FINANCIAL INSTRUMENTS

In the normal course of business, the Company is exposed to certain risks arising from business operations and economic factors. These fluctuations can increase the cost of financing, investing and operating the business. The Company may use various financial instruments, including derivative instruments, to manage the risks associated with interest rate and currency rate exposures. These financial instruments are not used for trading or speculative purposes.

On the date a derivative contract is entered into, the Company designates the derivative instrument as a cash flow hedge of a forecasted transaction or as an undesignated derivative. The Company formally documents its hedge relationships, including identification of the derivative instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the hedge transaction. This process includes linking derivative instruments that are designated as hedges to specific assets, liabilities or forecasted transactions.

The Company assesses at inception and at least quarterly thereafter, whether the derivatives used in cash flow hedging transactions are highly effective in offsetting the changes in the cash flows of the hedged item. To the extent the derivative is deemed to be a highly effective hedge, the fair market value changes of the instrument are recorded to Accumulated other comprehensive income (AOCI). Any ineffective portion of a derivative instrument’s change in fair value is recorded in Net earnings in the period of change. If the hedging relationship ceases to be highly effective, or it becomes probable that a forecasted transaction is no longer expected to occur, the hedging relationship will be undesignated and any future gains and losses on the derivative instrument will be recorded in Net earnings.

The fair values of derivative instruments included within the Consolidated Balance Sheet as of December 31 were as follows:



	Derivative assets				Derivative liabilities
In millions	2017		2016		2017		2016
Derivatives designated as hedges:
Currency derivatives	$	—	$	0.3	$	1.3	$	2.9
Derivatives not designated as hedges:
Currency derivatives	7.2		0.3		1.2		17.9
Total derivatives	$	7.2	$	0.6	$	2.5	$	20.8

Asset and liability derivatives included in the table above are recorded within Other current assets and Accrued expenses and other current liabilities, respectively.

Currency Hedging Instruments

The notional amount of the Company’s currency derivatives was $0.7 billion and $1.1 billion at December 31, 2017 and 2016, respectively. At December 31, 2017 and 2016, a net gain of $1.2 million and $2.4 million, net of tax, respectively, was included in AOCI related to the fair value of the Company’s currency derivatives designated as accounting hedges. The amount expected to be reclassified into Net earnings over the next twelve months is a gain of $1.2 million. The actual amounts that will be reclassified to Net earnings may vary from this amount as a result of changes in market conditions. Gains and losses associated with the Company’s currency derivatives not designated as hedges are recorded in Net earnings as changes in fair value occur. At December 31, 2017, the maximum term of the Company’s currency derivatives was approximately 12 months.

Other Derivative Instruments

The Company has utilized forward-starting interest rate swaps and interest rate locks to manage interest rate exposure in periods prior to the anticipated issuance of fixed-rate debt. These instruments were designated as cash flow hedges and had a notional amount of $1.3 billion at December 31, 2017 and 2016. Consequently, when the contracts were settled upon the issuance of the underlying debt, any realized gains or losses in the fair values of the instruments were deferred into Accumulated other comprehensive income. These deferred gains or losses are subsequently recognized into Interest expense over the term of the related notes. The net unrecognized gain in AOCI was $6.6 million and $6.0 million at December 31, 2017 and at December 31, 2016. The deferred gain at December 31, 2017 will be amortized over the term of notes with maturities ranging from 2018 to 2044. The amount expected to be amortized over the next twelve months is a net loss of $0.1 million. The Company has no forward-starting interest rate swaps or interest rate lock contracts outstanding at December 31, 2017 or 2016.

The following table represents the amounts associated with derivatives designated as hedges affecting Net earnings and AOCI for the years ended December 31:



	Amount of gain (loss) recognized in AOCI							Location of gain (loss) reclassified from AOCI and recognized into Net earnings	Amount of gain (loss) reclassified from AOCI and recognized into Net earnings
In millions	2017			2016		2015			2017			2016			2015
Currency derivatives designated as hedges	$	(1.8	)	$	2.2	$	1.2	Cost of goods sold	$	(3.1	)	$	5.3		$	(2.1	)
Interest rate swaps & locks	—			—		—		Interest expense	(0.5		)	(0.5		)	(0.5		)
Total	$	(1.8	)	$	2.2	$	1.2		$	(3.6	)	$	4.8		$	(2.6	)

The following table represents the amounts associated with derivatives not designated as hedges affecting Net earnings for the years ended December 31:



In millions	Location of gain (loss) recognized in Net earnings	Amount of gain (loss) recognized in Net earnings
In millions	Location of gain (loss) recognized in Net earnings	2017		2016			2015
Currency derivatives	Other income/(expense), net	$	58.0	$	(39.2	)	$	0.1
Total		$	58.0	$	(39.2	)	$	0.1

The gains and losses associated with the Company’s undesignated currency derivatives are materially offset in Other income/(expense), net by changes in the fair value of the underlying transactions.

Concentration of Credit Risk

The counterparties to the Company’s forward contracts consist of a number of investment grade major international financial institutions. The Company could be exposed to losses in the event of nonperformance by the counterparties. However, the credit ratings and the concentration of risk in these financial institutions are monitored on a continuous basis and present no significant credit risk to the Company.