Risk Management

Foreign Currency Risk

At September 28, 2013, the Company had outstanding foreign exchange contracts with notional amounts totaling $762 million, compared to $523 million outstanding at December 31, 2012. The Company does not believe these financial instruments should subject it to undue risk due to foreign exchange movements because gains and losses on these contracts should generally offset gains and losses on the underlying assets, liabilities and transactions, except for the ineffective portion of the instruments, which are charged to Other within Other income (expense) in the Company’s condensed consolidated statements of operations.

The following table shows the five largest net notional amounts of the positions to buy or sell foreign currency as of September 28, 2013, and the corresponding positions as of December 31, 2012:



	Notional Amount
Net Buy (Sell) by Currency	September 28, 2013			December 31, 2012
British Pound	$	213		$	225
Chinese Renminbi	(155		)	(99		)
Norwegian Krone	(107		)	(48		)
Euro	(88		)	(9		)
Malaysian Ringgit	65			30

Interest Rate Risk

At September 28, 2013, including the current portion, the Company had $2.5 billion of long-term debt, which is primarily priced at long-term, fixed interest rates.

As part of its liability management program, one of the Company’s European subsidiaries has outstanding interest rate agreements (“Interest Agreements”) relating to Euro-denominated loans. The interest on the Euro-denominated loans is variable. The Interest Agreements change the characteristics of interest payments from variable to maximum fixed-rate payments. The Interest Agreements are not accounted for as a part of a hedging relationship and, accordingly, the changes in the fair value of the Interest Agreements are included in Other income (expense) in the Company’s condensed consolidated statements of operations. The fair value of the Interest Agreements was in a liability position of $3 million and $4 million, at September 28, 2013 and December 31, 2012, respectively.

Counterparty Risk

The use of derivative financial instruments exposes the Company to counterparty credit risk in the event of non-performance by counterparties. However, the Company’s risk is limited to the fair value of the instruments when the derivative is in an asset position. The Company actively monitors its exposure to credit risk. As of September 28, 2013, all of the counterparties have investment grade credit ratings. The Company is not exposed to material net credit risk with any single counterparty. As of September 28, 2013, the Company was exposed to an aggregate net credit risk of approximately $5 million with all counterparties.

The following tables summarize the fair values and location in the condensed consolidated balance sheets of all derivative financial instruments held by the Company at September 28, 2013 and December 31, 2012:



	Fair Values of Derivative Instruments
	Assets			Liabilities
September 28, 2013	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location
Derivatives designated as hedging instruments:
Foreign exchange contracts	$	—	Other assets	$	1	Other liabilities
Derivatives not designated as hedging instruments:
Foreign exchange contracts	5		Other assets	—		Other liabilities
Interest agreements	—		Other assets	3		Other liabilities
Total derivatives not designated as hedging instruments	$	5		$	3
Total derivatives	$	5		$	4



	Fair Values of Derivative Instruments
	Assets			Liabilities
December 31, 2012	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location
Derivatives designated as hedging instruments:
Foreign exchange contracts	$	1	Other assets	$	—	Other liabilities
Derivatives not designated as hedging instruments:
Foreign exchange contracts	2		Other assets	3		Other liabilities
Interest agreements	—		Other assets	4		Other liabilities
Total derivatives not designated as hedging instruments	2			7
Total derivatives	$	3		$	7

The following tables summarize the effect of derivative instruments in the Company's condensed consolidated statements of operations for the three and nine months ended September 28, 2013 and September 29, 2012:



	Three Months Ended					Statement of Operations Location
Gain (loss) on Derivative Instruments	September 28, 2013		September 29, 2012			Statement of Operations Location
Derivatives not designated as hedging instruments:
Interest rate contracts	$	—	$	—		Other income (expense)
Foreign exchange contracts	8		(1		)	Other income (expense)
Total derivatives not designated as hedging instruments	$	8	$	(1	)



	Nine Months Ended						Statement of Operations Location
Gain (loss) on Derivative Instruments	September 28, 2013			September 29, 2012			Statement of Operations Location
Derivatives not designated as hedging instruments:
Interest rate contracts	$	1		$	(1	)	Other income (expense)
Foreign exchange contracts	(1		)	(5		)	Other income (expense)
Total derivatives not designated as hedging instruments	$	—		$	(6	)

The following tables summarize the gains and losses recognized in the condensed consolidated financial statements for the three and nine months ended September 28, 2013 and September 29, 2012:



	Three Months Ended					Nine Months Ended					Financial Statement Location
Foreign Exchange Contracts	September 28, 2013			September 29, 2012		September 28, 2013			September 29, 2012		Financial Statement Location
Derivatives in cash flow hedging relationships:
Other comprehensive gains (losses) before reclassifications	$	(1	)	$	1	$	(1	)	$	2	Accumulated other comprehensive loss
Losses (gains) reclassified from Accumulated other comprehensive loss into Net earnings	—			1		(1		)	2		Costs of sales