Derivative Financial Instruments

9 Months Ended

Sep. 30, 2011

Derivative Financial Instruments [Abstract]


16.	Derivative Financial Instruments

The Company’s derivative financial instruments include foreign currency forward contracts, which are entered into for risk management purposes, and an embedded derivative representing the contingent interest payment provision related to the CODES.

Foreign Currency Forward Contracts. The Company’s U.S. and foreign businesses enter into contracts with customers, subcontractors or vendors that are denominated in currencies other than their functional currencies. To protect the functional currency equivalent cash flows associated with certain of these contracts, the Company enters into foreign currency forward contracts. The Company’s activities involving foreign currency forward contracts are designed to hedge the changes in the functional currency equivalent cash flows due to movements in foreign exchange rates compared to the functional currency. The foreign currencies hedged are primarily the Canadian dollar, the Euro, the British pound and the U.S. dollar. The Company manages exposure to counterparty non-performance credit risk by entering into foreign currency forward contracts only with major financial institutions that are expected to fully perform under the terms of such contracts. Foreign currency forward contracts are recorded in the Company’s condensed consolidated balance sheets at fair value and are generally designated and accounted for as cash flow hedges in accordance with the accounting standards for derivative instruments and hedging activities. Gains and losses on designated foreign currency forward contracts that are highly effective in offsetting the corresponding change in the cash flows of the hedged transactions are recorded net of income taxes in accumulated other comprehensive income (loss) (accumulated OCI) and then recognized in income when the underlying hedged transaction affects income. Gains and losses on foreign currency forward contracts that do not meet hedge accounting criteria are recognized in income immediately.

Notional amounts are used to measure the volume of foreign currency forward contracts and do not represent exposure to foreign currency losses. The table below presents the notional amounts of the Company’s outstanding foreign currency forward contracts by currency at September 30, 2011:


Currency	Notional Amount
	(in millions)

Canadian dollar	$	205
U.S. dollar		74
British pound		37
Euro		29
Other		3

Total	$	348

At September 30, 2011, the Company’s foreign currency forward contracts had maturities through 2016.

Embedded Derivative. The embedded derivative related to the issuance of the CODES is recorded at fair value with changes reflected in the unaudited condensed consolidated statements of operations.

The table below presents the fair values and the location of the Company’s derivative instruments in the condensed consolidated balance sheets.


	Fair Values of Derivative Instruments⁽¹⁾
	September 30, 2011								December 31, 2010
	Other				Other				Other				Other
	Current		Other		Current		Other		Current		Other		Current		Other
	Assets		Assets		Liabilities		Liabilities		Assets		Assets		Liabilities		Liabilities
	(in millions)

Derivatives designated as hedging instruments:
Foreign currency forward contracts	$	3	$	5	$	8	$	2	$	11	$	8	$	2	$	—
Derivatives not designated as hedging instruments:
Foreign currency forward contracts		2		1		1		—		2		1		3		—
Embedded derivative related to the CODES		—		—		—		—		—		—		—		—

Total derivative instruments	$	5	$	6	$	9	$	2	$	13	$	9	$	5	$	—


⁽¹⁾		See Note 14 for a description of the fair value hierarchy related to the Company’s foreign currency forward contracts.

The effect of gains or losses from foreign currency forward contracts was not material to the unaudited condensed consolidated statements of operations for the quarter and year-to-date periods ended September 30, 2011 and September 24, 2010. At September 30, 2011, the estimated net amount of existing losses that are expected to be reclassified into income within the next 12 months is $5 million.