XML 28 R17.htm IDEA: XBRL DOCUMENT
v3.10.0.1

DERIVATIVES (Notes) | 3 Months Ended
--- | ---
Jan. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVES | DERIVATIVES We are exposed to foreign currency exchange rate fluctuations and interest rate changes in the normal course of our business. As part of our risk management strategy, we use derivative instruments, primarily forward contracts, purchased options to hedge economic and/or accounting exposures resulting from changes in foreign currency exchange rates. Fair Value Hedges We are exposed to interest rate risk due to the mismatch between the interest expense we pay on our loans at fixed rates and the variable rates of interest we receive from cash, cash equivalents and other short-term investments. We have issued long-term debt in U.S. dollars at fixed interest rates based on the market conditions at the time of financing. The fair value of our fixed rate debt changes when the underlying market rates of interest change, and, in the past, we have used interest rate swaps to change our fixed interest rate payments to U.S. dollar LIBOR-based variable interest expense to match the floating interest income from our cash, cash equivalents and other short-term investments. As of January 31, 2019, all interest rate swap contracts had either been terminated or had expired. On August 9, 2011, we terminated five interest rate swap contracts related to our 2020 senior notes that represented the notional amount of $500 million. The remaining gain to be amortized at January 31, 2019 was $6 million. All deferred gains from terminated interest rate swaps are being amortized over the remaining life of the 2020 senior notes. Cash Flow Hedges We enter into foreign exchange contracts to hedge our forecasted operational cash flow exposures resulting from changes in foreign currency exchange rates. These foreign exchange contracts, carried at fair value, have maturities between one and twelve months. These derivative instruments are designated and qualify as cash flow hedges under the criteria prescribed in the authoritative guidance and are assessed for effectiveness against the underlying exposure every reporting period. For open contracts as of January 31, 2019 and entered into prior to November 1, 2018, changes in the time value of the foreign exchange contract are excluded from the assessment of hedge effectiveness and are recognized in cost of sales each period. For open contracts as of January 31, 2019 and entered into on or after November 1, 2018, changes in the time value of the foreign exchange contract are excluded from the assessment of hedge effectiveness and are recognized in cost of sales over the life of the foreign exchange contract. The changes in fair value of the effective portion of the derivative instrument are recognized in accumulated other comprehensive income (loss). Amounts associated with cash flow hedges are reclassified to cost of sales in the condensed consolidated statement of operations when the forecasted transaction occurs. If it becomes probable that the forecasted transaction will not occur, the hedge relationship will be de-designated and amounts accumulated in other comprehensive income (loss) will be reclassified to other income (expense) in the current period. Changes in the fair value of the ineffective portion of derivative instruments are recognized in other income (expense) in the condensed consolidated statement of operations in the current period. We record the premium paid (time value) of an option on the date of purchase as an asset. For options designated as cash flow hedges, changes in the time value are excluded from the assessment of hedge effectiveness and are recognized in cost of sales over the life of the option contract. For the three months ended January 31, 2019 and 2018 ineffectiveness and gains and losses recognized in other income (expense) due to de-designation of cash flow hedge contracts were not significant. In July 2012, Agilent executed treasury lock agreements for $400 million in connection with future interest payments to be made on our 2022 senior notes issued on September 10, 2012. We designated the treasury lock as a cash flow hedge. The treasury lock contracts were terminated on September 10, 2012 and we recognized a deferred gain in accumulated other comprehensive income which is being amortized to interest expense over the life of the 2022 senior notes. The remaining gain to be amortized related to the treasury lock agreements at January 31, 2019 was $1 million. In February 2016, Agilent executed three forward-starting pay fixed/receive variable interest rate swaps for the notional amount of $300 million in connection with future interest payments to be made on our 2026 senior notes issued on September 15, 2016. These derivative instruments were designated and qualified as cash flow hedges under the criteria prescribed in the authoritative guidance. The swap arrangements were terminated on September 15, 2016 with a payment of $10 million and we recognized this as a deferred loss in accumulated other comprehensive income which is being amortized to interest expense over the