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Financial Instruments, Risk Management and Fair Value Measurements | 3 Months Ended
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Mar. 31, 2020
Fair Value Disclosures [Abstract] |
Financial Instruments, Risk Management and Fair Value Measurements | Financial Instruments, Risk Management and Fair Value Measurements Our financial instruments include cash and cash equivalents, trade receivables, other current assets, certain receivables classified as other long-term assets, accounts payable, and amounts included in investments and accruals meeting the definition of financial instruments. The carrying value of these financial instruments approximates their fair value. Our other financial instruments include the following:
Financial Instrument |  | Valuation Method
Foreign exchange forward contracts |  | Estimated amounts that would be received or paid to terminate the contracts at the reporting date based on current market prices for applicable currencies.
Commodity forward contracts |  | Estimated amounts that would be received or paid to terminate the contracts at the reporting date based on quoted market prices for applicable commodities.
Debt |  | Our estimates and information obtained from independent third parties using market data, such as bid/ask spreads for the last business day of the reporting period.
The estimated fair value of the financial instruments in the above table have been determined using standard pricing models which take into account the present value of expected future cash flows discounted to the balance sheet date. These standard pricing models utilize inputs derived from or corroborated by observable market data such as interest rate yield curves and currency and commodity spot and forward rates. In addition, we test a subset of our valuations against valuations received from the transaction's counterparty to validate the accuracy of our standard pricing models. Accordingly, the estimates presented may not be indicative of the amounts that we would realize in a market exchange at settlement date and do not represent potential gains or losses on these agreements. The estimated fair values of foreign exchange forward contracts and commodity forward contracts are included in the tables within this Note. The estimated fair value of debt is $3,872.5 million and $3,393.8 million and the carrying amount is $3,782.0 million and $3,258.8 million as of March 31, 2020 and December 31, 2019, respectively. We enter into various financial instruments with off-balance sheet risk as part of the normal course of business. These off-balance sheet instruments include financial guarantees and contractual commitments to extend financial guarantees under letters of credit, and other assistance to customers. See Note 19 for more information. Decisions to extend financial guarantees to customers and the amount of collateral required under these guarantees are based on our evaluation of creditworthiness on a case-by-case basis. Use of Derivative Financial Instruments to Manage Risk We mitigate certain financial exposures, including currency risk, commodity purchase exposures and interest rate risk, through a program of risk management that includes the use of derivative financial instruments. We enter into derivative contracts, including forward contracts and purchased options, to reduce the effects of fluctuating currency exchange rates, interest rates, and commodity prices. A detailed description of these risks including a discussion on the concentration of credit risk is provided in Note 19 to our consolidated financial statements on our 2019 Form 10-K. We formally document all relationships between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions. This process includes relating derivatives that are designated as fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. We also assess, both at the inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in fair values or cash flows of the hedged item. If we determine that a derivative is not highly effective as a hedge, or if a derivative ceases to be a highly effective hedge, we discontinue hedge accounting with respect to that derivative prospectively. Accounting for Derivative Instruments and Hedging Activities Cash Flow Hedges We recognize all derivatives on the balance sheet at fair value. On the date the derivative instrument is entered into, we generally designate the derivative as a hedge of the variability of cash flows to be received or paid related to a forecasted transaction (cash flow hedge). We record in AOCI changes in the fair value of derivatives that are designated as and meet all the required criteria for a cash flow hedge. We then reclassify these amounts into earnings as the underlying hedged item affects earnings. In contrast, we immediately record in earnings changes in the fair value of derivatives that are not designated as cash flow hedges. As of March 31, 2020, we had open foreign currency forward contracts in AOCI in a net after tax gain position of $18.5 million designated as cash flow hedges of underlying forecasted sales and purchases. Current open contracts hedge forecasted transactions until December 31, 2020. At March 31, 2020, we had open forward contracts designated as cash flow hedges with various expiration dates to buy, sell or exchange foreign currencies with a U.S. dollar equivalent of approximately $1,129 million. As of March 31, 2020, we had open interest rate contracts in AOCI in a net after tax loss position of $4.2 million designated as cash flow hedges of underlying floating rate interest payments on a portion of our variable-rate debt and the anticipated fixed rate coupon of debt forecasted to be issued within a designated window. At March 31, 2020, we had interest rate swap contracts outstanding with a total aggregate notional value of approximately $300 million. In conjunction with the issuance of the Senior Notes, on September 20, 2019 we settled on various interest rate swap agreements which were entered into to hedge the variability in treasury rates. This settlement resulted in a loss of $83.1 million which was recorded in other comprehensive income and will be amortized over the various terms of the Senior Notes. As of March 31, 2020, we had no open commodity contracts in AOCI designated as cash flow hedges of underlying forecasted purchases. At March 31, 2020, we had zero mmBTUs (millions of British Thermal Units) in aggregate notional volume of outstanding natural gas commodity forward contracts to hedge forecasted purchases. Approximately $17.7 million of the net gains after-tax, representing open foreign currency exchange contracts and interest rate contracts, will be realized in earnings during the twelve months ending March 31, 2021 if spot rates in the future are consistent with forward rates as of March 31, 2020. The actual effect on earnings will be dependent on the actual spot rates when the forecasted transactions occur. Derivatives Not Designated As Hedging Instruments We hold certain forward contracts that have not been designated as cash flow hedging instruments for accounting purposes. Contracts used to hedge the exposure to foreign currency fluctuations associated with certain monetary assets and liabilities are not designated as cash flow hedging instruments, and changes in the fair value of these items are recorded in earnings. We had open forward contracts not designated as cash flow hedging instruments for accounting purposes with various expiration dates to buy, sell or exchange foreign currencies with a U.S. dollar equivalent of approximately $1,472 million at March 31, 2020. Fair Value of Derivative Instruments The following tables provide the gross fair value and net balance sheet presentation of our derivative instruments.
