Financial Instruments

6 Months Ended

Jun. 30, 2015

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 June 30, 2015, pay variable/receive fixed interest rate swaps with notional amounts of $300 and net asset fair value of $5 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.

The following is a summary of our fair value hedges at June 30, 2015:

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	$	5	2.44	%	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 June 30, 2015, we had outstanding forward exchange and purchased option contracts with gross notional values of $3,631, which is reflective of the amounts that are normally outstanding at any point during the year. Approximately 64% of these contracts mature within three months, 14% in three to six months, 21% in six to twelve months, and 1% in more than twelve months.

The following is a summary of the primary hedging positions and corresponding fair values as of June 30, 2015:

Currency Hedged (Buy/Sell)	Gross Notional Value		Fair  Value Asset (Liability)(1)
Euro/U.K. Pound Sterling	$	902	$	(3	)
U.S. Dollar/U.K. Pound Sterling	591		(5		)
Japanese Yen/U.S. Dollar	464		(15		)
Japanese Yen/Euro	302		(2		)
U.S. Dollar/Euro	280		2
Canadian Dollar/Euro	278		5
U.K. Pound Sterling/Euro	212		1
Swiss Franc/Euro	109		—
Euro/U.S. Dollar	75		—
Euro/Canadian Dollar	65		1
Indian Rupee/U.S. Dollar	56		—
Philippine Peso/U.S. Dollar	51		(1		)
Mexican Peso/U.S. Dollar	40		(2		)
Mexican Peso/Euro	30		(1		)
U.S. Dollar/Canadian Dollar	23		—
Swedish Krone/Euro	20		—
Euro/Danish Krone	20		—
All Other	113		—
Total Foreign Exchange Hedging	$	3,631	$	(20	)

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(1) Represents the net receivable (payable) amount included in the Condensed Consolidated Balance Sheet at June 30, 2015.

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. The net liability fair value of these contracts was $18 and $30 as of June 30, 2015 and December 31, 2014, 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	June 30, 2015			December 31, 2014
Derivatives Designated as Hedging Instruments
Foreign exchange contracts – forwards	Other current assets	$	3		$	7
	Other current liabilities	(20		)	(39		)
Foreign currency options	Other current assets	2			2
	Other current liabilities	(3		)	—
Interest rate swaps	Other long-term assets	5			5
	Net Designated Derivative Liability	$	(13	)	$	(25	)
Derivatives NOT Designated as Hedging Instruments
Foreign exchange contracts – forwards	Other current assets	$	13		$	13
	Other current liabilities	(15		)	(19		)
	Net Undesignated Derivative Liability	$	(2	)	$	(6	)
Summary of Derivatives	Total Derivative Assets	$	23		$	27
	Total Derivative Liabilities	(38		)	(58		)
	Net Derivative Liability	$	(15	)	$	(31	)

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 table provides a summary of gains (losses) on derivative instruments:

	Three Months Ended June 30,						Six Months Ended June 30,
(Loss) Gain on Derivative Instruments	2015			2014			2015			2014
Fair Value Hedges - Interest rate contracts
Derivative (loss) gain recognized in interest expense	$	(4	)	$	5		$	—		$	2
Hedged item gain (loss) recognized in interest expense	4			(5		)	—			(2		)
Cash Flow Hedges - Foreign exchange forward contracts and options
Derivative (loss) gain recognized in OCI (effective portion)	$	(24	)	$	11		$	7		$	29
Derivative loss reclassified from AOCI to income - Cost of sales (effective portion)	—			(8		)	(10		)	(29		)

During the three and six months ended June 30,2015 and June 30,2014, no amount of ineffectiveness was recorded in earnings 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 June 30,2015, a net after-tax loss of $12 was 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 on non-designated derivative instruments:

Derivatives NOT Designated as Hedging Instruments		Three Months Ended June 30,					Six Months Ended June 30,
	Location of Derivative Gain (Loss)	2015			2014		2015			2014
Foreign exchange contracts – forwards	Other expense – Currency loss, net	$	(50	)	$	—	$	(35	)	$	—

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. During the three and six months ended June 30,2015, currency gains (losses), net were $5 and $(1), respectively. During the three and six months ended June 30, 2014, currency gains, net were $1 and $0, respectively.