Derivative Instruments

12 Months Ended

Dec. 31, 2011

Derivative Instruments [Abstract]

Derivative Instruments

7. Derivative Instruments

COMMODITY DERIVATIVE INSTRUMENTS

As of December 31, 2011, we had swap and option contracts to hedge $40 million notional amounts of natural gas. All of these contracts mature by December 31, 2012. For contracts designated as cash flow hedges, the unrealized loss that remained in AOCI as of December 31, 2011 was $7 million. AOCI also included $1 million of losses related to closed derivative contracts hedging underlying transactions that have not yet affected earnings. No ineffectiveness was recorded on contracts designated as cash flow hedges in 2011. 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 zero as of December 31, 2011.

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 $78 million as of December 31, 2011, and they mature by December 21, 2012. These forward contracts are designated as cash flow hedges and no ineffectiveness was recorded in 2011. 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, 2011.

COUNTERPARTY RISK

We are exposed to credit losses in the event of nonperformance by the counterparties to our derivative instruments. 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. Additionally, the derivatives 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 of December 31, 2011, our derivatives were in a net liability position of $4 million, and we provided $8 million of collateral to our counterparties related to our derivatives. No additional collateral is required under these agreements. We have not adopted an accounting policy to offset fair value amounts related to derivative contracts under our master netting arrangements. Amounts paid as cash collateral are included in receivables on our consolidated balance sheets.

FINANCIAL STATEMENT INFORMATION

The following are the pretax effects of derivative instruments on the consolidated statements of operations for the years ended December 31, 2011, 2010 and 2009 (dollars in millions):

Derivatives in Cash Flow Hedging Relationships	Amount of Gain or (Loss) Recognized in Other Comprehensive Income 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)
	2011			2010			2009				2011			2010			2009
Commodity contracts	$	(3	)	$	(18	)	$	(27	)	Cost of products sold	$	(17	)	$	(20	)	$	(64	)
Foreign exchange contracts		2			(3	)		(2	)	Cost of products sold		(5	)		—			(1	)
Total	$	(1	)	$	(21	)	$	(29	)		$	(22	)	$	(20	)	$	(65	)

Derivatives Not Designated as Hedging Instruments	Location of Gain or (Loss) Recognized in Income on Derivatives	Amount of Gain or  (Loss) Recognized in Income on Derivatives
		2011			2010			2009
Commodity contracts	Cost of products sold	$	(4	)	$	(4	)	$	(4	)
Foreign exchange contracts	Other expense (income), net		—			(2	)		1
Interest rate contracts	Interest expense		—			—			(1	)
Interest rate contracts	Other expense (income), net		—			—			1
Total		$	(4	)	$	(6	)	$	(3	)

As of December 31, 2011, 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, 2011 and 2010 (dollars in millions):

	0000		0000		0000	0000		0000		0000
Derivatives Designated as Hedging Instruments	Assets					Liabilities
	Balance Sheet Location	Fair Value				Balance Sheet Location	Fair Value
		12/31/11		12/31/10			12/31/11		12/31/10
Commodity contracts	Other current assets	$	1	$	—	Accrued expenses	$	8	$	16
Commodity contracts	Other assets		—		—	Other liabilities		—		5
Foreign exchange contracts	Other current assets		3		—	Accrued expenses		—		3
Foreign exchange contracts	Other assets		—		—	Other liabilities		—		1
Total		$	4	$	—		$	8	$	25

	0000		0000		0000	0000		0000		0000
Derivatives Not Designated as Hedging Instruments	Assets					Liabilities
	Balance Sheet Location	Fair Value				Balance Sheet Location	Fair Value
		12/31/11		12/31/10			12/31/11		12/31/10
Commodity contracts	Other current assets	$	—	$	1	Accrued expenses	$	—	$	—
Total		$	—	$	1		$	—	$	—
Total derivatives		$	4	$	1		$	8	$	25