| March 31, 2020 |  |  |  |  |  |  |  |
| Gross Amount of Derivatives |  |  |  |  |  |  |  |
(in Millions) | Designated as Cash Flow Hedges |  | Not Designated as Hedging Instruments |  | Total Gross Amounts |  | Gross Amounts Offset in the Condensed Consolidated Balance Sheet (3) |  | Net Amounts
Foreign exchange contracts | $ | 52.4 |  |  | $ | 21.3 |  |  | $ | 73.7 |  |  | $ | (8.2) |  |  | $ | 65.5 |
Total derivative assets (1) | $ | 52.4 |  |  | $ | 21.3 |  |  | $ | 73.7 |  |  | $ | (8.2) |  |  | $ | 65.5 |
Foreign exchange contracts | $ | (27.2) |  |  | $ | — |  |  | $ | (27.2) |  |  | $ | 8.2 |  |  | $ | (19.0) |
Interest rate contracts | (5.3) |  |  | — |  |  | (5.3) |  |  | — |  |  | (5.3) |
Total derivative liabilities (2) | $ | (32.5) |  |  | $ | — |  |  | $ | (32.5) |  |  | $ | 8.2 |  |  | $ | (24.3) |
Net derivative assets (liabilities) | $ | 19.9 |  |  | $ | 21.3 |  |  | $ | 41.2 |  |  | $ | — |  |  | $ | 41.2 |
| December 31, 2019 |  |  |  |  |  |  |  |
| Gross Amount of Derivatives |  |  |  |  |  |  |  |
(in Millions) | Designated as Cash Flow Hedges |  | Not Designated as Hedging Instruments |  | Total Gross Amounts |  | Gross Amounts Offset in the Condensed Consolidated Balance Sheet (3) |  | Net Amounts
Foreign exchange contracts | $ | 8.0 |  |  | $ | 0.3 |  |  | $ | 8.3 |  |  | $ | (8.1) |  |  | $ | 0.2 |
Total derivative assets (1) | $ | 8.0 |  |  | $ | 0.3 |  |  | $ | 8.3 |  |  | $ | (8.1) |  |  | $ | 0.2 |
Foreign exchange contracts | $ | (12.1) |  |  | $ | (4.2) |  |  | $ | (16.3) |  |  | $ | 8.1 |  |  | $ | (8.2) |
Interest rate contracts | (0.9) |  |  | — |  |  | (0.9) |  |  | — |  |  | (0.9) |
Total derivative liabilities (2) | $ | (13.0) |  |  | $ | (4.2) |  |  | $ | (17.2) |  |  | $ | 8.1 |  |  | $ | (9.1) |
Net derivative assets (liabilities) | $ | (5.0) |  |  | $ | (3.9) |  |  | $ | (8.9) |  |  | $ | — |  |  | $ | (8.9) |
____________________ (1) Net balance is included in "Prepaid and other current assets" in the condensed consolidated balance sheets. (2) Net balance is included in "Accrued and other liabilities" in the condensed consolidated balance sheets. (3) Represents net derivatives positions subject to master netting arrangements. The tables below summarize the gains or losses related to our cash flow hedges and derivatives not designated as hedging instruments. Derivatives in Cash Flow Hedging Relationships
| Contracts |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Foreign Exchange |  |  |  |  |  |  |  | Interest rate |  |  |  | Total |  |
| Three Months Ended March 31, |  |  |  |  |  |  |  |  |  |  |  |  |  |
(in Millions) | 2020 |  | 2019 |  |  |  |  |  | 2020 |  | 2019 |  | 2020 |  | 2019
Unrealized hedging gains (losses) and other, net of tax | $ | 29.7 |  |  | $ | 6.9 |  |  |  |  |  |  | $ | (2.2) |  |  | $ | (6.0) |  |  | $ | 27.5 |  |  | $ | 0.9 |
Reclassification of deferred hedging (gains) losses, net of tax (1) | (9.8) |  |  | (3.6) |  |  |  |  |  |  | (0.5) |  |  | — |  |  | (10.3) |  |  | (3.6) |
Total derivative instrument impact on comprehensive income, net of tax | $ | 19.9 |  |  | $ | 3.3 |  |  |  |  |  |  | $ | (2.7) |  |  | $ | (6.0) |  |  | $ | 17.2 |  |  | $ | (2.7) |
___________________ (1)See Note 15 for classification of amounts within the condensed consolidated statements of income (loss). Derivatives Not Designated as Hedging Instruments
|  |  |  |  |  | Amount of Pre-tax Gain (Loss) Recognized in Income on Derivatives (1) |  |
|  |  |  |  |  | Three Months Ended March 31, |  |
(in Millions) | Location of Gain or (Loss) Recognized in Income on Derivatives |  |  |  |  | 2020 |  | 2019
Foreign exchange contracts | Cost of sales and services |  |  |  |  | $ | 11.0 |  |  | $ | (2.9) |
Total |  |  |  |  |  | $ | 11.0 |  |  | $ | (2.9) |
