Derivatives

We recognize all derivative instruments as either assets or liabilities at fair value, and recognize changes in the fair value of the derivative instruments based on the designation of the derivative. We are exposed to certain risks relating to our ongoing business operations. During the six months ended June 30, 2017 and 2016, the risks we managed using derivative instruments were diesel price risk and foreign currency exchange rate risk. At June 30, 2017, we had outstanding fixed price swap contracts on diesel purchases which were entered into to mitigate the price risk associated with forecasted purchases of diesel. During the six months ended June 30, 2017, we entered into forward contracts to purchase Canadian dollars to mitigate the foreign currency exchange rate risk associated with certain Canadian dollar denominated intercompany loans. There were no outstanding forward contracts to purchase Canadian dollars at June 30, 2017.

Fixed Price Diesel Swaps

The fixed price swap contracts on diesel purchases that were outstanding at June 30, 2017 were designated and qualify as cash flow hedges and the effective portion of the gain or loss on these contracts is reported as a component of accumulated other comprehensive income and is reclassified into earnings in the period during which the hedged transaction affects earnings (i.e., when the hedged gallons of diesel are used). The remaining gain or loss on the fixed price swap contracts in excess of the cumulative change in the present value of future cash flows of the hedged item, if any (i.e., the ineffective portion), is recognized in our condensed consolidated statements of income during the current period. As of June 30, 2017, we had outstanding fixed price swap contracts covering 4.4 million gallons of diesel which will be purchased throughout 2017 and 2018.

Foreign Currency Forward Contracts

The forward contracts to purchase Canadian dollars, which were all settled as of June 30, 2017, represented derivative instruments not designated as hedging instruments and gains or losses due to changes in the fair value of the forward contracts were recognized in our consolidated statements of income during the period in which the changes in fair value occurred. During the six months ended June 30, 2017, forward contracts were used to purchase $402 Canadian dollars, representing the total amount due at maturity for certain Canadian dollar denominated intercompany loans that were settled during the six months ended June 30, 2017. Upon maturity, the proceeds from the forward contracts were used to pay down the Canadian dollar denominated intercompany loans.

Financial Statement Presentation

As of June 30, 2017 and December 31, 2016, immaterial amounts ($1 or less) were reflected in prepaid expenses and other assets, accrued expenses and other liabilities, and accumulated other comprehensive income in our condensed consolidated balance sheets associated with the outstanding fixed price swap contracts that were designated and qualify as cash flow hedges.

The effect of our derivative instruments on our condensed consolidated statements of income for the three and six months ended June 30, 2017 and 2016 was as follows:



		Three Months Ended June 30, 2017				Three Months Ended June 30, 2016
	Location of income (expense) recognized on derivative/hedged item	Amount of income (expense) recognized on derivative	Amount of income (expense) recognized on hedged item			Amount of income (expense) recognized on derivative		Amount of income (expense) recognized on hedged item
Derivatives designated as hedging instruments:
Fixed price diesel swaps	Other income (expense), net (1)	$ *				$ *
	Cost of equipment rentals, excluding depreciation (2), (3)	*	$	(5	)	(2	)	$	(6	)
Derivatives not designated as hedging instruments:
Foreign currency forward contracts (4)	Other income (expense), net	7	(7		)	3		(3		)
		Six Months Ended June 30, 2017				Six Months Ended June 30, 2016
	Location of income (expense) recognized on derivative/hedged item	Amount of income (expense) recognized on derivative	Amount of income (expense) recognized on hedged item			Amount of income (expense) recognized on derivative		Amount of income (expense) recognized on hedged item
Derivatives designated as hedging instruments:
Fixed price diesel swaps	Other income (expense), net (1)	$ *				$ *
	Cost of equipment rentals, excluding depreciation (2), (3)	*	$	(10	)	(4	)	$	(11	)
Derivatives not designated as hedging instruments:
Foreign currency forward contracts (4)	Other income (expense), net	7	(7		)	3		(3		)


*	Amounts are insignificant (less than $1).


(1)	Represents the ineffective portion of the fixed price diesel swaps.


(2)	Amounts recognized on derivative represent the effective portion of the fixed price diesel swaps.

(3)

Amounts recognized on hedged item reflect the use of 1.9 million and 2.4 million gallons and of diesel covered by the fixed price swaps during the three months ended June 30, 2017 and 2016, respectively, and the use of 3.8 million and 5.0 million gallons and of diesel covered by the fixed price swaps during the six months ended June 30, 2017 and 2016, respectively. These amounts are reflected, net of cash received from, or paid to, the counterparties to the fixed price swaps, in operating cash flows in our condensed consolidated statement of cash flows.


(4)	Insignificant amounts were reflected in our condensed consolidated statement of cash flows associated with the forward contracts to purchase Canadian dollars, as the cash impact of the gains/losses recognized on the derivatives were offset by the gains/losses recognized on the hedged items.