Derivative Instruments and Hedging Activities

6 Months Ended

Jun. 30, 2013

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

F. The Company is exposed to global market risk as part of its normal daily business activities. To manage these risks, the Company enters into various derivative contracts. These contracts include interest rate swap agreements, foreign currency exchange contracts and contracts intended to hedge the Company’s exposure to copper and zinc. The Company reviews its hedging program, derivative positions and overall risk management on a regular basis.

Interest Rate Swap Agreements. In March 2012, in connection with the issuance of $400 million of debt, the Company terminated the interest rate swap hedge relationships that it entered into in August 2011. These interest rate swaps were designated as cash flow hedges and effectively fixed interest rates on the forecasted debt issuance to variable rates based on 3-month LIBOR. Upon termination, the ineffective portion of the cash flow hedges of approximately $2 million loss was recognized in the Company’s consolidated statement of income in other, net. The remaining loss of approximately $23 million from the termination of these swaps is being amortized as an increase to interest expense over the remaining term of the debt, through March 2022. At June 30, 2013, the balance remaining in Accumulated Other Comprehensive Income was $20 million.

Foreign Currency Contracts. The Company’s net cash inflows and outflows exposed to the risk of changes in foreign currency exchange rates arise from the sale of products in countries other than the manufacturing source, foreign currency denominated supplier payments, debt and other payables, and investments in subsidiaries. To mitigate this risk during 2013 and 2012, the Company, including certain European operations, entered into foreign currency forward contracts and foreign currency exchange contracts.

Gains (losses) related to foreign currency forward and exchange contracts are recorded in the Company’s condensed consolidated statements of operations in other income (expense), net. In the event that the counterparties fail to meet the terms of the foreign currency forward contracts, the Company’s exposure is limited to the aggregate foreign currency rate differential with such institutions.

Metal Contracts. During 2013 and 2012, the Company entered into several contracts to manage its exposure to increases in the price of copper and zinc. (Losses) gains related to these contracts are recorded in the Company’s condensed consolidated statements of operations in cost of sales.

The pre-tax (loss) gain included in the Company’s consolidated statements of operations is as follows, in millions:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
Foreign Currency Contracts
Exchange Contracts	$	—		$	9		$	7		$	4
Forward Contracts		—			—			2			(1	)
Metal Contracts		(5	)		(6	)		(9	)		1
Total (loss) gain	$	(5	)	$	3		$	—		$	4

The Company presents its derivatives, net by counterparty due to the right of offset under master netting arrangements in current assets or current liabilities in the condensed consolidated balance sheet. The notional amounts being hedged and the fair value of those derivative instruments, on a gross basis, are as follows, in millions:

	At June 30, 2013
	Notional
	Amount		Assets		Liabilities
Foreign Currency Contracts
Exchange Contracts	$	103
Current assets			$	3	$	—
Forward Contracts		63
Current assets				1		—
Metal Contracts		46
Current liabilities				—		8
Total			$	4	$	8

	At December 31, 2012
	Notional
	Amount		Assets		Liabilities
Foreign Currency Contracts
Exchange Contracts	$	172
Current liabilities			$	—	$	5
Forward Contracts		76
Current assets				1		1
Metal Contracts		35
Current liabilities				1		2
Total			$	2	$	8

The fair value of all metal and foreign currency derivative contracts is estimated on a recurring basis using Level 2 inputs (significant other observable inputs).