Derivative Instruments and Hedging Activities

Our risk management and derivative accounting policies are presented in Notes 1 and 16 of the Notes included in our Annual Report and did not significantly change during the first three quarters of 2016. As noted in Note 16 of the Notes included in our Annual Report, due to the nature of our counterparty agreements, and the fact that we are not subject to master netting arrangements, we are not able to net positions with the same counterparty and, therefore, present our derivative positions on a gross basis in our unaudited condensed consolidated balance sheets. Except as noted below and the impacts from the Acquisition on October 11, 2016, our significant derivative positions have not changed considerably since year-end.

Derivative Activity Related to the Acquisition

During the first quarter of 2016, we entered into swaption agreements with a total notional amount of $855.0 million to economically hedge a portion of our long-term debt issuance with which we partially funded the Acquisition. We paid upfront premiums of $37.8 million for the option to enter into and exercise swaps with a forward starting effective date. These swaptions were not designated in hedge accounting relationships as the hedges were entered into in association with the Acquisition and, accordingly, all mark-to-market fair value adjustments were reflected within interest expense. During the second quarter of 2016, we terminated and cash settled these swaptions in anticipation of the issuance of the 2016 Notes, resulting in cash proceeds of $1.4 million.

Separately, prior to issuing the EUR Notes and the CAD Notes on July 7, 2016, we entered into foreign currency forward agreements in the second quarter of 2016 with a total notional amount of EUR 794.6 million and CAD 965.5 million, representing a majority of the anticipated net proceeds from the issuance of the respective CAD Notes and EUR Notes, to economically hedge the foreign currency exposure of the associated notes against the USD prior to issuance and to convert the proceeds to USD upon issuance through gross settlement. We settled these foreign currency forwards on July 7, 2016, resulting in a loss of $3.6 million, and received the USD necessary, along with the USD Notes, to complete our financing needs for the Acquisition. These foreign currency forwards were not designated in hedge accounting relationships, and, accordingly, the mark-to-market fair value adjustments and resulting unrealized losses were recorded to other income (expense).

On July 7, 2016, concurrent with the issuance of the EUR Notes, we designated the principal EUR 800.0 million of the EUR Notes as a non-derivative financial net investment hedge of our investment in our Europe business in order to hedge a portion of the related foreign currency translational impacts, and, accordingly, will record changes in the carrying value of the EUR Notes due to fluctuations in the spot rate to AOCI. See Note 11, "Debt" for further discussion of the EUR Notes and CAD Notes.

Derivative Fair Value Measurements

We utilize market approaches to estimate the fair value of our derivative instruments by discounting anticipated future cash flows derived from the derivative's contractual terms and observable market interest, foreign exchange and commodity rates. The fair values of our derivatives also include credit risk adjustments to account for our counterparties' credit risk, as well as our own non-performance risk. The table below summarizes our derivative assets and liabilities that were measured at fair value as of September 30, 2016, and December 31, 2015.



				Fair value measurements as of September 30, 2016
	Total at September 30, 2016			Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)
	(In millions)
Foreign currency forwards	$	9.1		$	—	$	9.1		$	—
Commodity swaps	(3.2		)	—		(3.2		)	—
Total	$	5.9		$	—	$	5.9		$	—



				Fair value measurements as of December 31, 2015
	Total at December 31, 2015			Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)
	(In millions)
Foreign currency forwards	$	44.1		$	—	$	44.1		$	—
Commodity swaps	(21.4		)	—		(21.4		)	—
Total	$	22.7		$	—	$	22.7		$	—

As of September 30, 2016, we had no significant transfers between Level 1 and Level 2. New derivative contracts transacted during the three and nine months ended September 30, 2016, were all included in Level 2.

Results of Period Derivative Activity

The tables below include the year-to-date results of our derivative activity in the unaudited condensed consolidated balance sheets as of September 30, 2016, and December 31, 2015, and the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2016, and September 30, 2015.

