Following is a discussion regarding the Company’s use of financial instruments:

Hedging Activities – As of December 31, 2012, the notional amount of foreign currency hedge positions was approximately $2.2 billion, while commodity hedge contracts totaled approximately 64 million pounds ($186 million) of copper and aluminum. All derivatives receiving deferral accounting are cash flow hedges. The majority of hedging gains and losses deferred as of December 31, 2012 are expected to be recognized over the next 12 months as the underlying forecasted transactions occur. Gains and losses on foreign currency derivatives reported in other deductions, net reflect hedges of balance sheet exposures that do not receive deferral accounting. The following amounts are included in earnings and other comprehensive income (OCI) for the three months ended December 31, 2012 and 2011 (in millions):



		Gain (Loss) to Earnings					Gain (Loss) to OCI
		Qtr Ended Dec 31,					Qtr Ended Dec 31,
		2011			2012		2011	2012
	Location
Commodity	Cost of sales	$	(11	)	(3	)	21	(5	)
Foreign currency	Sales, cost of sales	—			4		11	2
Foreign currency	Other deductions, net	7			9
Total		$	(4	)	10		32	(3	)

Regardless of whether derivatives receive deferral accounting, the Company expects hedging gains or losses to be essentially offset by losses or gains on the related underlying exposures. The amounts ultimately recognized will differ from those presented above for open positions, which remain subject to ongoing market price fluctuations until settlement. Derivatives receiving deferral accounting are highly effective and no amounts were excluded from the assessment of hedge effectiveness. Hedge ineffectiveness was immaterial for the three months ended December 31, 2012 and 2011.

Fair Value Measurements – Valuations for all derivatives and the Company's long-term debt fall within Level 2 of the GAAP valuation hierarchy. At December 31, 2012, the fair value of commodity contracts and foreign currency contracts were reported in other current assets. There was no collateral posted with counterparties as of December 31, 2012. The maximum collateral that could have been required was $2 million. As of December 31, 2012, the fair value of long-term debt was $4,785 million, which exceeded the carrying value by $701 million. Valuations of derivative contract positions are summarized below (in millions):



	September 30, 2012			December 31, 2012
	Assets		Liabilities	Assets	Liabilities
Foreign Currency	$	31	8	37	11
Commodity	$	9	7	6	6