Fair Value Measurements and Derivatives

3 Months Ended

Mar. 31, 2013

Fair Value Disclosures [Abstract]

Fair Value Measurements and Derivatives

Fair Value Measurements and Derivatives

In measuring the fair value of our assets and liabilities, we use market data or assumptions that we believe market participants would use in pricing an asset or liability including assumptions about risk when appropriate. Our valuation techniques include a combination of observable and unobservable inputs.

Fair value measurements on a recurring basis — Assets and liabilities that are carried in our balance sheet at fair value are as follows:

			Fair Value Measurements Using
			Quoted Prices in Active Markets		Significant Inputs Observable		Significant Inputs Unobservable
March 31, 2013	Total		(Level 1)		(Level 2)		(Level 3)
Notes receivable - current asset	$	61	$	—	$	—	$	61
Notes receivable - noncurrent asset	72						72
Marketable securities - current asset	63		38		25
Currency forward contracts - current asset	9				9
Currency forward contracts - current liability	2				2
December 31, 2012
Notes receivable - noncurrent asset	$	129	$	—	$	—	$	129
Marketable securities - current asset	60		37		23
Currency forward contracts - current asset	4				4
Currency forward contracts - current liability	1				1

Changes in Level 3 recurring fair value measurements —

	Three Months Ended March 31,
Notes receivable, including current portion	2013		2012
Beginning of period	$	129	$	116
Accretion of value (interest income)	4		4
Other			(1		)
End of period	$	133	$	119

The notes receivable balance represents a callable note, due 2019, obtained in connection with a divestiture in 2004. The fair value of the note is derived using a discounted cash flow technique and capped at the callable value. The discount rate used in the calculation is the current yield of the publicly traded debt of the operating subsidiary of the obligor, adjusted by a 250 basis point risk premium. The significant unobservable input used to fair value the note is the risk premium. A significant increase in the risk premium may result in a lower fair value measurement. A significant decrease in the risk premium would not result in a higher fair value measurement due to the callable value cap. The fair value of the note at March 31, 2013 equaled the callable value. We classified $61 of the note receivable as a current asset at March 31, 2013 based on having received notification from the obligor of its intention to prepay a portion of the note in April 2013.

Fair value of financial instruments – The fair values of financial instruments that do not approximate carrying values in our balance sheet are as follows:

	March 31, 2013				December 31, 2012
	Carrying Value		Fair Value		Carrying Value		Fair Value
Senior notes	$	750	$	817	$	750	$	805
Other indebtedness	131		129		109		107
Total	$	881	$	946	$	859	$	912

The fair value of our senior notes is estimated based upon a market approach (Level 2) while the fair value of our other indebtedness is based upon an income approach (Level 2).

Fair value measurements on a nonrecurring basis — In addition to items that are measured at fair value on a recurring basis, we also have long-lived assets that may be measured at fair value on a nonrecurring basis. These assets include intangible assets and property, plant and equipment which may be written down to fair value as a result of impairment. 

Foreign currency derivatives — The total notional amounts of outstanding foreign currency forward contracts, comprised of currency forward contracts involving the exchange of various currencies, were $214 and $217 as of March 31, 2013 and December 31, 2012.

The following currency forward contracts were outstanding at March 31, 2013 and are primarily associated with forecasted transactions involving the purchases and sales of inventory through the next twelve months:

		Notional Amount (U.S. Dollar Equivalent)
Functional Currency	Traded Currency	Designated as Cash Flow Hedges		Undesignated		Total		Maturity
U.S. dollar	Mexican peso	$	97	$	—	$	97	Mar-14
Euro	U.S. dollar, Canadian dollar, Hungarian forint, British pound	49				49		Mar-14
British pound	U.S. dollar, Euro	17		1		18		Mar-14
Swedish krona	Euro	16		2		18		Mar-14
Australian dollar	U.S. dollar	10		2		12		Feb-14
South African rand	U.S. dollar, Euro			6		6		Jun-13
Indian rupee	U.S. dollar, British pound, Euro			14		14		Nov-13
Total forward contracts		$	189	$	25	$	214

Cash flow hedges — With respect to contracts designated as cash flow hedges, changes in fair value during the period in which the contracts remain outstanding are reported in other comprehensive income (OCI) to the extent such contracts remain effective. Changes in fair value of those contracts that are not designated as cash flow hedges are reported in income in the period in which the changes occur. Forward contracts associated with product-related transactions are marked to market in cost of sales while other contracts are marked to market through other income, net. Amounts recorded in OCI are ultimately reclassified to earnings in the same periods in which the underlying transactions affect earnings.

Amounts to be reclassified to earnings — Deferred gains of $7 at March 31, 2013, which are reported in AOCI, are expected to be reclassified to earnings during the next twelve months. Amounts expected to be reclassified to earnings assume no change in the current hedge relationships or to March 31, 2013 market rates. Deferred gains at December 31, 2012 were $3, of which $2 was reclassified from AOCI to earnings in the first quarter of 2013. The remainder of the change in the amounts deferred in AOCI is primarily attributable to the weakening of the U.S. dollar against the Mexican peso during the first quarter of 2013.