Financial Instruments

The Company’s financial instruments include cash and marketable securities. Due to the short-term nature of these instruments, their book value approximates their fair value. The Company’s financial instruments may include long-term debt, interest rate and cross-currency swaps, commodity derivative contracts and foreign currency derivative contracts. All derivative contracts are placed with counterparties that have an S&P, or equivalent, investment grade credit rating at the time of the contracts’ placement. At June 30, 2017 and December 31, 2016, the Company had no derivative contracts that contained credit risk related contingent features.

The Company uses certain commodity derivative contracts to protect against commodity price changes related to forecasted raw material and supplies purchases. The Company primarily utilizes forward and option contracts, which are designated as cash flow hedges. At June 30, 2017 and December 31, 2016, the following commodity derivative contracts were outstanding:



	Commodity derivative contracts
Commodity	Volume hedged June 30, 2017	Volume hedged December 31, 2016	Units of measure	Duration
Copper	100.0	213.8	Metric Tons	Dec -17

The Company manages its interest rate risk by balancing its exposure to fixed and variable rates while attempting to optimize its interest costs. The Company selectively uses interest rate swaps to reduce market value risk associated with changes in interest rates (fair value hedges). At June 30, 2017 and December 31, 2016, the Company had no outstanding interest rate swaps.

The Company uses foreign currency forward and option contracts to protect against exchange rate movements for forecasted cash flows (cash flow hedges), remeasurement exposures that affect earnings (non-designated hedges), and exposures associated with the Company’s net investments in certain foreign operations (net investment hedges). Forecasted cash flows may include capital expenditures, inventory purchases, operating expenses or sales transactions designated in currencies other than the functional currency of the operating unit. The Company has also designated its Euro-denominated debt as a net investment hedge of the Company's investment in a European subsidiary.

At June 30, 2017 and December 31, 2016, the following foreign currency derivative contracts were outstanding:



Foreign currency derivatives (in millions)
Functional currency	Traded currency	Notional in traded currency June 30, 2017	Notional in traded currency December 31, 2016	Duration
Brazilian real	Euro	1.9	—	Jan - 18
Chinese renminbi	US dollar	14.7	33.5	Dec - 17
Chinese renminbi	Euro	43.8	—	Jun - 18
Euro	Chinese renminbi	63.9	—	Dec - 17
Euro	British pound	2.0	4.2	Dec - 17
Euro	Japanese yen	1,161.7	1,004.8	Dec - 17
Euro	Polish zloty	67.1	18.8	Dec - 17
Euro	Swedish krona	267.4	—	May - 18
Euro	US dollar	20.3	35.3	Dec - 17
Japanese yen	Chinese renminbi	35.0	68.7	Dec - 17
Japanese yen	Korean won	2,850.5	5,689.2	Dec - 17
Japanese yen	US dollar	1.0	2.0	Dec - 17
Korean won	Euro	6.5	—	Dec - 17
Korean won	Japanese yen	427.9	539.9	Dec - 17
Korean won	US dollar	20.0	14.2	Dec - 17
Mexican peso	US dollar	7.9	10.5	Dec - 17
Swedish krona	Euro	25.1	48.2	Dec - 17
US dollar	Euro	100.0	—	Dec - 17

At June 30, 2017 and December 31, 2016, the following amounts were recorded in the Condensed Consolidated Balance Sheets as being payable to or receivable from counterparties under ASC Topic 815:



	Assets					Liabilities
(in millions)	Location	June 30, 2017		December 31, 2016		Location	June 30, 2017		December 31, 2016
Foreign currency	Prepayments and other current assets	$	4.6	$	7.2	Accounts payable and accrued expenses	$	8.6	$	1.1
Commodity	Prepayments and other current assets	$	0.1	$	0.1	Accounts payable and accrued expenses	$	—	$	—

Effectiveness for cash flow and net investment hedges is assessed at the inception of the hedging relationship and quarterly, thereafter. To the extent that derivative instruments are deemed to be effective, gains and losses arising from these contracts are deferred into accumulated other comprehensive income (loss) ("AOCI") and reclassified into income as the underlying operating transactions are recognized. These realized gains or losses offset the hedged transaction and are recorded on the same line in the statement of operations. To the extent that derivative instruments are deemed to be ineffective, gains or losses are recognized into income.

The table below shows deferred gains (losses) reported in AOCI as well as the amount expected to be reclassified to income in one year or less. The amount expected to be reclassified to income in one year or less assumes no change in the current relationship of the hedged item at June 30, 2017 market rates.



(in millions)	Deferred gain (loss) in AOCI at						Gain (loss) expected to be reclassified to income in one year or less
Contract Type	June 30, 2017			December 31, 2016
Foreign currency	$	1.4		$	5.6		$	1.4
Commodity	0.1			(0.1		)	0.1
Net investment hedges	(22.2		)	29.5			—
Total	$	(20.7	)	$	35.0		$	1.5

Derivative instruments designated as hedging instruments as defined by ASC Topic 815 held during the period resulted in the following gains and losses recorded in income:

Cash Flow Hedges



		Gain (loss) reclassified from AOCI to income (effective portion)						Gain (loss) recognized in income (ineffective portion)
(in millions)		Three Months Ended						Three Months Ended
Contract Type	Location	June 30, 2017		June 30, 2016			Location	June 30, 2017			June 30, 2016
Foreign currency	Sales	$	0.9	$	0.2		SG&A expense	$	(0.1	)	$	—
Foreign currency	Cost of goods sold	$	0.5	$	0.3		SG&A expense	$	—		$	(0.1	)
Commodity	Cost of goods sold	$	0.1	$	(1.0	)	Cost of goods sold	$	—		$	—



		Gain (loss) reclassified from AOCI to income (effective portion)						Gain (loss) recognized in income (ineffective portion)
(in millions)		Six Months Ended						Six Months Ended
Contract Type	Location	June 30, 2017		June 30, 2016			Location	June 30, 2017		June 30, 2016
Foreign currency	Sales	$	2.0	$	0.2		SG&A expense	$	—	$	—
Foreign currency	Cost of goods sold	$	1.3	$	(0.2	)	SG&A expense	$	—	$	0.1
Commodity	Cost of goods sold	$	0.3	$	(1.1	)	Cost of goods sold	$	—	$	—

Fair Value Hedges



(in millions)		Three Months Ended June 30, 2017				Three Months Ended June 30, 2016
Contract Type	Location	Gain (loss) on swaps		Gain (loss) on borrowings		Gain (loss) on swaps		Gain (loss) on borrowings
Interest rate swap	Interest expense and finance charges	$	—	$	—	$	2.6	$	(2.6	)



(in millions)		Six Months Ended June 30, 2017				Six Months Ended June 30, 2016
Contract Type	Location	Gain (loss) on swaps		Gain (loss) on borrowings		Gain (loss) on swaps		Gain (loss) on borrowings
Interest rate swap	Interest expense and finance charges	$	—	$	—	$	11.3	$	(11.3	)

Derivatives not designated as hedges are used to hedge remeasurement exposures of monetary assets and liabilities designated in currencies other than the operating units’ functional currency. These derivatives resulted in the following gains and losses recorded in income:

Gain (loss) recognized in income

(in millions)

Three Months Ended

Six Months Ended

Contract Type

Location

June 30, 2017

June 30, 2016

June 30, 2017

June 30, 2016

Foreign currency

SG&A expense

1.1

—

0.1

—