risk Management Committee, consistent with the company's financial risk management policies and guidelines. Derivative instruments used are forwards, options, futures and swaps. The company has not designated any nonderivatives as hedging instruments.

The company's financial risk management procedures also address counterparty credit approval, limits and routine exposure monitoring and reporting. The counterparties to these contractual arrangements are major financial institutions and major commodity exchanges. The company is exposed to credit loss in the event of nonperformance by these counterparties. The company utilizes collateral support annex agreements with certain counterparties to limit its exposure to credit losses. The company anticipates performance by counterparties to these contracts and therefore no material loss is expected. Market and counterparty credit risks associated with these instruments are regularly reported to management.

The notional amounts of the company's derivative instruments were as follows:



Notional Amounts	Successor
(In millions)	June 30, 2018		December 31, 2017
Derivatives designated as hedging instruments:
Commodity contracts	$	145	$	587
Derivatives not designated as hedging instruments:
Foreign currency contracts	3,866		3,922
Commodity contracts	8		6

Foreign Currency Risk

The company's objective in managing exposure to foreign currency fluctuations is to reduce earnings and cash flow volatility associated with foreign currency rate changes. Accordingly, the company enters into various contracts that change in value as foreign exchange rates change to protect the value of its existing foreign currency-denominated assets, liabilities, commitments and cash flows.

The company routinely uses forward exchange contracts to offset its net exposures, by currency, related to the foreign currency denominated monetary assets and liabilities of its operations. The primary business objective of this hedging program is to maintain an approximately balanced position in foreign currencies so that exchange gains and losses resulting from exchange rate changes, net of related tax effects, are minimized. The company also uses foreign currency exchange contracts to offset a portion of the company's exposure to certain foreign currency-denominated revenues so that gains and losses on these contracts offset changes in the USD value of the related foreign currency-denominated revenues. The objective of the hedge program is to reduce earnings and cash flow volatility related to changes in foreign currency exchange rates.

Commodity Price Risk

Commodity price risk management programs serve to reduce exposure to price fluctuations on purchases of inventory such as corn, soybeans, soybean oil and soybean meal. The company enters into over-the-counter and exchange-traded derivative commodity instruments to hedge the commodity price risk associated with agricultural commodity exposures.

Derivatives Designated as Cash Flow Hedges

Commodity Contracts

The company enters into over-the-counter and exchange-traded derivative commodity instruments, including options, futures and swaps, to hedge the commodity price risk associated with agriculture commodity exposures.

While each risk management program has a different time maturity period, most programs currently do not extend beyond the next two-year period. Cash flow hedge results are reclassified into earnings during the same period in which the related exposure impacts earnings. Reclassifications are made sooner if it appears that a forecasted transaction is not probable of occurring.

The following table summarizes the after-tax effect of cash flow hedges on accumulated other comprehensive loss:



	Successor			Predecessor			Successor			Predecessor
(In millions)	Three Months Ended June 30, 2018			Three Months Ended June 30, 2017			Six Months Ended June 30, 2018			Six Months Ended June 30, 2017
Beginning balance	$	9		$	4		$	(2	)	$	7
Additions and revaluations of derivatives designated as cash flow hedges	(12		)	—			—			2
Clearance of hedge results to earnings	(4		)	(8		)	(5		)	(13		)
Ending balance	$	(7	)	$	(4	)	$	(7	)	$	(4	)

At June 30, 2018, an after-tax net loss of $5 million is expected to be reclassified from accumulated other comprehensive loss into earnings over the next twelve months.

Derivatives not Designated in Hedging Relationships

Foreign Currency Contracts

The company routinely uses forward exchange contracts to reduce its net exposure, by currency, related to foreign currency-denominated monetary assets and liabilities of its operations so that exchange gains and losses resulting from exchange rate changes are minimized. The netting of such exposures precludes the use of hedge accounting; however, the required revaluation of the forward contracts and the associated foreign currency-denominated monetary assets and liabilities intends to achieve a minimal earnings impact, after taxes. The company also uses foreign currency exchange contracts to offset a portion of the company's exposure to certain foreign currency-denominated revenues so that gains and losses on the contracts offset changes in the USD value of the related foreign currency-denominated revenues.

