NOTE 16—DERIVATIVE FINANCIAL INSTRUMENTS

Foreign Currency Exchange Rate Derivatives—The notional value of our outstanding foreign exchange rate derivative contracts totaled $898 million at June 30, 2018, with maturities extending through August 2022. These instruments consist of contracts to purchase or sell foreign-denominated currencies. As of June 30, 2018, the fair value of these contracts was in a net liability position totaling approximately $5 million. The fair value of outstanding derivative instruments is determined using observable financial market inputs, such as quoted market prices, and is classified as Level 2 in nature.

As of June 30, 2018, for, we deferred approximately $5 million of net losses in AOCI in connection with foreign exchange rate derivatives designated as cash flow hedges, and we expect to reclassify approximately $3 million of deferred losses out of AOCI by June 30, 2019, as hedged items are recognized in earnings.

Interest Rate Derivatives—On May 8, 2018, we entered into a U.S. dollar interest rate swap arrangement to mitigate exposure associated with cash flow variability on the Term Facility in an aggregate notional value of $1.94 billion. The swap arrangement has been designated as a cash flow hedge as its critical terms matched those of the Term Facility at inception and through June 30, 2018. Accordingly, changes in the fair value of the swap arrangement are included in AOCI until the associated underlying exposure impacts our interest expense. As of June 30, 2018, the fair value of the swap arrangement was in a net liability position totaling approximately $10 million. The fair value of outstanding derivative instruments is determined using observable financial market inputs, such as quoted market prices, and is classified as Level 2 in nature.

As of June 30, 2018, in connection with the interest rate swap arrangement, we deferred approximately $10 million of net losses in AOCI, and we expect to reclassify approximately $2 million of deferred losses out of AOCI by June 30, 2019, as the hedged items are recognized in earnings.

The following table presents the total fair value of the derivatives by underlying risk and balance sheet classification:

	June 30, 2018				December 31, 2017
	Derivatives designated as cash flow hedges		Derivatives not designated as cash flow hedges		Derivatives designated as cash flow hedges		Derivatives not designated as cash flow hedges
	(In millions)
Other current assets	$	5	$	4	$	2	$	-
Other non-current assets		1		-		-		-
Total derivatives asset	$	6	$	4	$	2	$	-

Accrued liabilities	$	11	$	2	$	1	$	-
Other non-current liabilities		11		-		-		-
Total derivatives liability	$	22	$	2	$	1	$	-

The following table presents the total value, by underlying risk, recognized in other comprehensive income and reclassified from AOCI to Cost of operations (foreign currency derivatives) and Interest expense, net (interest rate derivatives) in the Statements of Operations for the three and six months ended June 30, 2018 and 2017, in connection with derivatives designated as cash flow hedges:

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
	(In millions)
Foreign currency hedges
Amount of gain (loss) recognized in other comprehensive income (loss)	$	(5	)	$	5		$	(5	)	$	10
Loss (gain) reclassified from AOCI to Cost of operations		-			1			-			(3	)
Ineffective portion and amount excluded from effectiveness testing: gain (loss) recognized in Other non-operating income (expense)		(3)			(1	)		(2)			(1	)
Interest rate hedges
Amount of gain (loss) recognized in other comprehensive income (loss)		(10	)		-			(10	)		-

The following table presents the total value of gain (loss) recognized in Other non-operating income (expense), net, in our Statements of Operations for the three and six months ended June 30, 2018 and 2017, in connection with derivatives not designated as cash flow hedges:

	Three Months Ended June 30,					Six Months Ended June 30,
	2018			2017		2018			2017
	(In millions)
Foreign currency hedges	$	(10	)	$	-	$	(10	)	$	-