Fair Value of Derivative Instruments in the Condensed Consolidated Balance Sheet (in millions):



	September 30, 2016
			Asset derivatives			Liability derivatives
	Notional amount		Balance sheet location	Fair value		Balance sheet location	Fair value
Derivatives designated as hedging instruments:
Foreign currency forwards	$	344.8	Other current assets	$	11.1	Accounts payable and other current liabilities	$	(2.2	)
			Other non-current assets	1.9		Other liabilities	(1.6		)
Total derivatives designated as hedging instruments				$	13.0		$	(3.8	)
Derivatives not designated as hedging instruments:
Commodity swaps	$	128.2	Other current assets	$	1.6	Accounts payable and other current liabilities	$	(5.2	)
			Other non-current assets	3.7		Other liabilities	(3.3		)
Foreign currency forwards	$	100.0	Other current assets	—		Accounts payable and other current liabilities	(0.1		)
Total derivatives not designated as hedging instruments				$	5.3		$	(8.6	)



	December 31, 2015
			Asset derivatives			Liability derivatives
	Notional amount		Balance sheet location	Fair value		Balance sheet location	Fair value
Derivatives designated as hedging instruments:
Foreign currency forwards	$	300.3	Other current assets	$	28.4	Accounts payable and other current liabilities	$	—
			Other non-current assets	15.7		Other liabilities	—
Total derivatives designated as hedging instruments				$	44.1		$	—
Derivatives not designated as hedging instruments:
Commodity swaps	$	120.3	Other current assets	$	0.4	Accounts payable and other current liabilities	$	(12.5	)
			Other non-current assets	0.2		Other liabilities	(9.5		)
Total derivatives not designated as hedging instruments				$	0.6		$	(22.0	)

The Pretax Effect of Derivative Instruments on the Condensed Consolidated Statement of Operations (in millions):



For the Three Months Ended September 30, 2016
Derivatives in cash flow hedge relationships	Amount of gain (loss) recognized in OCI on derivative (effective portion)		Location of gain (loss) reclassified from AOCI into income (effective portion)	Amount of gain (loss) recognized from AOCI on derivative (effective portion)			Location of gain (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)	Amount of gain (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)
Forward starting interest rate swaps	$	—	Interest expense, net	$	(1.0	)	Interest expense, net	$	—
Foreign currency forwards	0.2		Other income (expense), net	(1.9		)	Other income (expense), net	—
			Cost of goods sold	2.9			Cost of goods sold	—
Total	$	0.2		$	—			$	—



For the Three Months Ended September 30, 2016
Non-derivative financial instruments in net investment hedge relationships	Amount of gain (loss) recognized in OCI on derivative (effective portion)			Location of gain (loss) reclassified from AOCI into income (effective portion)	Amount of gain (loss) recognized from AOCI on derivative (effective portion)		Location of gain (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)	Amount of gain (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)
EUR 800 million notes due 2024	$	(13.8	)	Other income (expense), net	$	—	Other income (expense), net	$	—
Total	$	(13.8	)		$	—		$	—



For the Three Months Ended September 30, 2015
Derivatives in cash flow hedge relationships	Amount of gain (loss) recognized in OCI on derivative (effective portion)			Location of gain (loss) reclassified from AOCI into income (effective portion)	Amount of gain (loss) recognized from AOCI on derivative (effective portion)			Location of gain (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)	Amount of gain (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)
Forward starting interest rate swaps	$	(14.3	)	Interest expense, net	$	(0.4	)	Interest expense, net	$	—
Foreign currency forwards	10.9			Other income (expense), net	(3.8		)	Other income (expense), net	—
				Cost of goods sold	6.2			Cost of goods sold	—
Total	$	(3.4	)		$	2.0			$	—



For the Three Months Ended September 30, 2015
Derivatives in net investment hedge relationships	Amount of gain (loss) recognized in OCI (effective portion)			Location of gain (loss) reclassified from AOCI into income (effective portion)	Amount of gain (loss) recognized from AOCI (effective portion)		Location of gain (loss) recognized in income (ineffective portion and amount excluded from effectiveness testing)	Amount of gain (loss) recognized in income (ineffective portion and amount excluded from effectiveness testing)
Cross currency swaps	$	(0.8	)	Interest expense, net	$	—	Interest expense, net	$	0.8
Total	$	(0.8	)		$	—		$	0.8



For the Nine Months Ended September 30, 2016
Derivatives in cash flow hedge relationships	Amount of gain (loss) recognized in OCI on derivative (effective portion)			Location of gain (loss) reclassified from AOCI into income (effective portion)	Amount of gain (loss) recognized from AOCI on derivative (effective portion)			Location of gain (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)	Amount of gain (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)
Forward starting interest rate swaps	$	—		Interest expense, net	$	(2.9	)	Interest expense, net	$	—
Foreign currency forwards	(29.0		)	Other income (expense), net	(5.9		)	Other income (expense), net	—
				Cost of goods sold	12.2			Cost of goods sold	—
Total	$	(29.0	)		$	3.4			$	—



For the Nine Months Ended September 30, 2016
Non-derivative financial instruments in net investment hedge relationships	Amount of gain (loss) recognized in OCI on derivative (effective portion)			Location of gain (loss) reclassified from AOCI into income (effective portion)	Amount of gain (loss) recognized from AOCI on derivative (effective portion)		Location of gain (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)	Amount of gain (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)
EUR 800.0 million notes due 2024	$	(13.8	)	Other income (expense), net	$	—	Other income (expense), net	$	—
Total	$	(13.8	)		$	—		$	—



For the Nine Months Ended September 30, 2015
Derivatives in cash flow hedge relationships	Amount of gain (loss) recognized in OCI on derivative (effective portion)			Location of gain (loss) reclassified from AOCI into income (effective portion)	Amount of gain (loss) recognized from AOCI on derivative (effective portion)			Location of gain (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)	Amount of gain (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)
Forward starting interest rate swaps	$	(19.3	)	Interest expense, net	$	(1.0	)	Interest expense, net	$	—
Foreign currency forwards	22.1			Other income (expense), net	(9.1		)	Other income (expense), net	—
				Cost of goods sold	16.3			Cost of goods sold	—
Total	$	2.8			$	6.2			$	—



For the Nine Months Ended September 30, 2015
Derivatives in net investment hedge relationships	Amount of gain (loss) recognized in OCI (effective portion)		Location of gain (loss) reclassified from AOCI into income (effective portion)	Amount of gain (loss) recognized from AOCI (effective portion)		Location of gain (loss) recognized in income (ineffective portion and amount excluded from effectiveness testing)	Amount of gain (loss) recognized in income (ineffective portion and amount excluded from effectiveness testing)
Cross currency swaps	$	3.7	Interest expense, net	$	—	Interest expense, net	$	—
Total	$	3.7		$	—		$	—

We expect net gains of approximately $5 million (pretax) recorded in AOCI at September 30, 2016, will be reclassified into earnings within the next 12 months. For derivatives designated in cash flow hedge relationships, the maximum length of time over which forecasted transactions are hedged at September 30, 2016, is three years.

Other Derivatives (in millions):



For the Three Months Ended September 30, 2016
Derivatives not in hedging relationships	Location of gain (loss) recognized in income on derivative	Amount of gain (loss) recognized in income on derivative
Commodity swaps	Cost of goods sold	$	1.2
Foreign currency forwards	Other income (expense), net	8.0
Total		$	9.2



For the Three Months Ended September 30, 2015
Derivatives not in hedging relationships	Location of gain (loss) recognized in income on derivative	Amount of gain (loss) recognized in income on derivative
Commodity swaps	Cost of goods sold	$	(7.2	)
Total		$	(7.2	)



For the Nine Months Ended September 30, 2016
Derivatives not in hedging relationships	Location of gain (loss) recognized in income on derivative	Amount of gain (loss) recognized in income on derivative
Commodity swaps	Cost of goods sold	$	9.3
Foreign currency forwards	Other income (expense), net	(4.2		)
Swaptions	Interest expense, net	(36.4		)
Total		$	(31.3	)



For the Nine Months Ended September 30, 2015
Derivatives not in hedging relationships	Location of gain (loss) recognized in income on derivative	Amount of gain (loss) recognized in income on derivative
Commodity swaps	Cost of goods sold	$	(13.2	)
Foreign currency forwards	Other income (expense), net	0.1
Total		$	(13.1	)

For the Three Months Ended September 30, 2015

Derivatives in fair value hedge relationships

Amount of gain
(loss) recognized
in income

Location of gain (loss) recognized in income

Interest rate swaps

Interest expense, net