life of the 2026 senior notes. The remaining loss to be amortized related to the interest rate swap agreements at January 31, 2019 was $7 million. Other Hedges Additionally, we enter into foreign exchange contracts to hedge monetary assets and liabilities that are denominated in currencies other than the functional currency of our subsidiaries. These foreign exchange contracts are carried at fair value and do not qualify for hedge accounting treatment and are not designated as hedging instruments. Changes in value of the derivative instruments are recognized in other income (expense) in the condensed consolidated statement of operations, in the current period, along with the offsetting foreign currency gain or loss on the underlying assets or liabilities. Our use of derivative instruments exposes us to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement. We do, however, seek to mitigate such risks by limiting our counterparties to major financial institutions which are selected based on their credit ratings and other factors. We have established policies and procedures for mitigating credit risk that include establishing counterparty credit limits, monitoring credit exposures, and continually assessing the creditworthiness of counterparties. A number of our derivative agreements contain threshold limits to the net liability position with counterparties and are dependent on our corporate credit rating determined by the major credit rating agencies. The counterparties to the derivative instruments may request collateralization, in accordance with derivative agreements, on derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position as of January 31, 2019, was $3 million. The credit-risk-related contingent features underlying these agreements had not been triggered as of January 31, 2019. There were 207 foreign exchange forward contracts open as of January 31, 2019 and designated as cash flow hedges. There were 169 foreign exchange forward contracts open as of January 31, 2019 not designated as hedging instruments. The aggregated notional amounts by currency and designation as of January 31, 2019 were as follows:
|  | Derivatives Designated as Cash Flow Hedges |  | Derivatives Not Designated as Hedging Instruments
|  | Forward Contracts USD |  | Forward Contracts USD
Currency |  | Buy/(Sell) |  | Buy/(Sell)
|  | (in millions)
Euro |  | $ | (48 | ) |  | $ | 40 |
British Pound |  | (57 | ) |  | 5 |
Canadian Dollar |  | (34 | ) |  | 8 |
Australian Dollar |  | 4 |  |  | 4 |
Malaysian Ringgit |  | — |  |  | (5 | )
Japanese Yen |  | (92 | ) |  | 11 |
Danish Krone |  | — |  |  | 7 |
Korean Won |  | (39 | ) |  | (36 | )
Singapore Dollar |  | 14 |  |  | 2 |
Swiss Franc |  | — |  |  | (9 | )
Chinese Yuan Renminbi |  | (44 | ) |  | (46 | )
Polish Zloty |  | — |  |  | (3 | )
Swedish Krona |  | — |  |  | (9 | )
Other |  | — |  |  | (23 | )
Totals |  | $ | (296 | ) |  | $ | (54 | )
Derivative instruments are subject to master netting arrangements and are disclosed gross in the balance sheet in accordance with the authoritative guidance. The gross fair values and balance sheet location of derivative instruments held in the consolidated balance sheet as of January 31, 2019 and October 31, 2018 were as follows:
Fair Values of Derivative Instruments
Asset Derivatives |  | Liability Derivatives
|  | Fair Value |  |  |  | Fair Value
Balance Sheet Location |  | January 31, 2019 |  | October 31, 2018 |  | Balance Sheet Location |  | January 31, 2019 |  | October 31, 2018
(in millions)
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash flow hedges |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts |  |  |  |  |  |  |  |  |  |
Other current assets |  | $ | 3 |  |  | $ | 11 |  |  | Other accrued liabilities |  | $ | 4 |  |  | $ | 1 |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other current assets |  | $ | 1 |  |  | $ | 5 |  |  | Other accrued liabilities |  | $ | 2 |  |  | $ | 4 |
Total derivatives |  | $ | 4 |  |  | $ | 16 |  |  |  |  | $ | 6 |  |  | $ | 5 |
The effect of derivative instruments for foreign exchange contracts designated as hedging instruments and not designated as hedging instruments in our consolidated statement of operations were as follows:
| Three Months Ended
| January 31,
| 2019 |  | 2018
| (in millions)
Derivatives designated as hedging instruments: |  |  |  |  |
Cash Flow Hedges |  |  |
Foreign exchange contracts: |  |  |
Loss recognized in accumulated other comprehensive income (loss) | $ | (6 | ) |  | $ | (10 | )
Gain reclassified from accumulated other comprehensive income (loss) into cost of sales | $ | 5 |  |  | $ | — |
Gain on time value of forward contracts recorded in cost of sales | $ | 1 |  |  | $ | — |
Derivatives not designated as hedging instruments: |  |  |
Gain (loss) recognized in other income (expense) | $ | (3 | ) |  | $ | 6 |
At January 31, 2019, the estimated amount of existing net gain that is expected to be reclassified from accumulated other comprehensive loss to cost of sales within the next twelve months is $1 million.

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 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration