Financial Instruments

3 Months Ended

Mar. 31, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Financial Instruments

Financial Instruments

Interest Rate Risk Management

We 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.

Fair Value Hedges

As of March 31, 2014, pay variable/receive fixed interest rate swaps with notional amounts of $300 and net liability fair value of $3 were designated and accounted for as fair value hedges. The swaps were structured to hedge the fair value of related debt by converting them from fixed rate instruments to variable rate instruments. No ineffective portion was recorded to earnings during 2014. We did not have any interest rate swaps outstanding at December 31, 2013.

The following is a summary of our fair value hedges at March 31, 2014:

Debt Instrument	Year First Designated	Notional Amount		Net Fair Value			Weighted Average Interest Rate Paid		Interest Rate Received		Basis	Maturity
Senior Note 2021	2014	$	300	$	(3	)	2.42	%	4.5	%	Libor	2021

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 March 31, 2014, we had outstanding forward exchange and purchased option contracts with gross notional values of $2,994, which is reflective of the amounts that are normally outstanding at any point during the year. Approximately 68% of these contracts mature within three months, 9% in three to six months and 23% in six to twelve months.

The following is a summary of the primary hedging positions and corresponding fair values as of March 31, 2014:

Currency Hedged (Buy/Sell)	Gross Notional Value		Fair  Value Asset (Liability)(1)
Euro/U.K. Pound Sterling	$	769	$	(4	)
Japanese Yen/U.S. Dollar	487		(8		)
Canadian Dollar/Euro	409		(4		)
U.S. Dollar/Euro	397		(1		)
Japanese Yen/Euro	378		(11		)
U.K. Pound Sterling/Euro	167		—
Philippine Peso/U.S. Dollar	52		—
Mexican Peso/U.S. Dollar	47		1
Swiss Franc/Euro	44		—
Indian Rupee/U.S. Dollar	41		3
Euro/Danish Krone	29		—
Mexican Peso/Euro	24		—
All Other	150		(1		)
Total Foreign Exchange Hedging	$	2,994	$	(25	)

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(1) Represents the net receivable (payable) amount included in the Condensed Consolidated Balance Sheet at March 31, 2014.

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 $16 and $50 as of March 31, 2014 and December 31, 2013, 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	March 31, 2014			December 31, 2013
Derivatives Designated as Hedging Instruments
Foreign exchange contracts – forwards	Other current assets	$	4		$	1
	Other current liabilities	(20		)	(51		)
Interest rate swaps	Other long-term liabilities	(3		)	—
	Net Designated Derivative Liability	$	(19	)	$	(50	)
Derivatives NOT Designated as Hedging Instruments
Foreign exchange contracts – forwards	Other current assets	$	5		$	5
	Other current liabilities	(14		)	(19		)
	Net Undesignated Derivative Liability	$	(9	)	$	(14	)
Summary of Derivatives	Total Derivative Assets	$	9		$	6
	Total Derivative Liabilities	(37		)	(70		)
	Net Derivative Liability	$	(28	)	$	(64	)

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 Fair Value Hedging Relationships	Location of Gain (Loss) Recognized in Income	Derivative Gain (Loss) Recognized in income					Hedged Item Gain (Loss) Recognized in Income
		Three Months Ended March 31,					Three Months Ended March 31,
		2014			2013		2014		2013
Interest Rate Contracts	Interest Expense	$	(3	)	$	—	$	3	$	—

Derivatives in Cash Flow Hedging Relationships	Derivative Gain (Loss) Recognized in OCI (Effective Portion)					Location of Derivative Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Gain (Loss) Reclassified from AOCI to Income (Effective Portion)
	Three Months Ended March 31,						Three Months Ended March 31,
	2014		2013				2014			2013
Foreign exchange contracts – forwards	$	18	$	(34	)	Cost of sales	$	(21	)	$	(17	)

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 March 31,2014, net after-tax losses of $11 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 March 31,
	Location of Derivative Gain (Loss)	2014		2013
Foreign exchange contracts – forwards	Other expense – Currency losses, net	$	—	$	(15	)

During the three months ended March 31,2014 and March 31,2013, Currency (loss) gains, net were $(1) and $4, 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.