Risk Management

Foreign Currency Risk

At June 29, 2013, the Company had outstanding foreign exchange contracts with notional amounts totaling $667 million, compared to $523 million outstanding at December 31, 2012. Management believes that these financial instruments should not subject the Company to undue risk due to foreign exchange movements because gains and losses on these contracts should generally offset gains and losses on the underlying assets, liabilities and transactions, except for the ineffective portion of the instruments, which are charged to Other within Other income (expense) in the Company’s condensed consolidated statements of operations.

The following table shows the five largest net notional amounts of the positions to buy or sell foreign currency as of June 29, 2013, and the corresponding positions as of December 31, 2012:



	Notional Amount
Net Buy (Sell) by Currency	June 29, 2013			December 31, 2012
British Pound	$	231		$	225
Chinese Renminbi	(141		)	(99		)
Norwegian Krone	(75		)	(48		)
Brazilian Real	(75		)	3
Israeli Shekel	(43		)	(35		)

Interest Rate Risk

At June 29, 2013, the Company had $2.5 billion of long-term debt, including the current portion of long-term debt, which is primarily priced at long-term, fixed interest rates.

As part of its liability management program, one of the Company’s European subsidiaries has outstanding interest rate agreements (“Interest Agreements”) relating to Euro-denominated loans. The interest on the Euro-denominated loans is variable. The Interest Agreements change the characteristics of interest payments from variable to maximum fixed-rate payments. The Interest Agreements are not accounted for as a part of a hedging relationship and, accordingly, the changes in the fair value of the Interest Agreements are included in Other income (expense) in the Company’s condensed consolidated statements of operations. The fair value of the Interest Agreements was in a liability position of $3 million and $4 million, at June 29, 2013 and December 31, 2012, respectively.

Counterparty Risk

The use of derivative financial instruments exposes the Company to counterparty credit risk in the event of non-performance by counterparties. However, the Company’s risk is limited to the fair value of the instruments when the derivative is in an asset position. The Company actively monitors its exposure to credit risk. As of June 29, 2013, all of the counterparties have investment grade credit ratings. The Company is not exposed to material net credit risk with any single counterparty. As of June 29, 2013, the Company was exposed to an aggregate net credit risk of approximately $2 million with all counterparties.

The following tables summarize the fair values and location in the condensed consolidated balance sheets of all derivative financial instruments held by the Company at June 29, 2013 and December 31, 2012:



	Fair Values of Derivative Instruments
	Assets			Liabilities
June 29, 2013	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location
Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	4	Other assets	$	5	Other liabilities
Interest agreements	—		Other assets	3		Other liabilities
Total derivatives not designated as hedging instruments	$	4		$	8



	Fair Values of Derivative Instruments
	Assets			Liabilities
December 31, 2012	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location
Derivatives designated as hedging instruments:
Foreign exchange contracts	$	1	Other assets	$	—	Other liabilities
Derivatives not designated as hedging instruments:
Foreign exchange contracts	2		Other assets	3		Other liabilities
Interest agreements	—		Other assets	4		Other liabilities
Total derivatives not designated as hedging instruments	2			7
Total derivatives	$	3		$	7

The following tables summarize the effect of derivative instruments in the Company's condensed consolidated statements of operations for the three and six months ended June 29, 2013 and June 30, 2012:



	Three Months Ended				Statement of Operations Location
Gain on Derivative Instruments	June 29, 2013		June 30, 2012		Statement of Operations Location
Derivatives not designated as hedging instruments:
Interest rate contracts	$	1	$	—	Other income (expense)
Foreign exchange contracts	8		1		Other income (expense)
Total derivatives not designated as hedging instruments	$	9	$	1



	Six Months Ended						Statement of Operations Location
Gain (loss) on Derivative Instruments	June 29, 2013			June 30, 2012			Statement of Operations Location
Derivatives not designated as hedging instruments:
Interest rate contracts	$	1		$	—		Other income (expense)
Foreign exchange contracts	(9		)	(3		)	Other income (expense)
Total derivatives not designated as hedging instruments	$	(8	)	$	(3	)

The following tables summarize the gains and losses recognized in the condensed consolidated financial statements for the three and six months ended June 29, 2013 and June 30, 2012:



	Three Months Ended					Financial Statement Location
Foreign Exchange Contracts	June 29, 2013		June 30, 2012			Financial Statement Location
Derivatives in cash flow hedging relationships:
Loss recognized in Accumulated other comprehensive loss	$	—	$	(2	)	Accumulated other comprehensive loss



	Six Months Ended					Financial Statement Location
Foreign Exchange Contracts	June 29, 2013		June 30, 2012			Financial Statement Location
Derivatives in cash flow hedging relationships:
Gain recognized in Accumulated other comprehensive loss	$	—	$	1		Accumulated other comprehensive loss
Gain (loss) reclassified from Accumulated other comprehensive loss into Net earnings	1		(1		)	Costs of sales