Quarterly report pursuant to Section 13 or 15(d)

Derivative Instruments

v3.23.4
Derivative Instruments
 9 Months Ended
Nov. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE INSTRUMENTS DERIVATIVE INSTRUMENTS
Overview
Our risk management and derivative accounting policies are presented in Notes 1 and 6 of our consolidated financial statements included in our 2023 Annual Report and have not changed significantly for the nine months and three months ended November 30, 2023.

The aggregate notional value of outstanding derivative instruments is as follows:
November 30,
2023		 February 28,
2023
(in millions)
Derivative instruments designated as hedging instruments
Foreign currency contracts $ 2,233.3  $ 1,969.5 
Pre-issuance hedge contracts $ 125.0  $ — 
Derivative instruments not designated as hedging instruments
Foreign currency contracts $ 578.9  $ 831.7 
Commodity derivative contracts $ 383.9  $ 416.5 
Credit risk
We are exposed to credit-related losses if the counterparties to our derivative contracts default. This credit risk is limited to the fair value of the derivative contracts. To manage this risk, we contract only with major financial institutions that have earned investment-grade credit ratings and with whom we have standard International Swaps and Derivatives Association agreements which allow for net settlement of the derivative contracts. We have also established counterparty credit guidelines that are regularly monitored. Because of these safeguards, we believe the risk of loss from counterparty default to be immaterial.

In addition, our derivative instruments are not subject to credit rating contingencies or collateral requirements. As of November 30, 2023, the estimated fair value of derivative instruments in a net liability position due to counterparties was $1.5 million. If we were required to settle the net liability position under these derivative instruments on November 30, 2023, we would have had sufficient available liquidity on hand to satisfy this obligation.

Results of period derivative activity
The estimated fair value and location of our derivative instruments on our balance sheets are as follows (see Note 4):
Assets Liabilities
November 30,
2023		 February 28,
2023		 November 30,
2023		 February 28,
2023
(in millions)
Derivative instruments designated as hedging instruments
Foreign currency contracts:
Prepaid expenses and other $ 152.6  $ 109.1  Other accrued expenses and liabilities $ 4.3  $ 9.8 
Other assets $ 166.2  $ 134.5  Deferred income taxes and other liabilities $ 0.4  $ 3.5 
Pre-issuance hedge contracts:
Prepaid expenses and other $ —  $ —  Other accrued expenses and liabilities $ 0.1  $ — 
Derivative instruments not designated as hedging instruments
Foreign currency contracts:
Prepaid expenses and other $ 8.1  $ 5.9  Other accrued expenses and liabilities $ 5.7  $ 3.9 
Commodity derivative contracts:
Prepaid expenses and other $ 6.7  $ 21.2  Other accrued expenses and liabilities $ 24.9  $ 19.5 
Other assets $ 2.8  $ 4.6  Deferred income taxes and other liabilities $ 6.4  $ 8.3 
The principal effect of our derivative instruments designated in cash flow hedging relationships on our results of operations, as well as OCI, net of income tax effect, is as follows:
Derivative Instruments in
Designated Cash Flow
Hedging Relationships		 Net
Gain (Loss)
Recognized
in OCI		 Location of Net Gain (Loss)
Reclassified from
AOCI to Income (Loss)		 Net
Gain (Loss)
Reclassified
from AOCI
to Income (Loss)
(in millions)
For the Nine Months Ended November 30, 2023
Foreign currency contracts $ 177.1  Sales $ (0.2)
Cost of product sold 102.3 
Pre-issuance hedge contracts 0.5  Interest expense (0.4)
$ 177.6  $ 101.7 
For the Nine Months Ended November 30, 2022
Foreign currency contracts $ 146.6  Sales $ (1.4)
Cost of product sold 34.0 
Pre-issuance hedge contracts 15.7  Interest expense (0.8)
$ 162.3  $ 31.8 
For the Three Months Ended November 30, 2023
Foreign currency contracts $ 27.2  Sales $ — 
Cost of product sold 36.6 
Pre-issuance hedge contracts (0.1) Interest expense (0.1)
$ 27.1  $ 36.5 
For the Three Months Ended November 30, 2022
Foreign currency contracts $ 75.3  Sales $ (0.2)
Cost of product sold 12.1 
Pre-issuance hedge contracts —  Interest expense (0.2)
$ 75.3  $ 11.7 

We expect $130.2 million of net gains, net of income tax effect, to be reclassified from AOCI to our results of operations within the next 12 months.

The effect of our undesignated derivative instruments on our results of operations is as follows:
Derivative Instruments Not
Designated as Hedging Instruments		 Location of Net Gain (Loss)
Recognized in Income (Loss)		 Net
Gain (Loss)
Recognized
in Income (Loss)
(in millions)
For the Nine Months Ended November 30, 2023
Commodity derivative contracts Cost of product sold $ (28.9)
Foreign currency contracts Selling, general, and administrative expenses 12.7 
$ (16.2)
Derivative Instruments Not
Designated as Hedging Instruments		 Location of Net Gain (Loss)
Recognized in Income (Loss)		 Net
Gain (Loss)
Recognized
in Income (Loss)
(in millions)
For the Nine Months Ended November 30, 2022
Commodity derivative contracts Cost of product sold $ 25.3 
Foreign currency contracts Selling, general, and administrative expenses (11.9)
$ 13.4 
For the Three Months Ended November 30, 2023
Commodity derivative contracts Cost of product sold $ (13.3)
Foreign currency contracts Selling, general, and administrative expenses (9.8)
$ (23.1)
For the Three Months Ended November 30, 2022
Commodity derivative contracts Cost of product sold $ (7.8)
Foreign currency contracts Selling, general, and administrative expenses (9.3)
$ (17.1)