Derivative Instruments

12 Months Ended

Dec. 31, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

COMMODITY DERIVATIVE INSTRUMENTS

As of December 31, 2014, we had 26 million mmBTUs (millions of British Thermal Units) in aggregate notional amount of outstanding natural gas swap contracts to hedge forecasted purchases. All of these contracts mature by December 31, 2017. For contracts designated as cash flow hedges, the unrealized loss that remained in AOCI as of December 31, 2014 was $20 million. No ineffectiveness was recorded on contracts designated as cash flow hedges in 2014. Gains and losses on contracts designated as cash flow hedges are reclassified into earnings when the underlying forecasted transactions affect earnings. For contracts designated as cash flow hedges, we reassess the probability of the underlying forecasted transactions occurring on a regular basis. Changes in fair value on contracts not designated as cash flow hedges are recorded to earnings. The fair value of those contracts not designated as cash flow hedges was a $5 million unrealized loss as of December 31, 2014.

FOREIGN EXCHANGE DERIVATIVE INSTRUMENTS

We have foreign exchange forward contracts to hedge purchases of products and services denominated in foreign currencies. The notional amount of these contracts was $72 million as of December 31, 2014, and they mature by June 30, 2016. These forward contracts are designated as cash flow hedges and no ineffectiveness was recorded in 2014. Gains and losses on the contracts are reclassified into earnings when the underlying transactions affect earnings. The fair value of these contracts that remained in AOCI was a $3 million unrealized gain as of December 31, 2014.

During the third quarter of 2012, we entered into foreign exchange forward contracts to hedge a portion of our net investment in one of our European subsidiaries. The notional amount of these contracts was $25 million and they matured on October 29, 2012. These forward contracts were designated as net investment hedges and no ineffectiveness was recorded. Gains and losses on derivatives designated as net investment hedges, to the extent they are effective as hedges, remain in AOCI until such point when the investment is either sold or liquidated. On December 27, 2012, we sold the subsidiary and, as a result, we reclassified the $1 million loss from AOCI to earnings as a reduction to the gain on the sale of the businesses. See Note 4 for further discussion on the sale.

COUNTERPARTY RISK

We are exposed to credit losses in the event of nonperformance by the counterparties to our derivative instruments. As of December 31, 2014, our derivatives were in a $22 million net liability position. All of our counterparties have investment grade credit ratings; accordingly, we anticipate that they will be able to fully satisfy their obligations under the contracts.

All of our derivative contracts are governed by master netting agreements negotiated between us and the counterparties that reduce our counterparty credit exposure. The agreements outline the conditions (such as credit ratings and net derivative fair values) upon which we, or the counterparties, are required to post collateral. As required by certain of our agreements, we had $19 million of collateral posted with our counterparties related to our derivatives as of December 31, 2014. Amounts paid as cash collateral are included in receivables on our consolidated balance sheets.

We have not adopted an accounting policy to offset fair value amounts related to derivative contracts under our master netting arrangements; therefore, individual derivative contracts are reflected on a gross basis, as either assets or liabilities, on our consolidated balance sheets, based on their fair value as of the balance sheet date.

FINANCIAL STATEMENT INFORMATION

The following are the pretax effects of derivative instruments on the consolidated statements of operations and the consolidated statements of comprehensive income (loss) for the years ended December 31, 2014, 2013 and 2012:

	Amount of Gain or (Loss) Recognized in Other Comprehensive Income (Loss) on Derivatives (Effective Portion)								Location of Gain or (Loss)  Reclassified from AOCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)
(millions)	2014			2013		2012				2014		2013			2012
Derivatives in Cash Flow Hedging Relationships
Commodity contracts	$	(19	)	$	1	$	(4	)	Cost of products sold	$	2	$	(2	)	$	(10	)
Foreign exchange contracts	4			3		(1		)	Cost of products sold	2		3			2
Derivatives in Net Investment Hedging Relationships
Foreign exchange contracts	—			—		—			Gain on sale of discontinued operations	—		—			(1		)
Total	$	(15	)	$	4	$	(5	)		$	4	$	1		$	(9	)

	Location of Gain or (Loss)  Recognized in Income on Derivatives	Amount of Gain or (Loss) Recognized in Income on Derivatives
(millions)		2014			2013		2012
Derivatives Not Designated as Hedging Instruments
Commodity contracts	Cost of products sold	$	(4	)	$	2	$	—
Foreign exchange contracts	Other (income) expense, net	—			—		—
Total		$	(4	)	$	2	$	—

As of December 31, 2014, we had no derivatives designated as net investment or fair value hedges.

The following are the fair values of derivative instruments on the consolidated balance sheets as of December 31, 2014 and 2013:

	Balance Sheet Location	Fair Value				Balance Sheet Location	Fair Value
(millions)		12/31/14		12/31/13			12/31/14		12/31/13
Derivatives in Cash Flow Hedging Relationships
Commodity contracts	Other current assets	$	1	$	2	Accrued expenses	$	14	$	—
Commodity contracts	Other assets	—		—		Other liabilities	7		—
Foreign exchange contracts	Other current assets	3		1		Accrued expenses	—		—
Total derivatives in hedging relationships		$	4	$	3		$	21	$	—

	Balance Sheet Location	Fair Value				Balance Sheet Location	Fair Value
(millions)		12/31/14		12/31/13			12/31/14		12/31/13
Derivatives Not Designated as Hedging Instruments
Commodity contracts	Other current assets	$	—	$	2	Accrued expenses	$	4	$	—
Commodity contracts	Other assets	—		—		Other liabilities	1		—
Total derivatives not designated as hedging instruments		$	—	$	2		$	5	$	—
Total derivatives	Total assets	$	4	$	5	Total liabilities	$	26	$	—