Derivatives

From time to time, the Company enters into derivative transactions to hedge its exposures to interest rate, foreign currency rate and commodity price fluctuations. The Company does not enter into derivative transactions for trading purposes.

Interest Rate Contracts

The Company manages its fixed and floating rate debt mix using interest rate swaps. The Company may use fixed and floating rate swaps to alter its exposure to the impact of changing interest rates on its consolidated results of operations and future cash outflows for interest. Floating rate swaps would be used, depending on market conditions, to convert the fixed rates of long-term debt into short-term variable rates. Fixed rate swaps would be used to reduce the Company’s risk of the possibility of increased interest costs. Interest rate swap contracts are therefore used by the Company to separate interest rate risk management from the debt funding decision. The cash paid and received from the settlement of interest rate swaps is included in interest expense.

Fair Value Hedges

At December 31, 2016, the Company had $596.0 million notional amount of interest rate swaps that exchange a fixed rate of interest for variable rate (LIBOR) of interest plus a weighted average spread. These floating rate swaps are designated as fair value hedges against $346.0 million of principal on the 4.7% Senior Subordinated Notes due 2020 and $250.0 million of principal on the 4.0% Senior Subordinated Notes due 2024 for the remaining life of these notes. The effective portion of the fair value gains or losses on these swaps is offset by fair value adjustments in the underlying debt.

Cross-Currency Contracts

The Company uses cross-currency swaps to hedge foreign currency risk on certain intercompany financing arrangements with foreign subsidiaries. As of December 31, 2016, the notional value of outstanding cross-currency interest rate swaps was $173.7 million. The cross-currency interest rate swaps are intended to eliminate uncertainty in cash flows in U.S. Dollars and British Pounds in connection with the intercompany financing arrangements. The effective portions of the changes in fair values of these cross-currency interest rate swap agreements are reported in AOCI and an amount is reclassified out of AOCI into other (income) expense, net, in the same period that the carrying value of the underlying foreign currency intercompany financing arrangements are remeasured.

Foreign Currency Contracts

The Company uses forward foreign currency contracts to mitigate the foreign currency exchange rate exposure on the cash flows related to forecasted inventory purchases and sales and have maturity dates through December 2017. The derivatives used to hedge these forecasted transactions that meet the criteria for hedge accounting are accounted for as cash flow hedges. The effective portion of the gains or losses on these derivatives is deferred as a component of AOCI and is recognized in earnings at the same time that the hedged item affects earnings and is included in the same caption in the statements of operations as the underlying hedged item. At December 31, 2016, the Company had approximately $419.0 million notional amount outstanding of forward foreign currency contracts that are designated as cash flow hedges of forecasted inventory purchases and sales.

The Company also uses foreign currency contracts, primarily forward foreign currency contracts, to mitigate the foreign currency exposure of certain other foreign currency transactions. At December 31, 2016, the Company had approximately $1.4 billion notional amount outstanding of these foreign currency contracts that are not designated as effective hedges for accounting purposes and have maturity dates through January 2017. Fair market value gains or losses are included in the results of operations and are classified in other (income) expense, net.

Commodity Contracts

The Company enters into commodity-based derivatives in order to mitigate the risk associated with the impact changes in prices of commodities could have on the cost of certain of the Company’s raw materials. These commodity-based derivatives provide the Company with cost certainty, and in certain instances, allow the Company to benefit should the cost of the commodity fall below certain dollar thresholds. At December 31, 2016 , the Company had approximately $0.7 million notional amount outstanding of commodity-based derivatives that are not designated as effective hedges for accounting purposes and have maturity dates through December 2017. Fair market value gains or losses associated with commodity derivative instruments are included in the results of operations and are classified in cost of products sold.

The following table summarizes the Company’s outstanding derivative instruments and their effects on the Consolidated Balance Sheets as of December 31, 2016 and 2015 (in millions):



		Assets					Liabilities
Derivatives designated as hedging instruments:	Balance Sheet Location	2016		2015		Balance Sheet Location	2016		2015
Interest rate swaps	Other assets	$	—	$	2.2	Other noncurrent liabilities	$	5.9	$	5.3
Forward-starting interest rate swaps	Prepaid expenses and other	—		0.1		Other accrued liabilities	—		3.2
Cross-currency interest rate swaps	Other assets	0.7		0.6		Other noncurrent liabilities	16.3		3.3
Foreign exchange contracts on forecasted transactions	Prepaid expenses and other and Other assets	14.2		6.6		Other accrued liabilities	3.4		0.1
Foreign exchange contracts on intercompany borrowings	Prepaid expenses and other	—		—		Other accrued liabilities	—		1.6
Subtotal		14.9		9.5			25.6		13.5
Derivatives not designated as effective hedges:
Foreign exchange contracts	Prepaid expenses and other	18.2		—		Other accrued liabilities	10.9		—
Commodity contracts	Prepaid expenses and other	0.2		—		Other accrued liabilities	0.3		—
Subtotal		18.4		—			11.2		—
Total		$	33.3	$	9.5		$	36.8	$	13.5

The Company recognized income of $25.6 million in other (income) expense, net, during the year ended December 31, 2016, related to derivatives that are not designated as hedging instruments. The amounts of gains (losses) from changes in the fair value of derivatives not designated as hedging instruments was not material for the year ended December 31, 2015.

The Company is not a party to any derivatives that require collateral to be posted prior to settlement.

Cash Flow Hedges

The pretax effects of derivative instruments designated as cash flow hedges on the Company’s Consolidated Statements of Operations and AOCI for 2016, 2015 and 2014 were as follows (in millions):



Derivatives in cash flow hedging relationships	Location of gain (loss) recognized in income	Amount of gain (loss) reclassified from AOCI into income
Derivatives in cash flow hedging relationships	Location of gain (loss) recognized in income	2016			2015			2014
Foreign exchange contracts on forecasted transactions	Cost of products sold, intercompany sales, third party sales	$	7.4		$	16.2		$	5.9
Foreign exchange contracts on intercompany borrowings	Other expense, net	—			(0.1		)	0.3
Forward-starting interest rate swaps	Interest expense, net	(6.2		)	(0.8		)	(0.7		)
Cross-currency interest rate swaps on intercompany borrowings	Other expense, net	(13.2		)	(1.0		)	—
		$	(12.0	)	$	14.3		$	5.5



Derivatives in cash flow hedging relationships	Amount of gain (loss) recognized in AOCI
Derivatives in cash flow hedging relationships	2016			2015			2014
Foreign exchange contracts on forecasted transactions	$	31.2		$	15.5		$	11.6
Foreign exchange contracts on intercompany borrowings	0.1			0.3			3.3
Forward-starting interest rate swaps	(88.1		)	(3.1		)	—
Cross-currency interest rate swaps on intercompany borrowings	(13.0		)	(2.7		)	—
	$	(69.8	)	$	10.0		$	14.9

During December 2015, the Company entered into forward-starting interest rate swaps for an aggregate $1.0 billion notional amount for the anticipated issuance of notes to finance the Jarden transaction (the “2015 Swaps”). During January 2016, the Company entered into additional forward-starting interest rate swaps for an aggregate $1.3 billion notional amount (the “2016 Swaps,” and together with the 2015 Swaps, the “Swaps”). The total notional amount of the Swaps relating to the anticipated debt issuances for the Jarden Acquisition was $2.3 billion. In March 2016, the Company completed the offering and sale of the Notes (see Footnote 10 for additional information) and settled the Swaps. The net pretax loss and net amount paid upon settlement of the Swaps was $91.2 million, which was recorded in AOCI and is being amortized to interest expense over the terms of the Notes the Swaps were designated to hedge.

The ineffectiveness related to cash flow hedges during 2016, 2015 and 2014 was not material. The Company estimates that during the next 12 months it will reclassify income of $20.4 million included in the pretax amount recorded in AOCI as of December 31, 2016 into earnings.