Commodity Contracts

The company utilizes options, futures and swaps that are not designated as hedging instruments to reduce exposure to commodity price fluctuations on purchases of inventory such as corn, soybeans, soybean oil and soybean meal.

Fair Value of Derivative Instruments

Asset and liability derivatives subject to an enforceable master netting arrangement with the same counterparty are presented on a net basis in the interim Condensed Consolidated Balance Sheets. The presentation of the company's derivative assets and liabilities is as follows:



		Successor
		June 30, 2018
(In millions)	Balance Sheet Location	Gross		Counterparty and Cash Collateral Netting¹			Net Amounts Included in the Condensed Consolidated Balance Sheet
Asset derivatives:
Derivatives not designated as hedging instruments:
Foreign currency contracts	Other current assets	$	153	$	(35	)	$	118
Commodity contracts	Other current assets	4		—			4
Total asset derivatives		$	157	$	(35	)	$	122

Liability derivatives:
Derivatives not designated as hedging instruments:
Foreign currency contracts	Accrued and other current liabilities	$	35	$	9		$	44
Total liability derivatives		$	35	$	9		$	44


^1.	Counterparty and cash collateral amounts represent the estimated net settlement amount when applying netting and set-off rights included in master netting arrangements between the company and its counterparties and the payable or receivable for cash collateral held or placed with the same counterparty.



		Successor
		December 31, 2017
(In millions)	Balance Sheet Location	Gross		Counterparty and Cash Collateral Netting¹			Net Amounts Included in the Condensed Consolidated Balance Sheet
Asset derivatives:
Derivatives not designated as hedging instruments:
Foreign currency contracts	Other current assets	$	46	$	(37	)	$	9
Total asset derivatives		$	46	$	(37	)	$	9

Liability derivatives:
Derivatives not designated as hedging instruments:
Foreign currency contracts	Accrued and other current liabilities	$	79	$	(32	)	$	47
Total liability derivatives		$	79	$	(32	)	$	47


^1.	Counterparty and cash collateral amounts represent the estimated net settlement amount when applying netting and set-off rights included in master netting arrangements between the company and its counterparties and the payable or receivable for cash collateral held or placed with the same counterparty.

Effect of Derivative Instruments



	Amount of (Loss) Gain Recognized in OCI¹ - Pre-Tax
	Successor			Predecessor		Successor		Predecessor
(In millions)	Three Months Ended June 30, 2018			Three Months Ended June 30, 2017		Six Months Ended June 30, 2018		Six Months Ended June 30, 2017
Derivatives designated as hedging instruments:
Cash flow hedges:
Commodity contracts	$	(15	)	$	—	$	1	$	4
Total derivatives designated as hedging instruments	(15		)	—		1		4
Total derivatives	$	(15	)	$	—	$	1	$	4


^1.	OCI is defined as other comprehensive income (loss).



	Amount of Gain (Loss) Recognized in Income - Pre-Tax¹
	Successor		Predecessor			Successor			Predecessor
(In millions)	Three Months Ended June 30, 2018		Three Months Ended June 30, 2017			Six Months Ended June 30, 2018			Six Months Ended June 30, 2017
Derivatives designated as hedging instruments:
Cash flow hedges:
Commodity contracts²	$	6	$	13		$	7		$	21
Total derivatives designated as hedging instruments	6		13			7			21
Derivatives not designated as hedging instruments:
Foreign currency contracts³	177		(86		)	(4		)	(171		)
Foreign currency contracts⁴	—		(1		)	—			(1		)
Commodity contracts²	8		—			5			4
Total derivatives not designated as hedging instruments	185		(87		)	1			(168		)
Total derivatives	$	191	$	(74	)	$	8		$	(147	)


^1.	For cash flow hedges, this represents the portion of the gain (loss) reclassified from accumulated OCI into income during the period.


^2.	Recorded in cost of goods sold.


^3.	Gain recognized in sundry income (expense) - net was partially offset by the related gain on the foreign currency-denominated monetary assets and liabilities of the company's operations. See Note 8 for additional information.


^4.	Recorded in net sales.