1.0.0.3 false Financial Instruments false 1 $ false false USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 USDEPS Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares xbrli 0 2 Financial Instruments [Abstract] 0 bhi_FinancialInstrumentsAbstract bhi false na duration string Financial Instruments. false false false false false true false false false 1 false false 0 0 false false Financial Instruments. false 3 FINANCIAL INSTRUMENTS 1 us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock us-gaap true na duration string No definition available. false false false false false false false false false 1 false false 0 0  <html> <head></head> <body>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>NOTE 9. FINANCIAL INSTRUMENTS</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b>Fair Value of Financial Instruments</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     During the second quarter of 2009, we adopted FSP FAS 107-1 and APB 28-1, <i>Interim Disclosures about Fair Value of Financial Instruments</i>. This FSP requires fair value disclosure of financial instruments for interim and annual reporting periods. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Our financial instruments include cash and short-term investments, noncurrent investments in auction rate securities, accounts receivable, accounts payable, accrued payroll taxes, debt, foreign currency forward contracts and interest rate swaps. Except as described below, the estimated fair value of such financial instruments at June 30, 2009 approximates their carrying value as reflected in our consolidated condensed balance sheet. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The estimated fair value of total debt at June 30, 2009 was $2,037 million, which differs from the carrying amounts of $1,777 million included in our consolidated condensed balance sheet. The fair value of our debt has been estimated based on quoted market prices as of June 30, 2009. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Foreign Currency Forward Contracts</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     We conduct our business in over 90 countries around the world, and we are exposed to market risks resulting from fluctuations in foreign currency exchange rates. A number of our significant foreign subsidiaries have designated the local currency as their functional currency. We transact in various foreign currencies and have established a program that primarily utilizes foreign currency forward contracts to reduce the risks associated with the effects of certain foreign currency exposures. Under this program, our strategy is to have gains or losses on the foreign currency forward contracts mitigate the foreign currency transaction gains or losses to the extent practical. These foreign currency exposures typically arise from changes in the value of assets and liabilities which are denominated in currencies other than the functional currency. Our foreign currency forward contracts generally settle within 90 days. We do not use these forward contracts for trading or speculative purposes. We designate these forward contracts as fair value hedging instruments pursuant to SFAS 133. The hedging objective is to mitigate exposure to fluctuations in the non functional currency exchange rate. Accordingly, we record the fair value of these contracts as of the end of our reporting period to our consolidated condensed balance sheet with changes in fair value recorded in our consolidated condensed statement of operations along with the change in fair value of the hedged item. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     At June 30, 2009, we had outstanding foreign currency forward contracts with notional amounts aggregating $130 million to hedge exposure to currency fluctuations in various foreign currencies. These contracts expire on various dates prior to September 30, 2009. These contracts are designated and qualify as fair value hedging instruments. The fair value was determined using a model with Level 2 inputs including quoted market prices for contracts with similar terms and maturity dates. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Interest Rate Swaps</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     We are subject to interest rate risk on our debt and investment of cash and cash equivalents arising in the normal course of our business, as we do not engage in speculative trading strategies. We maintain an interest rate management strategy, which primarily uses a mix of fixed and variable rate debt that is intended to mitigate the exposure to changes in interest rates in the aggregate for our investment portfolio. In addition, we use interest rate swaps to manage the economic effect of fixed rate obligations associated with our senior notes so that the interest payable on the senior notes effectively becomes linked to variable rates. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In June 2009, we entered into two interest rate swap agreements (“the Swap Agreements”) for a notional amount of $250 million each in order to hedge changes in the fair market value of our $500 million 6.5% senior notes maturing on November 15, 2013. Under the Swap Agreements, we receive interest at a fixed rate of 6.5% and pay interest at a floating rate of one-month Libor plus a spread of 3.67% on one swap and three-month Libor plus a spread of 3.54% on the second swap both through November 15, 2013. The counterparties are primarily the lenders in our credit facilities. The Swap Agreements are designated and each qualifies as a fair value hedging instrument and are both determined to be highly effective resulting in no gain or loss recorded in the consolidated condensed statement of operations. The fair value of the Swap Agreements was based on quoted market prices for contracts with similar terms and maturity dates. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Fair Value of Derivative Instruments</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The fair value of derivative instruments included in our consolidated condensed balance sheet was as follows as of June 30, 2009: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="30%"> </td> <td width="12%"> </td> <td width="16%"> </td> <td width="20%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center"><b>Balance Sheet</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center"><b>Location</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Fair Value</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="7" valign="top" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td align="left" valign="top">Foreign Currency Forward Contracts</td> <td> </td> <td> <div style="margin-left:15px; text-indent:-15px">Other accrued liabilities </div></td> <td> </td> <td align="right">$</td> <td align="right">  2</td> <td> </td> </tr> <tr valign="bottom"> <td align="left" valign="top">Interest Rate Swaps</td> <td> </td> <td> <div style="margin-left:15px; text-indent:-15px">Other assets </div></td> <td> </td> <td align="right">$</td> <td align="right">  2</td> <td> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The effects of derivative instruments in our consolidated condensed statement of operations were as follows (amounts exclude any income tax effects): </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="37%"> </td> <td width="5%"> </td> <td width="34%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>Amount of Gain/(Loss) Recognized in Income</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center"><b>Statement of</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Three Months Ended</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Six Months Ended</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center"><b>Operations Location</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>June 30, 2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>June 30, 2009</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="11" valign="top" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td align="left" valign="top">Foreign Currency Forward Contracts</td> <td> </td> <td nowrap="nowrap"> <div style="margin-left:15px; text-indent:-15px">Marketing, general and administrative expense </div></td> <td> </td> <td align="right">$</td> <td align="right">6</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">4</td> <td> </td> </tr>  </table> </div> </div> </body> </html>  NOTE 9. 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