Derivative Instruments and Hedging Activities

6 Months Ended

Jun. 30, 2012

Derivative Instruments and Hedging Activities [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Derivative Instruments and Hedging Activities

Derivative Financial Instruments

The Company is exposed to certain risks related to its ongoing business operations. The primary risks managed by using derivative instruments are foreign currency exchange risk, interest rate risk and commodity price risk. The Company does not hold or issue derivative financial instruments for trading purposes.

Foreign Exchange Rate Swaps

International operations account for a significant portion of the Company’s revenue and operating income. The Company’s policy is to reduce foreign currency cash flow exposure from exchange rate fluctuations by hedging anticipated and firmly committed transactions when it is economically feasible. The Company periodically enters into forward contracts to buy and sell foreign currencies to reduce foreign exchange exposure and protect the U.S. dollar value of certain transactions to the extent of the amount under contract. The counter-parties to our forward contracts are financial institutions with investment grade ratings. The Company does not apply hedge accounting to these derivative instruments.

Interest Rate Swaps

The Company periodically uses interest rate swaps to alter interest rate exposures between fixed and floating rates on certain long-term debt. Under interest rate swaps, the Company agrees with other parties to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts calculated using an agreed-upon notional principal amount. The counter-parties to the interest rate swap agreements are financial institutions with investment grade ratings.

In July 2010, the Company entered into a two-year interest rate swap agreement . This swap is designed to offset the cash flow variability that results from interest rate fluctuations on the Company’s variable rate debt. This swap became effective on January 4, 2011 upon the expiration of the January 2007 interest rate swap. The initial notional amount of the swap is $350, and will subsequently be amortized down to $325. The Company pays a fixed rate of 1.032% and will receive a variable one month LIBOR rate. The Company accounts for the swap as a qualifying cash flow hedge.

In December 2011, the Company entered into a three-year interest rate swap agreement with a notional amount of AUD $6, which became effective on January 3, 2012 and will mature on December 5, 2014. The Company pays a fixed rate of 4.140% and receives a variable rate based on the 3 month Australian Bank Bill Rate. The Company has not applied hedge accounting to this derivative instrument.

Commodity Contracts

The Company hedges a portion of its electricity purchases for certain North American plants. The Company enters into forward contracts with fixed prices to hedge electricity pricing at these plants. Any unused electricity is net settled for cash each month based on the market electricity price versus the contract price. The Company also hedges a portion of its natural gas purchases for certain North American plants. The Company uses futures contracts to hedge natural gas pricing at these plants. The natural gas contracts are settled for cash each month based on the closing market price on the last day the contract trades on the New York Mercantile Exchange. The Company does not apply hedge accounting to these electricity or natural gas future contracts.

The following tables summarize the Company’s derivative financial instruments:

		June 30, 2012					December 31, 2011
Liability Derivatives	Balance Sheet Location	Notional Amount		Fair Value Liability			Notional Amount		Fair Value Liability
Derivatives designated as hedging instruments:
Interest Rate Swaps
Interest swap – 2010	Other current liabilities	$	325	$	(1	)	$	350	$	(2	)
Total				$	(1	)			$	(2	)
Derivatives not designated as hedging instruments:
Interest Rate Swap
Australian dollar interest swap	Other current liabilities	$	6	$	—		$	6	$	—
Commodity Contracts
Electricity contracts	Other current liabilities	2		—			3		(1		)
Natural gas futures	Other current liabilities	2		(1		)	5		—
Total				$	(1	)			$	(1	)

Derivatives in Cash Flow Hedging Relationship	Amount of Loss Recognized in OCI on Derivative for the Three Months Ended:					Location of Loss Reclassified from Accumulated OCI into Income	Amount of Loss Reclassified from Accumulated OCI into Income for the Three Months Ended:
	June 30, 2012		June 30, 2011				June 30, 2012			June 30, 2011
Interest Rate Swaps
Interest swap – 2010	$	—	$	(2	)	Interest expense, net	$	(1	)	$	(1	)
Total	$	—	$	(2	)		$	(1	)	$	(1	)

Derivatives in Cash Flow Hedging Relationship	Amount of Loss Recognized in OCI on Derivative for the Six Months Ended:					Location of Loss Reclassified from Accumulated OCI into Income	Amount of Loss Reclassified from Accumulated OCI into Income for the Six Months Ended:
	June 30, 2012		June 30, 2011				June 30, 2012			June 30, 2011
Interest Rate Swaps
Interest swap – 2010	$	—	$	(2	)	Interest expense, net	$	(1	)	$	(2	)
Total	$	—	$	(2	)		$	(1	)	$	(2	)

As of June 30, 2012, the Company expects to reclassify $1 of losses recognized in Accumulated other comprehensive income to earnings over the next twelve months.

Derivatives Not Designated as Hedging Instruments	Amount of Gain (Loss) Recognized in Income on Derivative for the Three Months Ended:					Location of Gain (Loss) Recognized in Income on Derivative
	June 30, 2012		June 30, 2011
Foreign Exchange and Interest Rate Swaps
Cross-Currency and Interest Rate Swap	$	—	$	—		Other non-operating expense, net
Commodity Contracts
Electricity contracts	—		(1		)	Cost of sales
Natural gas futures	1		—			Cost of sales
Total	$	1	$	(1	)

Derivatives Not Designated as Hedging Instruments	Amount of Gain (Loss) Recognized in Income on Derivative for the Six Months Ended:						Location of Gain (Loss) Recognized in Income on Derivative
	June 30, 2012			June 30, 2011
Foreign Exchange and Interest Rate Swaps
Cross-Currency and Interest Rate Swap	$	—		$	(2	)	Other non-operating expense, net
Commodity Contracts
Electricity contracts	1			(1		)	Cost of sales
Natural gas futures	(1		)	—			Cost of sales
Total	$	—		$	(3	)