Derivative Instruments And Hedging Strategies Derivative Instruments and Hedging Strategies (Notes)

9 Months Ended

Sep. 30, 2014

Derivative [Line Items]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

DERIVATIVE INSTRUMENTS

We use operational and economic hedges as well as foreign currency exchange forward contracts and interest rate derivative instruments to manage the impact of currency exchange on earnings and cash flow.

Cash Flow Hedges

During the period we did not change our hedging strategies or objectives from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2013. The gross notional, maximum term and gross fair value amounts of foreign exchange forward contract derivatives designated and non-designated as hedging instruments are:

	Designated		Non-Designated			Total
September 30, 2014
Gross Notional Amount	$	219	$	3,155		$	3,374
Maximum term in days						546
Fair Value
Other Current Assets	$	6	$	14		$	20
Other Assets - Noncurrent	1		—			1
Other Current Liabilities	1		22			23
	$	6	$	(8	)	$	(2	)
December 31, 2013
Gross Notional Amount	$	344	$	2,000		$	2,344
Maximum term in days						546
Fair Value
Other Current Assets	$	11	$	10		$	21
Other Assets - Noncurrent	1		3			4
Other Current Liabilities	1		1			2
	$	11	$	12		$	23

We are exposed to credit loss in the event of nonperformance by counterparties on our outstanding forward currency exchange contracts but do not anticipate nonperformance by any of our counterparties. Should a counterparty default, our maximum exposure to loss is the asset balance of the instrument.

The net currency exchange rate gains (losses) for both designated and non-designated derivative instruments were:

	Three Months					Nine Months
Recorded in:	2014			2013		2014			2013
Cost of goods sold	$	(1	)	$	—	$	4		$	—
Other income (expense)	(2		)	—		(11		)	(3		)
Total	$	(3	)	$	—	$	(7	)	$	(3	)

At September 30, 2014 and December 31, 2013, pretax gains on derivatives designated as hedges of $2 and $12, which are recorded in AOCI, are expected to be reclassified to earnings during the next twelve months. This reclassification is primarily due to the sale of inventory that includes previously hedged purchases. There have been no ineffective portions of derivatives that have resulted in gains or losses in any period.

Fair Value Hedges

Interest rate derivative instruments designated as fair value hedges are being used to manage the exposure to interest rate movements and to reduce borrowing costs by converting fixed-rate debt into floating-rate debt. Under these agreements, the Company agrees to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount.

As of  September 30, 2014, we had interest rate swaps in gross notional amounts of $500 designated as fair value hedges of underlying fixed rate obligations representing a portion of our $600 senior unsecured notes due in 2024.  The market value of outstanding interest rate swap agreements at September 30, 2014 was a realized loss of $6 which is recorded in other long-term liabilities with an offsetting realized gain of  $6 on the fair value of the underlying fixed rate obligation recorded in long-term debt in the consolidated balance sheet. No hedge ineffectiveness was recorded as a result of these fair value hedges for the three and nine months ended September 30, 2014.