Derivative Financial Instruments

9 Months Ended

Sep. 30, 2013

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Note 12. Derivative Financial Instruments

We enter into forward currency contracts to manage foreign exchange risk on intercompany loans that are not deemed permanently invested. These forward contracts are not designated as hedges, and their change in fair value is recorded in our consolidated statements of income in the interest expense line item during each reporting period. These forward contracts provide an economic hedge, as they largely offset foreign currency exposures on intercompany loans.

The counterparties to our derivative financial instruments are major financial institutions. We evaluate the bond ratings of the financial institutions and believe that credit risk is at an acceptable level.

We enter into interest rate swap agreements to manage interest expense. Our objective is to manage the impact of interest rates on the results of operations, cash flows and the market value of our debt. During the three months ended September 30, 2013, we entered into four interest rate swap agreements with an aggregate notional amount of $200 million under which we pay floating rates and receive fixed rates of interest (“Fair Value Swaps”). The Fair Value Swaps hedge the change in fair value of certain fixed rate debt related to fluctuations in interest rates and mature in 2018 and 2019. The Fair Value Swaps modify our interest rate exposure by effectively converting debt with a fixed rate to a floating rate. These interest rate swaps have been designated and qualify as fair value hedges and have met the requirements to assume zero ineffectiveness. The fair value of our interest rate swaps at September 30, 2013 was de minimis.

The following tables summarize the fair value of our derivative instruments and the effect on the Consolidated Statements of Income during the quarter.

Fair Value of Derivative Instruments

(in millions)

	September 30, 2013			December 31, 2012
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives not designated as hedging instruments
Asset Derivatives
Forward contracts	Prepaid expenses and other	$	3	Prepaid expenses and other	$	2
Total assets		$	3		$	2
Liability Derivatives
Forward contracts	Accrued expenses	$	4	Accrued expenses	$	—
Total liabilities		$	4		$	—

Derivatives Not Designated as Hedging         Instruments	Location of Gain or (Loss)  Recognized in Income on Derivative	Amount of Gain or  (Loss) Recognized in Income on Derivative
		Three Months Ended September 30,
		2013			2012
Foreign forward exchange contracts	Interest expense, net	$	(3	)	$	(8	)
Total loss included in income		$	(3	)	$	(8	)
Derivatives Not Designated as Hedging         Instruments	Location of Gain or (Loss)  Recognized in Income on Derivative	Amount of Gain or  (Loss) Recognized in Income on Derivative
		Nine Months  Ended September 30,
		2013			2012
Foreign forward exchange contracts	Interest expense, net	$	8		$	(7	)
Total gain included in income		$	8		$	(7	)