Fair Value Disclosure (Tables)

6 Months Ended

Jun. 30, 2017

Fair Value Disclosures [Abstract]

Assets and liabilities at fair value recurring basis

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

Assets	Total June 30 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)	$	0.5	$	—	$	0.5	$	—
Foreign exchange rate derivatives (1)	5.0		—		5.0		—
Foreign exchange rate derivatives (2)	0.2		—		0.2		—
Liabilities
Interest rate derivatives (1)	0.7		—		0.7		—
Foreign exchange rate derivatives (1)	14.0		—		14.0		—
Foreign exchange rate derivatives (2)	4.8		—		4.8		—

Assets	Total December 31 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Interest rate derivatives (1)	$	2.9	$	—	$	2.9	$	—
Foreign exchange rate derivatives (1)	12.2		—		12.2		—
Foreign exchange rate derivatives (2)	1.3		—		1.3		—
Liabilities
Interest rate derivatives (1)	0.1		—		0.1		—

_________

(1) Designated as hedges.

(2) Not designated as hedges.

Impact of GATX's Derivative Instrument On Income Statement and Other comprehensive income (loss)

Derivative instruments

Fair Value Hedges

We use interest rate swaps to manage the fixed-to-floating rate mix of our debt obligations by converting the 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. As of June 30, 2017, we had eight instruments outstanding with an aggregate notional amount of $450.0 million and maturities ranging from 2018 to 2022, compared to eight instruments outstanding, with an aggregate notional amount of $550.0 million and maturities ranging from 2017 to 2020, as of December 31, 2016.

Cash Flow Hedges

We use interest rate swaps to convert floating rate debt to fixed rate debt. We use Treasury 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 seventeen instruments outstanding with an aggregate notional amount of $294.7 million as of June 30, 2017 that mature from 2017 to 2022 and nine instruments outstanding with an aggregate notional amount of $412.1 million as of December 31, 2016 with maturities ranging from 2017 to 2022. Within the next 12 months, we expect to reclassify $4.9 million ($3.0 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 June 30, 2017, was $14.7 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 (in millions):

		Three Months Ended June 30						Six Months Ended June 30
Derivative Designation	Location of Loss (Gain) Recognized	2017			2016			2017			2016
Fair value hedges (1)	Interest expense	$	(1.2	)	$	(1.1	)	$	0.9		$	(5.9	)
Cash flow hedges	Other comprehensive (income) loss (effective portion)	(18.6		)	(0.8		)	(23.7		)	(24.0		)
Cash flow hedges	Interest expense (effective portion reclassified from accumulated other comprehensive loss)	1.7			1.7			3.4			3.4
Cash flow hedges	Operating lease expense (effective portion reclassified from accumulated other comprehensive loss)	—			0.1			—			0.4
Cash flow hedges (2)	Other (income) expense (effective portion reclassified from accumulated other comprehensive loss)	19.6			(6.7		)	23.7			10.3
Non-designated	Other (income) expense	1.3			(3.6		)	6.1			(2.3		)

_________

(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

Fair Value Other Financial Instruments

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

	June 30, 2017				December 31, 2016
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets
Investment funds	$	0.6	$	1.2	$	0.6	$	1.2
Loans	0.4		0.4		6.2		6.2
Liabilities
Recourse fixed rate debt	$	3,862.3	$	3,953.8	$	3,858.5	$	3,852.6
Recourse floating rate debt	422.8		424.4		417.8		412.2