Financial Instruments and Commodity Contracts

3 Months Ended

Jan. 31, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Financial Instruments and Commodity Contracts

Financial Instruments and Commodity Contracts

Derivative Financial Instruments

We use derivative financial instruments as part of our overall interest rate, foreign currency, and commodity risk management strategies to reduce our interest rate exposure, reduce exchange rate risk for transactional exposures denominated in currencies other than the functional currency, and minimize the effect of commodity price volatility. From time to time, we use foreign currency forward and option contracts to manage the risk of exchange rate movements that would affect the value of our foreign currency cash flows. Foreign currency exchange rate movements create a degree of risk by affecting the value of sales made and costs incurred in currencies other than the functional currency. In addition, we also use commodity forward contracts to manage our exposure to variability in certain commodity prices. In 2009, in connection with the sale of our 2014 Convertible Notes, we purchased call options and we entered into separate warrant transactions. The call options were intended to minimize share dilution associated with the 2014 Convertible Notes. In the fourth quarter of 2014, the remaining call options expired upon maturity of the 2014 Convertible Notes. As the warrants are indexed to our common stock, we recognized them in permanent equity in Additional paid-in capital in the Company's Consolidated Balance Sheets, and will not recognize subsequent changes in fair value as long as the instruments remain classified as equity.

We generally do not enter into derivative financial instruments for speculative or trading purposes and did not during the three months ended January 31, 2015 and 2014. None of our derivatives qualified for hedge accounting treatment during the three months ended January 31, 2015 and 2014.

The majority of our derivative contracts are transacted under International Swaps and Derivatives Association ("ISDA") master agreements. Each agreement permits the net settlement of amounts owed in the event of default or certain other termination events. For derivative financial instruments, we have elected not to offset derivative positions in the balance sheet with the same counterparty under the same agreement. Certain of our derivative contracts contain provisions that require us to provide collateral if certain thresholds are exceeded. Collateral of $5 million was provided at January 31, 2015 and no collateral was provided as of October 31, 2014. Collateral is generally not required to be provided by our counter-parties for derivative contracts. We manage exposure to counter-party credit risk by entering into derivative financial instruments with various major financial institutions that can be expected to fully perform under the terms of such instruments. We do not anticipate nonperformance by any of the counter-parties. Our exposure to credit risk in the event of nonperformance by the counter-parties is limited to those assets that have been recorded, but have not yet been received in cash. At January 31, 2015, we had no exposure to the credit risk of others and at October 31, 2014, our exposure to the credit risk of others was $1 million.

	Location in Consolidated Statements of Operations	Three Months Ended January 31,
(in millions)		2015		2014
Cross currency swaps	Other (income) expense, net	$	2	$	1
Interest rate caps	Interest expense	—		(1		)
Foreign currency contracts	Other (income) expense, net	1		—
Commodity forward contracts	Costs of products sold	10		—
Total loss		$	13	$	—

Foreign Currency Contracts

During 2015 and 2014, we entered into foreign exchange forward and option contracts as economic hedges of anticipated cash flows denominated in Brazilian Reais and Euros. All contracts were entered into to protect against the risk that the eventual cash flows resulting from certain transactions would be affected by changes in exchange rates between the U.S. Dollar and the respective foreign currency.

The following table presents the outstanding foreign currency contracts as of January 31, 2015 and October 31, 2014:

(in millions)	Currency	Notional Amount		Maturity
As of January 31, 2015
Forward exchange contract	EUR	€	6	February 2015
Forward exchange contract	EUR	€	6	March 2015
Forward exchange contract	EUR	€	6	April 2015
Forward exchange contract	EUR	€	12	May 2015-October 2015(A)
As of October 31, 2014
Forward exchange contract	EUR	€	4	November 2014
Forward exchange contract	EUR	€	4	December 2014
Forward exchange contract	EUR	€	5	January 2015
Forward exchange contract	EUR	€	9	February 2015 - October 2015(B)

_________________________

(A) Forward exchange contracts of €2 expire on the last day of each month from May 2015 through October 2015.

(B) Forward exchange contracts of €1 expire on the last day of each month from February 2015 through October 2015.

Commodity Forward Contracts

During 2015 and 2014, we entered into commodity forward contracts as economic hedges of our exposure to variability in commodity prices for diesel fuel and steel. As of January 31, 2015, we had outstanding diesel fuel contracts with aggregate notional values of $26 million and outstanding steel contracts with aggregate notional values of $13 million. The commodity forward contracts have maturity dates ranging from March 31, 2015 to October 31, 2015. As of October 31, 2014, we had outstanding diesel fuel contracts with aggregate notional values of $24 million and outstanding steel contracts with aggregate notional values of $23 million. All of these contracts were entered into to protect against the risk that the eventual cash flows related to purchases of the commodities will be affected by changes in prices.

Interest-Rate Contracts

From time to time, we enter into various interest-rate contracts, interest rate caps, and cross currency swaps. As of January 31, 2015 and October 31, 2014, the notional amount of our outstanding cross currency swaps was $23 million and $27 million, respectively. We are exposed to interest rate and exchange rate risk as a result of our borrowing activities. The objective of these contracts is to mitigate fluctuations in earnings, cash flows, and fair value of borrowings. Our Mexican financial services operation uses interest rate caps and cross currency swaps to protect against the potential of rising interest rates as required by the terms of its variable-rate asset-backed securities and fluctuations in the value of the peso, as required under Mexican bank credit facilities. As of January 31, 2015 and October 31, 2014, the notional amount of our outstanding interest rate caps was $121 million and $134 million, respectively.