XML 31 R20.htm IDEA: XBRL DOCUMENT
v3.21.2

Derivative Financial Instruments and Hedging Activities | 6 Months Ended
--- | ---
Jun. 30, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments and Hedging Activities | Derivative Financial Instruments and Hedging Activities Foreign Currency Derivatives The Company uses derivatives to facilitate cross-currency corporate payments by writing derivatives within its cross-border solution. The Company writes derivatives, primarily foreign currency forward contracts, and option contracts, mostly with small and medium size enterprises that are customers, and derives a currency spread from this activity. Derivative transactions associated with the Company's cross-border solution include: •Forward contracts, which are commitments to buy or sell at a future date a currency at a contract price and will be settled in cash. •Option contracts, which gives the purchaser the right, but not the obligation, to buy or sell within a specified time a currency at a contracted price that may be settled in cash. •Swap contracts, which are commitments to settlement in cash at a future date or dates, usually on an overnight basis. The credit risk inherent in derivative agreements represents the possibility that a loss may occur from the nonperformance of a counterparty to the agreements. Concentrations of credit and performance risk may exist with counterparties, which includes customers and banking partners, as we are engaged in similar activities with similar economic characteristics related to fluctuations in foreign currency rates. The Company performs a review of the credit risk of these counterparties at the inception of the contract and on an ongoing basis. The Company also monitors the concentration of its contracts with any individual counterparty against limits at the individual counterparty level. The Company anticipates that the counterparties will be able to fully satisfy their obligations under the agreements, but takes action when doubt arises about the counterparties' ability to perform. These actions may include requiring customers to post or increase collateral, and for all counterparties, if the counterparty does not perform under the term of the contract, the contract may be terminated. The Company does not designate any of its foreign exchange derivatives as hedging instruments in accordance with ASC 815. For derivatives accounted for as hedging instruments, the Company formally designates and documents, at inception, the financial instrument as a hedge of a specific underlying exposure, the risk management objective and the strategy for undertaking the hedge transaction. The Company formally assesses, both at the inception and at least quarterly thereafter, whether the financial instruments used in hedging transactions are effective at offsetting changes in cash flows of the related underlying exposures. Any ineffective portion of a financial instrument's change in fair value is immediately recognized in earnings. The aggregate equivalent U.S. dollar notional amount of foreign exchange derivative customer contracts held by the Company as of June 30, 2021 and December 31, 2020 (in millions) is presented in the table below.
| Notional
| June 30, 2021 |  | December 31, 2020
Foreign exchange contracts: |  |  |
Swaps | $ | 1,660.3 |  |  | $ | 684.5 |
Futures, forwards and spot | 7,355.5 |  |  | 5,467.8 |
Written options | 8,954.8 |  |  | 5,578.1 |
Purchased options | 8,399.2 |  |  | 5,195.0 |
Total | $ | 26,369.8 |  |  | $ | 16,925.4 |
The majority of customer foreign exchange contracts are written in currencies such as the U.S. dollar, Canadian dollar, British pound, euro and Australian dollar. The following table summarizes the fair value of foreign currency derivatives reported in the Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020 (in millions):
| June 30, 2021 |  |  |  |
| Fair Value, Gross |  | Fair Value, Net |  |
| Derivative Assets |  | Derivative Liabilities |  | Derivative Assets |  | Derivative Liabilities |  |  |  |
Derivatives - undesignated: |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts | $ | 319.1 |  |  | $ | 268.7 |  |  | $ | 165.8 |  |  | $ | 115.4 |  |  |  |  |
Cash collateral | 39.5 |  |  | 49.7 |  |  | 39.5 |  |  | 49.7 |  |  |  |  |
Total net of cash collateral | $ | 279.6 |  |  | $ | 219.0 |  |  | $ | 126.3 |  |  | $ | 65.7 |  |  |  |  |
| December 31, 2020 |  |  |  |
| Fair Value, Gross |  | Fair Value, Net |  |
| Derivative Assets |  | Derivative Liabilities |  | Derivative Assets |  | Derivative Liabilities |  |  |  |
Derivatives - undesignated: |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts | $ | 326.1 |  |  | $ | 310.5 |  |  | $ | 155.8 |  |  | $ | 140.3 |  |  |  |  |
Cash collateral | 18.2 |  |  | 38.6 |  |  | 18.2 |  |  | 38.6 |  |  |  |  |
Total net of cash collateral | $ | 307.9 |  |  | $ | 271.9 |  |  | $ | 137.6 |  |  | $ | 101.7 |  |  |  |  |
The fair values of derivative assets and liabilities associated with contracts, which include netting terms that the Company believes to be enforceable, have been recorded net within the Consolidated Balance Sheets. The Company receives cash from customers as collateral for trade exposures, which is recorded within cash and cash equivalents and customer deposits in the Consolidated Balance Sheets. The customer has the right to recall their collateral in the event exposures move in their favor, they perform on all outstanding contracts and have no outstanding amounts due to the Company, or they cease to do business with the Company. The Company has trading lines with several banks, most of which require collateral to be posted if certain MTM thresholds are exceeded. Cash collateral posted with banks is recorded within restricted cash and can be recalled in the event that exposures move in the Company’s favor or move below the collateral posting thresholds. The Company does not offset fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral. The table below presents the fair value of the Company’s derivative assets and liabilities, as well as their classification on the accompanying Consolidated Balance Sheets, as of June 30, 2021 and December 31, 2020 (in millions).
