Fair Value Disclosure

The following tables show our assets and liabilities that are measured at fair value on a recurring basis (in millions):



Assets	Total December 31 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Foreign exchange rate derivatives (1)	$	4.4	$	—	$	4.4	$	—
Foreign exchange rate derivatives (2)	0.5		—		0.5		—
Liabilities
Interest rate derivatives (1)	7.7		—		7.7		—
Foreign exchange rate derivatives (1)	18.2		—		18.2		—
Foreign exchange rate derivatives (2)	4.7		—		4.7		—



Assets	Total December 31 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Interest rate derivatives (1)	$	1.2	$	—	$	1.2	$	—
Liabilities
Interest rate derivatives (1)	4.7		—		4.7		—
Foreign exchange rate derivatives (1)	27.7		—		27.7		—
Foreign exchange rate derivatives (2)	6.9		—		6.9		—

_________


(1)	Designated as hedges.


(2)	Not designated as hedges.

We value derivatives using a pricing model with inputs (such as yield curves and foreign currency rates) that are observable in the market or that can be derived principally from observable market data.

In addition, we review long-lived assets, such as operating assets and facilities, for impairment whenever circumstances indicate that the carrying amount of these assets may not be recoverable or when assets may be classified as held for sale. We determine the fair value of the respective assets using Level 3 inputs, including estimates of discounted future cash flows (including net proceeds from sale), independent appraisals, and market comparables, as applicable. Certain assets were subject to non-recurring Level 3 fair value measurements during 2018 and 2017 and continue to be held and used at December 31, 2018 and 2017. The fair value of such assets at the time of their measurement was $10.9 million in 2018 and $32.2 million in 2017 and included railcars, inland marine vessels, maintenance facilities and an affiliate investment. See "Note 9. Asset Impairments and Assets Held for Sale" for further information.

Derivative instruments

Fair Value Hedges

We use interest rate swaps to manage the fixed-to-floating rate mix of our debt obligations by converting a portion of our fixed rate debt to floating rate debt. For fair value hedges, we recognize changes in fair value of both the derivative and the hedged item as interest expense. We had nine instruments outstanding with an aggregate notional amount of $500.0 million as of December 31, 2018 with maturities ranging from 2019 to 2022 and ten instruments outstanding with an aggregate notional amount of $550.0 million as of December 31, 2017 with maturities ranging from 2018 to 2022.

Cash Flow Hedges

We use Treasury rate locks and swap rate locks to hedge our exposure to interest rate risk on anticipated transactions. We also use currency swaps to hedge our exposure to fluctuations in the exchange rates of the foreign currencies in which we conduct business. We had eight instruments outstanding with an aggregate notional amount of $501.9 million as of December 31, 2018 that mature from 2019 to 2022 and five instruments outstanding with an aggregate notional amount of $285.6 million as of December 31, 2017 with maturities ranging from 2019 to 2022. Within the next 12 months, we expect to reclassify $4.1 million ($3.1 million after-tax) of net losses on previously terminated derivatives from accumulated other comprehensive income (loss) to interest expense or operating lease expense, as applicable. We reclassify these amounts when interest and operating lease expense on the related hedged transactions affect earnings.

Non-designated Derivatives

We do not hold derivative financial instruments for purposes other than hedging, although certain of our derivatives are not designated as accounting hedges. We recognize changes in the fair value of these derivatives in other (income) expense immediately.

Some of our derivative instruments contain credit risk provisions that could require us to make immediate payment on net liability positions in the event that we default on certain outstanding debt obligations. The aggregate fair value of our derivative instruments with credit risk related contingent features that are in a liability position as of December 31, 2018 was $25.9 million. We are not required to post any collateral on our derivative instruments and do not expect the credit risk provisions to be triggered.

In the event that a counterparty fails to meet the terms of an interest rate swap agreement or a foreign exchange contract, our exposure is limited to the fair value of the swap, if in our favor. We manage the credit risk of counterparties by transacting with institutions that we consider financially sound and by avoiding concentrations of risk with a single counterparty. We believe that the risk of non-performance by any of our counterparties is remote.

The following table shows the impacts of our derivative instruments on our statement of comprehensive income for the years ended December 31 (in millions):



Derivative Designation	Location of Loss (Gain) Recognized	2018			2017			2016
Fair value hedges (1)	Interest expense	$	3.0		$	5.3		$	0.8
Cash flow hedges	Other comprehensive loss (effective portion)	12.6			(41.5		)	4.9
Cash flow hedges	Interest expense (effective portion reclassified from accumulated other comprehensive loss)	4.2			6.8			6.9
Cash flow hedges	Operating lease expense (effective portion reclassified from accumulated other comprehensive loss)	0.1			0.1			1.1
Cash flow hedges (2)	Other (income) expense (effective portion reclassified from accumulated other comprehensive loss)	(11.7		)	38.9			(11.9		)
Non-designated	Other (income) expense	(2.2		)	8.0			(2.6		)

_________


(1)	The fair value adjustments related to the underlying debt equally offset the amounts recognized in interest expense.


(2)	Includes (income) expense on foreign currency derivatives that are substantially offset by foreign currency remeasurement adjustments on related hedged instruments, also recognized in Other (income) expense.

Other Financial Instruments

The carrying amounts of cash and cash equivalents, restricted cash, rent and other receivables, accounts payable, and commercial paper and bank credit facilities approximate fair value due to the short maturity of those instruments. We estimate the fair values of loans and fixed and floating rate debt using discounted cash flow analyses that are based on interest rates currently offered for loans with similar terms to borrowers of similar credit quality. The inputs we use to estimate each of these values are classified in Level 2 of the fair value hierarchy because they are directly or indirectly observable inputs.

The following table shows the carrying amounts and fair values of our other financial instruments as of December 31 (in millions):



	2018		2018		2017		2017
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Liabilities
Recourse fixed rate debt	$	3,933.4	$	3,836.0	$	3,971.2	$	4,089.1
Recourse floating rate debt	522.7		515.1		426.0		428.7