___________________ (1)Amounts represent the gain or loss on the derivative instrument offset by the gain or loss on the hedged item. Fair Value Measurements Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market participants are defined as buyers or sellers in the principle or most advantageous market for the asset or liability that are independent of the reporting entity, knowledgeable and able and willing to transact for the asset or liability. Fair Value Hierarchy We have categorized our assets and liabilities that are recorded at fair value, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the assets and liabilities fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Recurring Fair Value Measurements The following tables present our fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis in the condensed consolidated balance sheets. During the periods presented there were no transfers between fair value hierarchy levels.
(in Millions) | March 31, 2020 |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Assets |  |  |  |  |  |  |
Derivatives – Foreign exchange (1) | $ | 65.5 |  |  | $ | — |  |  | $ | 65.5 |  |  | $ | — |
Other (2) | 17.9 |  |  | 17.9 |  |  | — |  |  | — |
Total assets | $ | 83.4 |  |  | $ | 17.9 |  |  | $ | 65.5 |  |  | $ | — |
Liabilities |  |  |  |  |  |  |
Derivatives – Foreign exchange (1) | $ | 19.0 |  |  | $ | — |  |  | $ | 19.0 |  |  | $ | — |
Derivatives – Interest rate (1) | 5.3 |  |  | — |  |  | 5.3 |  |  | — |
Other (3) | 27.1 |  |  | 26.0 |  |  | 1.1 |  |  | — |
Total liabilities | $ | 51.4 |  |  | $ | 26.0 |  |  | $ | 25.4 |  |  | $ | — |
(in Millions) | December 31, 2019 |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Assets |  |  |  |  |  |  |
Derivatives – Foreign exchange (1) | $ | 0.2 |  |  | $ | — |  |  | $ | 0.2 |  |  | $ | — |
Other (2) | 20.2 |  |  | 20.2 |  |  | — |  |  | — |
Total assets | $ | 20.4 |  |  | $ | 20.2 |  |  | $ | 0.2 |  |  | $ | — |
Liabilities |  |  |  |  |  |  |
Derivatives – Foreign exchange (1) | $ | 8.2 |  |  | $ | — |  |  | $ | 8.2 |  |  | $ | — |
Derivatives – Interest rate (1) | 0.9 |  |  | — |  |  | 0.9 |  |  | — |
Other (3) | 32.8 |  |  | 29.7 |  |  | 3.1 |  |  | — |
Total liabilities | $ | 41.9 |  |  | $ | 29.7 |  |  | $ | 12.2 |  |  | $ | — |
____________________ (1)See the Fair Value of Derivative Instruments table within this Note for classification on the condensed consolidated balance sheets. (2)Consists of a deferred compensation arrangement, through which we hold various investment securities, recognized on our balance sheets. Both the asset and liability are recorded at fair value. Asset amounts are included in "Other assets including long-term receivables, net" in the condensed consolidated balance sheets. (3)Primarily consists of a deferred compensation arrangement recognized on our balance sheets. Both the asset and liability are recorded at fair value. Liability amounts are included in "Other long-term liabilities" in the condensed consolidated balance sheets. Nonrecurring Fair Value Measurements There were no non-recurring fair value measurements in the condensed consolidated balance sheets during the periods presented.

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- Definition This element can be used to disclose the entity's entire derivative instruments and hedging activities disclosure as a single block of text. Describes an entity's risk management strategies, derivatives in hedging activities and non-hedging derivative instruments, the assets, obligations, liabilities, revenues and expenses arising there from, and the amounts of and methodologies and assumptions used in determining the amounts of such items. This item also represents the complete disclosure regarding the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the Company is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risk is are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References No definition available. + Details
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