Derivatives:

Objectives and Strategies for Using Derivative Instruments

Commodity Price Risk - We utilize a cash flow hedging program to mitigate our exposure to volatility in the prices of metal commodities used in our production processes. Our hedging program includes the use of futures contracts to lock in prices, and as a result, we are subject to derivative losses should the metal commodity prices decrease and gains should the prices increase. We utilize a dollar cost averaging strategy so that a higher percentage of commodity price exposures are hedged near-term and lower percentages hedged at future dates. This strategy allows for protection against near-term price volatility while allowing us to adjust to market price movements over time.

Interest Rate Risk - A portion of our debt bears interest at variable rates, and as a result, we are subject to variability in the cash paid for interest. To mitigate a portion of that risk, we may choose to engage in an interest rate swap hedging strategy to eliminate the variability of interest payment cash flows. We are not currently hedged against interest rate risk.

Foreign Currency Risk - Foreign currency exchange rate movements create a degree of risk by affecting the U.S. dollar value of assets and liabilities arising in foreign currencies. We seek to mitigate the impact of currency exchange rate movements on certain short-term transactions by periodically entering into foreign currency forward contracts. Our forward contracts are generally not designated as hedges, but on occasion we have entered into forward contracts that are designated as cash flow hedges. By entering into forward contracts, we lock in exchange rates that would otherwise cause losses should the U.S. dollar appreciate and gains should the U.S. dollar depreciate.

Cash Flow Hedges

We have commodity futures contracts and foreign exchange forward contracts designated as cash flow hedges that are scheduled to mature through December 2017. Unrealized gains or losses from our cash flow hedges are included in Accumulated Other Comprehensive Loss (“AOCL”) and are expected to be reclassified into earnings within the next 18 months based on the prices of the commodities and foreign currencies at the settlement dates. We recorded the following amounts in AOCL related to our cash flow hedges (in millions):



	As of June 30, 2016			As of December 31, 2015
Unrealized losses on unsettled futures contracts	$	5.5		$	13.2
Income tax benefit	(2.0		)	(4.8		)
Losses included in AOCL, net of tax ⁽¹⁾	$	3.5		$	8.4

⁽¹⁾ Assuming commodity and foreign currency prices remain constant, we expect to reclassify $3.7 million of derivative losses into earnings within the next 12 months.

We had the following outstanding commodity futures contracts designated as cash flow hedges (in millions of pounds):



	As of June 30, 2016	As of December 31, 2015
Copper	33.8	34.7

We had the following outstanding foreign exchange forward contracts designated as cash flow hedges (in millions):



	As of June 30, 2016	As of December 31, 2015
Notional Amounts (in local currency):
Mexican Peso	101.5	201.4
Canadian Dollar	37.4	—

Derivatives not Designated as Cash Flow Hedges

For commodity derivatives not designated as cash flow hedges, we follow the same hedging strategy as derivatives designated as cash flow hedges, except that we elect not to designate them as cash flow hedges at the inception of the arrangement. We had the following outstanding commodity futures contracts not designated as cash flow hedges (in millions of pounds):



	As of June 30, 2016	As of December 31, 2015
Copper	2.8	3.3
Aluminum	2.6	3.2

We also had the following outstanding foreign currency forward contracts not designated as cash flow hedges (in millions):



	As of June 30, 2016	As of December 31, 2015
Notional Amounts (in local currency):
Mexican Peso	38.4	53.0
Indian Rupee	375.1	30.8
Euro	31.0	3.2
Polish Zloty	—	25.4
Canadian Dollar	7.0	—
New Zealand Dollar	4.0	—
Australian Dollar	29.0	—

Information about the Locations and Amounts of Derivative Instruments

The following tables provide the locations and amounts of derivative fair values in the Consolidated Balance Sheets and derivative gains and losses in the Consolidated Statements of Operations (in millions):



	Fair Values of Derivative Instruments ⁽¹⁾
	Derivatives Designated as Hedging Instruments				Derivatives Not Designated as Hedging Instruments
	As of June 30, 2016		As of December 31, 2015		As of June 30, 2016			As of December 31, 2015
Current Assets:
Other Assets
Commodity futures contracts	$	—	$	—	$	—		$	—
Foreign currency forward contracts	—		—		1.1			0.2
Non-Current Assets:
Other Assets, net
Commodity futures contracts	0.3		—		—			—
Total Assets	$	0.3	$	—	$	1.1		$	0.2
Current Liabilities:
Accrued Expenses
Commodity futures contracts	$	5.4	$	12.5	$	0.6		$	1.5
Foreign currency forward contracts	0.5		0.4		(0.1		)	—
Non-Current Liabilities:
Other Liabilities
Commodity futures contracts	0.2		0.4		—			—
Foreign currency forward contracts	—		—		—			—
Total Liabilities	$	6.1	$	13.3	$	0.5		$	1.5

⁽¹⁾ All derivative instruments are classified as Level 2 within the fair value hierarchy. See Note 15 for more information.



Derivatives Designated as Cash Flow Hedges	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2016		2015		2016		2015
Amount of Loss reclassified from AOCL into Income (effective portion) ⁽¹⁾	$	3.4	$	2.8	$	8.2	$	6.2
Amount of Loss recognized in Net income (ineffective portion) ⁽²⁾	$	—	$	—	$	0.1	$	—



Derivatives Not Designated as Hedging Instruments	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2016			2015		2016			2015
Amount of Loss (Gain) Recognized in Net Income:
Commodity futures contracts ⁽²⁾	$	0.1		$	0.4	$	0.1		$	0.8
Foreign currency forward contracts ⁽²⁾	(0.5		)	—		(0.1		)	0.2
	$	(0.4	)	$	0.4	$	—		$	1.0

⁽¹⁾ The loss was recorded in Cost of goods sold in the accompanying Consolidated Statements of Operations.

⁽²⁾ The loss was recorded in Losses and other expenses, net in the accompanying Consolidated Statements of Operations.