Financial Instruments

9 Months Ended

Sep. 30, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Financial Instruments

Financial Instruments

Interest Rate Risk Management

We may use interest rate swap agreements to manage our interest rate exposure and to achieve a desired proportion of variable and fixed rate debt. These derivatives may be designated as fair value hedges or cash flow hedges depending on the nature of the risk being hedged.

At September 30,2013 and December 31, 2012, we did not have any interest rate swaps outstanding.

Foreign Exchange Risk Management

We are a global company that is exposed to foreign currency exchange rate fluctuations in the normal course of our business. As a part of our foreign exchange risk management strategy, we use derivative instruments, primarily forward contracts and purchased option contracts, to hedge the following foreign currency exposures, thereby reducing volatility of earnings or protecting fair values of assets and liabilities:

• Foreign currency-denominated assets and liabilities

• Forecasted purchases and sales in foreign currency

Summary of Foreign Exchange Hedging Positions

At September 30, 2013, we had outstanding forward exchange and purchased option contracts with gross notional values of $2,826, which is reflective of the amounts that are normally outstanding at any point during the year. Approximately 81% of these contracts mature within three months, 10% in three to six months and 9% in six to twelve months.

The following is a summary of the primary hedging positions and corresponding fair values as of September 30, 2013:

Currency Hedged (Buy/Sell)	Gross Notional Value		Fair  Value Asset (Liability)(1)
Japanese Yen/U.S. Dollar	$	574	$	(10	)
U.S. Dollar/Euro	513		(9		)
Euro/U.K. Pound Sterling	383		(2		)
Japanese Yen/Euro	367		(16		)
U.K. Pound Sterling/U.S. Dollar	242		—
U.K. Pound Sterling/Euro	146		2
Canadian Dollar/Euro	97		—
Euro/U.S. Dollar	92		1
Mexican Peso/U.S. Dollar	67		(1		)
Indian Rupee/U.S. Dollar	54		(1		)
Philippine Peso/U.S. Dollar	47		—
U.S. Dollar/Japanese Yen	38		—
Euro/Danish Krone	28		—
U.S. Dollar/Peruvian Nuevo Sol	26		—
All Other	152		—
Total Foreign Exchange Hedging	$	2,826	$	(36	)

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(1) Represents the net receivable (payable) amount included in the Condensed Consolidated Balance Sheet at September 30, 2013.

Foreign Currency Cash Flow Hedges

We designate a portion of our foreign currency derivative contracts as cash flow hedges of our foreign currency-denominated inventory purchases, sales and expenses. No amount of ineffectiveness was recorded in the Condensed Consolidated Statements of Income for these designated cash flow hedges and all components of each derivative’s gain or loss was included in the assessment of hedge effectiveness. The net liability fair value of these contracts was $33 and $48 as of September 30, 2013 and December 31, 2012, respectively.

Summary of Derivative Instruments Fair Value

The following table provides a summary of the fair value amounts of our derivative instruments:

Designation of Derivatives	Balance Sheet Location	September 30, 2013			December 31, 2012
Derivatives Designated as Hedging Instruments
Foreign exchange contracts – forwards	Other current assets	$	4		$	3
	Other current liabilities	(37		)	(51		)
	Net Designated Derivative Liability	$	(33	)	$	(48	)
Derivatives NOT Designated as Hedging Instruments
Foreign exchange contracts – forwards	Other current assets	$	7		$	8
	Other current liabilities	(10		)	(31		)
	Net Undesignated Derivative Asset (Liability)	$	(3	)	$	(23	)
Summary of Derivatives	Total Derivative Assets	$	11		$	11
	Total Derivative Liabilities	(47		)	(82		)
	Net Derivative Liability	$	(36	)	$	(71	)

Summary of Derivative Instruments Gains (Losses)

Derivative gains (losses) affect the income statement based on whether such derivatives are designated as hedges of underlying exposures. The following is a summary of derivative gains (losses).

Designated Derivative Instruments Gains (Losses): The following tables provide a summary of gains (losses) on derivative instruments:

Derivatives in Cash Flow Hedging Relationships	Derivative Gain (Loss) Recognized in OCI (Effective Portion) Three Months Ended September 30,					Location of Derivative Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Gain (Loss) Reclassified from AOCI to Income (Effective Portion) Three Months Ended September 30,
	2013			2012			2013			2012
Foreign exchange contracts – forwards	$	(13	)	$	8	Cost of sales	$	(35	)	$	8
Derivatives in Cash Flow Hedging Relationships	Derivative Gain (Loss) Recognized in OCI (Effective Portion) Nine Months Ended September 30,					Location of Derivative Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Gain (Loss) Reclassified from AOCI to Income (Effective Portion) Nine Months Ended September 30,
	2013			2012			2013			2012
Foreign exchange contracts – forwards	$	(81	)	$	16	Cost of sales	$	(89	)	$	29

No amount of ineffectiveness was recorded in the Condensed Consolidated Statements of Income for these designated cash flow hedges and all components of each derivative’s gain (loss) was included in the assessment of hedge effectiveness. In addition, no amount was recorded for an underlying exposure that did not occur or was not expected to occur.

At September 30, 2013, net after-tax losses of $33 were recorded in accumulated other comprehensive loss associated with our cash flow hedging activity. The entire balance is expected to be reclassified into net income within the next 12 months, providing an offsetting economic impact against the underlying anticipated transactions.

Non-Designated Derivative Instruments Gains (Losses)

Non-designated derivative instruments are primarily instruments used to hedge foreign currency-denominated assets and liabilities. They are not designated as hedges since there is a natural offset for the re-measurement of the underlying foreign currency-denominated asset or liability.

The following table provides a summary of gains (losses) on non-designated derivative instruments:

Derivatives NOT Designated as Hedging Instruments		Three Months Ended September 30,						Nine Months Ended September 30,
	Location of Derivative Gain (Loss)	2013			2012			2013			2012
Foreign exchange contracts – forwards	Other expense – Currency losses, net	$	(12	)	$	(6	)	$	(45	)	$	(1	)

During the three and nine months ended September 30, 2013, Currency gains, net were $0 and $7, respectively. During the three and nine months ended September 30, 2012, Currency gains/losses, net were less than $1, respectively. Net Currency gains and losses are included in Other expenses, net and include the mark-to market adjustments of the derivatives not designated as hedging instruments and the related cost of those derivatives, as well as the re-measurement of foreign currency-denominated assets and liabilities.