Financial Instruments and Commodity Contracts

9 Months Ended

Jul. 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.

We generally do not enter into derivative financial instruments for speculative or trading purposes and did not during the three and nine months ended July 31, 2015 and 2014. None of our derivatives qualified for hedge accounting treatment during the three and nine months ended July 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 $1 million was provided at July 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 July 31, 2015 and October 31, 2014, our exposure to the credit risk of others was $5 million and $1 million, respectively.

	Location in Consolidated Statements of Operations	Three Months Ended July 31,
(in millions)		2015			2014
Interest rate caps	Interest expense	$	1		$	1
Cross currency swaps	Other income, net	(1		)	1
Foreign currency contracts	Other income, net	(6		)	1
Commodity forward contracts	Costs of products sold	(1		)	(1		)
Total (income) loss		$	(7	)	$	2

	Location in Consolidated Statements of Operations	Nine Months Ended July 31,
(in millions)		2015			2014
Interest rate caps	Interest expense	$	1		$	2
Cross currency swaps	Other income, net	2			1
Foreign currency contracts	Other income, net	(5		)	2
Commodity forward contracts	Costs of products sold	4			(1		)
Total loss		$	2		$	4

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, Euros, Canadian Dollars, and Mexican Pesos. 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 July 31, 2015 and October 31, 2014:

(in millions)	Currency	Notional Amount		Maturity
As of July 31, 2015
Forward exchange contract	EUR	€	12	August 2015-October 2015(A)
Forward exchange contract	CAD	C$	100	August 2015-October 2015(B)
Forward exchange contract	MXN	₱	813	August 2015
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(C)

_________________________

(A) Forward exchange contracts of €4 million mature each month from August 2015 through October 2015.

(B) Forward exchange contracts of C$25 million settle each month from August 2015 through November 2015.

(C) Forward exchange contracts of €1 million mature 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 July 31, 2015, we had outstanding diesel fuel contracts with aggregate notional values of $13 million and outstanding steel contracts with aggregate notional values of $6 million. The commodity forward contracts have various maturity dates through October 31, 2016. 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 July 31, 2015, there were no outstanding cross currency swaps. As of October 31, 2014, the notional amount of our outstanding cross currency swaps was $27 million. 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 July 31, 2015 and October 31, 2014, the notional amount of our outstanding interest rate caps was $111 million and $134 million, respectively.