|  |  |  | June 30, 2021 |  | December 31, 2020
|  | Balance Sheet Classification |  | Fair Value
Derivative Asset |  | Other current assets |  | $ | 133.4 |  |  | $ | 139.3 |
Derivative Asset |  | Other noncurrent assets |  | $ | 32.4 |  |  | $ | 16.6 |
Derivative Liability |  | Other current liabilities |  | $ | 84.2 |  |  | $ | 127.7 |
Derivative Liability |  | Other noncurrent liabilities |  | $ | 31.2 |  |  | $ | 12.5 |
Cash Flow Hedges On January 22, 2019, the Company entered into three interest rate swap cash flow contracts (the "swap contracts"). The objective of these swap contracts is to reduce the variability of cash flows in the previously unhedged interest payments associated with $2.0 billion of variable rate debt, the sole source of which is due to changes in the LIBOR benchmark interest rate. As of June 30, 2021, the Company had the following outstanding interest rate derivatives that qualify as hedging instruments and are designated as cash flow hedges of interest rate risk (in millions):
|  | Notional Amount |  | Fixed Rates |  | Maturity Date
Interest Rate Derivative: |  |  |  |  |  |
Interest Rate Swap |  | $ | 1,000 |  |  | 2.56% |  | 1/31/2022
Interest Rate Swap |  | 500 |  |  | 2.56% |  | 1/31/2023
Interest Rate Swap |  | 500 |  |  | 2.55% |  | 12/19/2023
For each of these swap contracts, the Company pays a fixed monthly rate and receives one month LIBOR. The table below presents the fair value of the Company’s interest rate swap contracts, as well as their classification on the accompanying Consolidated Balance Sheets, as of June 30, 2021 and December 31, 2020 (in millions). See Note 3 for additional information on the fair value of the Company’s swap contracts.
|  |  | June 30, 2021 |  | December 31, 2020
| Balance Sheet Classification |  | Fair Value
Derivatives designated as cash flow hedges: |  |  |  |  |
Swap contracts | Other current liabilities |  | $ | 39.0 |  |  | $ | 49.3 |
Swap contracts | Other noncurrent liabilities |  | $ | 22.0 |  |  | $ | 38.6 |
The table below displays the effect of the Company’s derivative financial instruments in the Unaudited Consolidated Statements of Income and Other Comprehensive Income (Loss) for the six months ended June 30, 2021 and 2020 (in millions):
|  | Six Months Ended June 30,
|  | 2021 |  | 2020
Interest Rate Swaps: |  |  |  |
Amount of gain (loss) recognized in other comprehensive income (loss) on derivatives, net of tax of $(6.6) million and $28.2 million for 2021 and 2020, respectively |  | $ | 20.3 |  |  | $ | (42.6) |
Amount of loss reclassified from accumulated other comprehensive loss into interest expense |  | 24.5 |  |  | 14.7 |
The estimated net amount of the existing losses expected to be reclassified into earnings within the next 12 months is approximately $39.1 million at June 30, 2021.

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration