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 half of 2017. 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, our significant derivative positions have not changed considerably since year-end.

Interest Rate Swaps

In the first quarter of 2017, we entered into interest rate swaps with an aggregate notional amount of $1.0 billion to economically convert our fixed rate $1.0 billion 2017 USD Notes to floating rate debt. We will receive fixed interest payments semi-annually at a rate of 1.90% and 2.25% per annum on our $500 million senior notes due March 15, 2019, and $500 million senior notes due March 15, 2020, respectively, and pay a rate to our counterparties based on a credit spread plus the one month LIBOR rate, thereby effectively exchanging a fixed interest obligation for a floating interest obligation.

We entered into these interest rate swap agreements to minimize exposure to changes in the fair value of each of our $500 million notes that results from fluctuations in the benchmark interest rate, specifically LIBOR, and have designated these swaps as fair value hedges and determined that there is zero ineffectiveness. The changes in fair value of derivatives designated as fair value hedges and the offsetting changes in fair value of the hedged item are recognized in earnings. For the three months ended March 31, 2017, the total changes in fair value of the two $500 million interest rate swaps resulted in total unrealized losses of $0.3 million, which were recorded in interest expense in our unaudited condensed consolidated statement of operations and were fully offset by changes in fair value of the two $500 million notes attributable to the benchmark interest rate, also recorded to interest expense. See Note 11, "Debt" for additional details.

Net Investment Hedges

On March 15, 2017, we issued an aggregate of EUR 500 million (approximately $530 million at issuance), three-month EURIBOR floating rate senior notes due March 15, 2019. We simultaneously designated the principal of the 2017 EUR Notes as a net investment hedge of our investment in our Europe business in order to hedge a portion of the foreign currency translational impacts and, accordingly, will record changes in the carrying value of the 2017 EUR Notes due to fluctuations in the spot rate to AOCI. See Note 11, "Debt" for further discussion.

Foreign Currency Forwards

Prior to issuing the 2017 EUR Notes on March 15, 2017, we entered into foreign currency forward agreements in the first quarter of 2017 with a total notional amount of EUR 499.0 million, representing a majority of the anticipated net proceeds from the issuance of the respective 2017 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 March 15, 2017, resulting in a loss of $8.3 million. See Note 11, "Debt" for further details related to the issuance. These foreign currency forwards were not designated in hedge accounting relationships, and, accordingly, the mark-to-market fair value adjustments and resulting losses were recorded to other income (expense).

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, as appropriate. The table below summarizes our derivative assets and liabilities that were measured at fair value as of June 30, 2017, and December 31, 2016.



				Fair value measurements as of June 30, 2017
	Total at June 30, 2017			Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)
	(In millions)
Interest rate swaps	$	0.1		$	—	$	0.1		$	—
Foreign currency forwards	(2.5		)	—		(2.5		)	—
Commodity swaps	30.1			—		30.1			—
Total	$	27.7		$	—	$	27.7		$	—



				Fair value measurements as of December 31, 2016
	Total at December 31, 2016			Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)
	(In millions)
Foreign currency forwards	$	14.4		$	—	$	14.4		$	—
Commodity swaps	(18.1		)	—		(18.1		)	—
Total	$	(3.7	)	$	—	$	(3.7	)	$	—

As of June 30, 2017, we had no significant transfers between Level 1 and Level 2. New derivative contracts transacted during the three and six months ended June 30, 2017, 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 June 30, 2017, and December 31, 2016, and the unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2017, and June 30, 2016.

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



	June 30, 2017
			Asset derivatives			Liability derivatives
	Notional amount		Balance sheet location	Fair value		Balance sheet location	Fair value
Derivatives designated as hedging instruments:
Interest rate swaps	$	1,000.0	Other current assets	$	—	Accounts payable and other current liabilities	$	—
			Other non-current assets	0.4		Other liabilities	(0.3		)
Foreign currency forwards	$	317.2	Other current assets	2.9		Accounts payable and other current liabilities	(2.2		)
			Other non-current assets	—		Other liabilities	(3.2		)
Total derivatives designated as hedging instruments				$	3.3		$	(5.7	)
Derivatives not designated as hedging instruments:
Commodity swaps⁽¹⁾	$	687.8	Other current assets	$	21.9	Accounts payable and other current liabilities	$	(12.4	)
			Other non-current assets	27.8		Other liabilities	(7.2		)
Commodity Options⁽¹⁾	$	13.6	Other current assets	0.1		Accounts payable and other current liabilities	(0.1		)
			Other non-current assets	0.1		Other liabilities	(0.1		)
Total derivatives not designated as hedging instruments				$	49.9		$	(19.8	)



