FINANCIAL INSTRUMENTS

6 Months Ended

Jun. 30, 2011

NOTE 14: FINANCIAL INSTRUMENTS

The following table presents the carrying amounts, estimated fair values, and location in the Consolidated Statement of Financial Position for the Company's financial instruments:

		Assets
(in millions)		June 30, 2011				December 31, 2010
	Balance Sheet Location	Carrying Amount		Fair Value		Carrying Amount		Fair Value

Marketable securities:
Available-for-sale (1)	Other current assets and Other long-term assets	$	7	$	7	$	10	$	10
Held-to-maturity (2)	Other current assets and Other long-term assets		30		30		8		8

Derivatives designated as hedging instruments:
Commodity contracts (1)	Receivables, net		3		3		2		2

Derivatives not designated as hedging instruments:
Foreign exchange contracts (1)	Receivables, net		2		2		11		11
Foreign exchange contracts (1)	Other long-term assets		-		-		1		1


		Liabilities
(in millions)		June 30, 2011				December 31, 2010
	Balance Sheet Location	Carrying Amount		Fair Value		Carrying Amount		Fair Value

Long-term borrowings, net of current portion (2)	Long-term debt, net of current portion	$	1,401	$	1,366	$	1,195	$	1,242

Derivatives designated as hedging instruments:
Commodity contracts (1)	Other current liabilities		3		3		-		-

Derivatives not designated as hedging instruments:
Foreign exchange contracts (1)	Other current liabilities		7		7		8		8
Foreign exchange contracts (1)	Other long-term liabilities		3		3		-		-

(1) Recorded at fair value.

(2) Recorded at historical cost.

Long-term debt is generally used to finance long-term investments, while short-term borrowings (excluding the current portion of long-term debt) are used to meet working capital requirements. The carrying value of the current portion of long-term debt approximates its fair value as of June 30, 2011 and December 31, 2010. The Company does not utilize financial instruments for trading or other speculative purposes.

Fair value

The fair values of marketable securities are determined using quoted prices in active markets for identical assets (Level 1 fair value measurements). Fair values of the Company's forward contracts are determined using other observable inputs (Level 2 fair value measurements), and are based on the present value of expected future cash flows (an income approach valuation technique) considering the risks involved and using discount rates appropriate for the duration of the contracts. Transfers between levels of the fair value hierarchy are recognized based on the actual date of the event or change in circumstances that caused the transfer. There were no transfers between levels of the fair value hierarchy during the three and six months ended June 30, 2011.

Fair values of long-term borrowings are determined by reference to quoted market prices, if available, or by pricing models based on the value of related cash flows discounted at current market interest rates. The carrying values of cash and cash equivalents, trade receivables, short-term borrowings and payables (which are not shown in the table above) approximate their fair values.

Foreign exchange

Foreign exchange gains and losses arising from transactions denominated in a currency other than the functional currency of the entity involved are included in Other income (charges), net in the accompanying Consolidated Statement of Operations. The net effects of foreign currency transactions, including changes in the fair value of foreign exchange contracts, are shown below:

(in millions)	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Net gain (loss)	$	20	$	-	$	7	$	(11	)

Derivative financial instruments

The Company, as a result of its global operating and financing activities, is exposed to changes in foreign currency exchange rates, commodity prices, and interest rates, which may adversely affect its results of operations and financial position. The Company manages such exposures, in part, with derivative financial instruments.

Foreign currency forward contracts are used to mitigate currency risk related to foreign currency denominated assets and liabilities, especially those of the Company's International Treasury Center. Silver forward contracts are used to mitigate the Company's risk to fluctuating silver prices. The Company's exposure to changes in interest rates results from its investing and borrowing activities used to meet its liquidity needs.

The Company's financial instrument counterparties are high-quality investment or commercial banks with significant experience with such instruments. The Company manages exposure to counterparty credit risk by requiring specific minimum credit standards and diversification of counterparties. The Company has procedures to monitor the credit exposure amounts. The maximum credit exposure at June 30, 2011 was not significant to the Company.

In the event of a default under the Company's Second Amended and Restated Credit Agreement, or one of the Company's Indentures, or a default under any derivative contract or similar obligation of the Company, the derivative counterparties would have the right, although not the obligation, to require immediate settlement of some or all open derivative contracts at their then-current fair value, but with liability positions netted against asset positions with the same counterparty. At June 30, 2011, the Company had open derivative contracts in liability positions with a total fair value of $13 million.

The location and amounts of pre-tax gains and losses related to derivatives reported in the Consolidated Statement of Operations are shown in the following tables:

Derivatives in Cash Flow Hedging Relationships	Gain (Loss) Recognized in OCI on Derivative (Effective Portion)					Gain (Loss) Reclassified from Accumulated OCI Into Cost of Sales (Effective Portion)				Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
(in millions)	For the three months ended June 30,					For the three months ended June 30,				For the three months ended June 30,
	2011			2010		2011		2010		2011		2010

Commodity contracts	$	(5	)	$	2	$	7	$	1	$	-	$	-

	For the six months ended June 30,					For the six months ended June 30,				For the six months ended June 30,
		2011			2010		2011		2010		2011		2010

Commodity contracts	$	9		$	4	$	7	$	6	$	-	$	-

Derivatives Not Designated as Hedging Instruments	Location of Gain or (Loss) Recognized in Income on Derivative	Gain (Loss) Recognized in Income on Derivative
(in millions)		For the three months ended June 30,				For the six months ended June 30,
		2011		2010		2011		2010

Foreign exchange contracts	Other income (charges), net	$	10	$	27	$	10	$	31

Foreign currency forward contracts

Certain of the Company's foreign currency forward contracts used to mitigate currency risk related to existing foreign currency denominated assets and liabilities are not designated as hedges, and are marked to market through net (loss) earnings at the same time that the exposed assets and liabilities are remeasured through net (loss) earnings (both in Other income (charges), net). The notional amount of such contracts open at June 30, 2011 was approximately $956 million. The majority of the contracts of this type held by the Company are denominated in euros and British pounds.

Silver forward contracts

The Company enters into silver forward contracts that are designated as cash flow hedges of commodity price risk related to forecasted purchases of silver. The value of the notional amounts of such contracts open at June 30, 2011 was $38 million. Hedge gains and losses related to these silver forward contracts are reclassified into cost of sales as the related silver-containing products are sold to third parties. These gains or losses transferred to cost of sales are generally offset by increased or decreased costs of silver purchased in the open market. The amount of existing gains and losses at June 30, 2011 to be reclassified into earnings within the next 12 months is a net gain of $4 million. At June 30, 2011, the Company had hedges of a portion of its forecasted purchases through November 2011.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 820
-SubTopic 10
-Section 50
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19296-110258

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 159
-Paragraph 17-22, 27, 28
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13433-108611

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15C, 15D
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 28
-URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612

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-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
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-URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13504-108611

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-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15A
-Subparagraph a-d
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 21
-URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13537-108611

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 133
-Paragraph 44A, 44B
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 820
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19207-110258

Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 30
-URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612

Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 3, 10, 14, 15
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 13: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15B
-Subparagraph a, b
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 14: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 157
-Paragraph 32, 33, 34
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

+ Details