Financial Instruments

9 Months Ended

Sep. 30, 2011

Financial Instruments [Abstract]

FINANCIAL INSTRUMENTS

NOTE 6 — FINANCIAL INSTRUMENTS

Interest Rate Swap Agreements

We have entered into interest rate swap agreements to manage our exposure to fluctuations in interest rates. These swap agreements involve the exchange of fixed and variable rate interest payments between two parties based on common notional principal amounts and maturity dates. Pay-fixed interest rate swaps effectively convert LIBOR indexed variable rate obligations to fixed interest rate obligations. Pay-variable interest rate swaps effectively convert fixed interest rate obligations to LIBOR indexed variable rate obligations. The interest payments under these agreements are settled on a net basis. The net interest payments, based on the notional amounts in these agreements, generally match the timing of the related liabilities, for the interest rate swap agreements which have been designated as cash flow hedges. The notional amounts of the swap agreements represent amounts used to calculate the exchange of cash flows and are not our assets or liabilities. Our credit risk related to these agreements is considered low because the swap agreements are with creditworthy financial institutions.

The following table sets forth our interest rate swap agreements, which have been designated as cash flow hedges, at September 30, 2011 (dollars in millions):

	Notional Amount		Maturity Date	Fair Value
Pay-fixed interest rate swaps	$	7,100	November 2011	$	(42	)
Pay-fixed interest rate swaps (starting November 2011)		500	December 2014		(8	)
Pay-fixed interest rate swaps (starting November 2011)		3,000	December 2016		(332	)
Pay-fixed interest rate swaps (starting November 2011)		1,000	December 2017		(48	)

Certain of our interest rate swaps are not designated as hedges, and changes in fair value are recognized in results of operations. The following table sets forth our interest rate swap agreements, which were not designated as hedges, at September 30, 2011 (dollars in millions):

	Notional Amount		Maturity Date	Fair Value
Pay-fixed interest rate swap	$	900	November 2011	$	(5	)
Pay-variable interest rate swap		900	November 2011		1

During the next 12 months, we estimate $147 million will be reclassified from other comprehensive income (“OCI”) to interest expense.

Cross Currency Swaps

The Company and certain subsidiaries have incurred obligations and entered into various intercompany transactions where such obligations are denominated in currencies other than the functional currencies of the parties executing the trade. In order to mitigate the currency exposure risks and better match the cash flows of our obligations and intercompany transactions with cash flows from operations, we entered into various cross currency swaps. Our credit risk related to these agreements is considered low because the swap agreements are with creditworthy financial institutions.

Certain of our cross currency swaps are not designated as hedges, and changes in fair value are recognized in results of operations. The following table sets forth our cross currency swap agreement, which was not designated as a hedge, at September 30, 2011 (amounts in millions):

	Notional Amount	Maturity Date	Fair Value
Euro — United States Dollar currency swap	351 Euro	December 2011	$	39

Derivatives — Results of Operations

The following table presents the effect on our results of operations of our interest rate swaps for the nine months ended September 30, 2011 (dollars in millions):

Derivatives in Cash Flow Hedging Relationships	Amount of Loss Recognized  in OCI on Derivatives, Net of Tax		Location of Loss Reclassified  from Accumulated OCI into Operations	Amount of  Loss Reclassified from Accumulated  OCI into Operations
Interest rate swaps	$	180	Interest expense	$	279

Credit-risk-related Contingent Features

We have agreements with each of our derivative counterparties that contain a provision where we could be declared in default on our derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to our default on the indebtedness. As of September 30, 2011, we have not been required to post any collateral related to these agreements. If we had breached these provisions at September 30, 2011, we would have been required to settle our obligations under the agreements at their aggregate, estimated termination value of $446 million.