	December 31, 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	$	329.4	Other current assets	$	12.0	Accounts payable and other current liabilities	$	(0.3	)
			Other non-current assets	3.3		Other liabilities	(0.6		)
Total derivatives designated as hedging instruments				$	15.3		$	(0.9	)
Derivatives not designated as hedging instruments:
Commodity swaps⁽¹⁾	$	791.4	Other current assets	$	11.8	Accounts payable and other current liabilities	$	(23.3	)
			Other non-current assets	12.6		Other liabilities	(19.2		)
Commodity options⁽¹⁾	$	13.6	Other current and non-current assets	—		Accounts payable and other current liabilities and other liabilities	—
Total derivatives not designated as hedging instruments				$	24.4		$	(42.5	)


(1)	Notional includes offsetting buy and sell positions, shown in terms of absolute value. Buy and sell positions are shown gross in the asset and/or liability position, as appropriate.

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



For the Three Months Ended June 30, 2017
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	$	(0.9	)	Interest expense, net	$	—
Foreign currency forwards	(8.4		)	Other income (expense), net	(1.2		)	Other income (expense), net	—
				Cost of goods sold	2.8			Cost of goods sold	—
Total	$	(8.4	)		$	0.7			$	—



For the Three Months Ended June 30, 2017
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	$	(61.9	)	Other income (expense), net	$	—	Other income (expense), net	$	—
EUR 500 million notes due 2019	(38.7		)	Other income (expense), net	—		Other income (expense), net	—
Total	$	(100.6	)		$	—		$	—



For the Three Months Ended June 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	(7.6		)	Other income (expense), net	(2.1		)	Other income (expense), net	—
				Cost of goods sold	3.9			Cost of goods sold	—
Total	$	(7.6	)		$	0.8			$	—



For the Six Months Ended June 30, 2017
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	$	(1.9	)	Interest expense, net	$	—
Foreign currency forwards	(13.9		)	Other income (expense), net	(2.1		)	Other income (expense), net	—
				Cost of goods sold	4.7			Cost of goods sold	—
Total	$	(13.9	)		$	0.7			$	—



For the Six Months Ended June 30, 2017
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	$	(72.7	)	Other income (expense), net	$	—	Other income (expense), net	$	—
EUR 500 million notes due 2019	(34.6		)	Other income (expense), net	—		Other income (expense), net	—
Total	$	(107.3	)		$	—		$	—



For the Six Months Ended June 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	$	(1.9	)	Interest expense, net	$	—
Foreign currency forwards	(29.2		)	Other income (expense), net	(4.0		)	Other income (expense), net	—
				Cost of goods sold	9.3			Cost of goods sold	—
Total	$	(29.2	)		$	3.4			$	—

We expect net gains of approximately $2 million (pretax) recorded in AOCI at June 30, 2017, 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 June 30, 2017, is approximately three years.

Other Derivatives (in millions):



For the Three Months Ended June 30, 2017
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	$	(17.7	)
Total		$	(17.7	)



For the Three Months Ended June 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	$	9.7
Foreign currency forwards	Other income (expense), net	(12.1		)
Swaptions	Interest expense, net	(15.3		)
Total		$	(17.7	)



For the Six Months Ended June 30, 2017
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	$	48.0
Foreign currency forwards	Other income (expense), net	(8.3		)
Total		$	39.7



For the Six Months Ended June 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	$	8.1
Foreign currency forwards	Other income (expense), net	(12.2		)
Swaptions	Interest expense, net	(36.4		)
Total		$	(40.5	)

Higher commodity prices towards the end of the first quarter drove the total gain recognized in income related to commodity swaps for the six months ended June 30, 2017. Commodity prices specific to the items we hedge have since flattened out, driving the loss recognized during the second quarter of 2017.

For the Three Months Ended June 30, 2017

Derivatives in fair value hedge relationships

Amount of gain (loss) recognized in income on derivative

Location of gain (loss)recognized in income

Interest rate swaps

Interest expense, net