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Derivative Financial Instruments | 3 Months Ended
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Mar. 31, 2017
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 are 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 March 31, 2017, we held the following material net positions:
| Net Notional Amount Bought (Sold)
(In millions) |  |  | USD Equivalent
Australian dollar | 236.6 |  |  | 180.3 |
Brazilian real | 571.9 |  |  | 179.8 |
British pound | 219.4 |  |  | 273.7 |
Canadian dollar | (172.7 | ) |  | (129.8 | )
Euro | 895.0 |  |  | 966.2 |
Malaysian ringgit | 233.2 |  |  | 52.7 |
Nigerian naira | (5,341.3 | ) |  | (17.2 | )
Norwegian krone | 919.9 |  |  | 107.7 |
Singapore dollar | 129.0 |  |  | 92.3 |
U.S. dollar | (1,741.0 | ) |  | (1,741.0 | )
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 March 31, 2017, our portfolio of these instruments included the following material net positions:
| Net Notional Amount Bought (Sold)
(In millions) |  |  | USD Equivalent
Brazilian real | (54.4 | ) |  | (17.1 | )
Euro | (23.7 | ) |  | (25.4 | )
Norwegian krone | (240.2 | ) |  | (27.9 | )
U.S. dollar | 68.7 |  |  | 68.7 |
Fair value amounts for all outstanding derivative instruments have been determined using available market information and commonly accepted valuation methodologies. Refer to Note 18 to these consolidated financial statements for further disclosures related to the fair value measurement process. 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.
| March 31, 2017 |  | December 31, 2016
(In millions) | Assets |  | Liabilities |  | Assets |  | Liabilities
Derivatives designated as hedging instruments: |  |  |  |  |  |  |
Foreign exchange contracts: |  |  |  |  |  |  |
Current – Derivative financial instruments | $ | 67.4 |  |  | $ | 154.6 |  |  | $ | 47.2 |  |  | $ | 183.0 |
Long-term – Derivative financial instruments | 17.3 |  |  | 38.6 |  |  | 10.7 |  |  | 47.6 |
Total derivatives designated as hedging instruments | 84.7 |  |  | 193.2 |  |  | 57.9 |  |  | 230.6 |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |
Foreign exchange contracts: |  |  |  |  |  |  |
Current – Derivative financial instruments | 17.2 |  |  | 25.9 |  |  | — |  |  | — |
Long-term – Derivative financial instruments | 3.0 |  |  | 11.7 |  |  | — |  |  | — |
Total derivatives not designated as hedging instruments | 20.2 |  |  | 37.6 |  |  | — |  |  | — |
Long-term – Derivative financial instruments – Synthetic Bonds – Call Option Premium | 108.4 |  |  | — |  |  | 180.1 |  |  | — |
Long-term – Derivative financial instruments – Synthetic Bonds – Embedded Derivatives | — |  |  | 108.4 |  |  | — |  |  | 180.1 |
Total derivatives | $ | 213.3 |  |  | $ | 339.2 |  |  | $ | 238.0 |  |  | $ | 410.7 |
We recognized a loss of $2.7 million and a gain of $10.6 million for the three months ended March 31, 2017 and 2016, respectively, due to hedge ineffectiveness as it was probable that the original forecasted transaction would not occur. Cash flow hedges of forecasted transactions, net of tax, resulted in an accumulated other comprehensive loss of $67.8 million and $126.9 million at March 31, 2017, and December 31, 2016, respectively. We expect to transfer an approximate $65.4 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 first half of 2020. The following table presents the location of gains (losses) on the consolidated statements of income related to derivative instruments designated as fair value hedges.
Location of Fair Value Hedge Gain (Loss) Recognized in Income | Gain (Loss) Recognized in Income
| Three Months Ended March 31,
(In millions) | 2017 |  | 2016
Other income (expense), net | $ | 20.8 |  |  | $ | (16.2 | )
The following tables present the location of gains (losses) on the consolidated statements of other comprehensive income and/or the consolidated statements of income related to derivative instruments designated as cash flow hedges.
| Gain (Loss) Recognized in OCI (Effective Portion)
| Three Months Ended March 31,
(In millions) | 2017 |  | 2016
Foreign exchange contracts | $ | 34.5 |  |  | $ | (45.5 | )
Location of Cash Flow Hedge Gain (Loss) Reclassified from Accumulated OCI into Income | Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
| Three Months Ended March 31,
(In millions) | 2017 |  | 2016
Foreign exchange contracts: |  |  |
Revenue | $ | (14.6 | ) |  | $ | — |
Cost of sales | (0.1 | ) |  | — |
Research and development expense | (0.1 | ) |  | — |
Other (expense), net | (28.4 | ) |  | (63.5 | )
Total | $ | (43.2 | ) |  | $ | (63.5 | )
Location of Cash Flow Hedge Gain (Loss) Recognized in Income | Gain (Loss) Recognized in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing)
| Three Months Ended March 31,
(In millions) | 2017 |  | 2016
Foreign exchange contracts: |  |  |
Revenue | $ | 1.8 |  |  | $ | — |
Cost of sales | (1.2 | ) |  | — |
Other income (expense), net | (3.1 | ) |  | 9.8 |
Total | $ | (2.5 | ) |  | $ | 9.8 |
The following table presents the location of gains (losses) on the consolidated statements of income related to derivative instruments not designated as hedging instruments.
Location of Gain (Loss) Recognized in Income | Gain (Loss) Recognized in Income on Derivatives (Instruments Not Designated as Hedging Instruments)
| Three Months Ended March 31,
(In millions) | 2017 |  | 2016
Foreign exchange contracts: |  |  |
Revenue | $ | 0.3 |  |  | $ | — |
Cost of sales | (0.5 | ) |  | — |
Other income, net | 28.0 |  |  | 1.6 |
Total | $ | 27.8 |  |  | $ | 1.6 |
Balance Sheet Offsetting—We execute derivative contracts only 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 March 31, 2017 and December 31, 2016, we had no collateralized derivative contracts. The following tables present both gross information and net information of recognized derivative instruments:
| March 31, 2017 |  | December 31, 2016
(In millions) | Gross Amount Recognized |  | Gross Amounts Not Offset Permitted Under Master Netting Agreements |  | Net Amount |  | Gross Amount Recognized |  | Gross Amounts Not Offset Permitted Under Master Netting Agreements |  | Net Amount
Derivative assets | $ | 213.3 |  |  | $ | (81.5 | ) |  | $ | 131.8 |  |  | $ | 238.0 |  |  | $ | (57.9 | ) |  | $ | 180.1 |
| March 31, 2017 |  | December 31, 2016
(In millions) | Gross Amount Recognized |  | Gross Amounts Not Offset Permitted Under Master Netting Agreements |  | Net Amount |  | Gross Amount Recognized |  | Gross Amounts Not Offset Permitted Under Master Netting Agreements |  | Net Amount
Derivative liabilities | $ | 339.2 |  |  | $ | (81.5 | ) |  | $ | 257.7 |  |  | $ | 410.7 |  |  | $ | (57.9 | ) |  | $ | 352.8 |

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- 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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624171-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=64837297&loc=d3e41620-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624163-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5579240-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624177-113959 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80784-113994 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=64837297&loc=d3e41641-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5579245-113959 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624258-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80748-113994 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5708775-113959 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5708773-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5618551-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5580258-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624181-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=64837297&loc=d3e41638-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 + Details
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