Quarterly report pursuant to Section 13 or 15(d)

DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT (Tables)

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DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT (Tables)
 6 Months Ended
Jun. 30, 2011
Notional Amounts of Outstanding Derivative Positions

As of June 30, 2011 and December 31, 2010, the notional amounts of our outstanding derivative positions were as follows (in millions):

 

     June 30, 2011
Notional Value		      December 31, 2010
Notional Value		  

Currency Hedges:

      

Euro

    € 2,377       € 1,732   

British Pound Sterling

    £ 1,031       £ 871   

Canadian Dollar

    C$ 475       C$ 289   

Interest Rate Hedges:

      

Fixed to Floating Interest Rate Swaps

    $ 6,424       $ 6,000   

Floating to Fixed Interest Rate Swaps

    $ 48       $ 53
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

The following table indicates the location on the consolidated balance sheets in which our derivative assets and liabilities have been recognized, the fair value hierarchy level applicable to each derivative type, and the related fair values of those derivatives (in millions). The table is segregated between those derivative instruments that qualify and are designated as hedging instruments and those that are not, as well as by type of contract and whether the derivative is in an asset or liability position.

 

Asset Derivatives

   Balance Sheet Location   Fair Value
Hierarchy Level		     June 30, 2011
Fair Value		     December 31, 2010
Fair Value		  

Derivatives designated as hedges:

        

Foreign exchange contracts

   Other current assets     Level 2      $ 4      $ 36   

Foreign exchange contracts

   Other non-current assets     Level 2        37        —     

Interest rate contracts

   Other non-current assets     Level 2        273        182   
     

 

 

    

 

 

  

Total Asset Derivatives

       $ 314      $ 218   
     

 

 

    

 

 

  

Liability Derivatives

   Balance Sheet Location   Fair Value
Hierarchy  Level 		    June 30, 2011
Fair Value 		    December 31, 2010
Fair Value 		 

Derivatives designated as hedges:

        

Foreign exchange contracts

   Other current liabilities     Level 2      $ (54 )    $ (9 ) 

Foreign exchange contracts

   Other non-current liabilities     Level 2        (112 )      (99 ) 

Interest rate contracts

   Other non-current liabilities     Level 2        (7 )      (29 ) 

Derivatives not designated as hedges:

        

Foreign exchange contracts

   Other current liabilities     Level 2        (5 )      (3 ) 

Interest rate contracts

   Other non-current liabilities     Level 2        (1 )      (1 ) 
     

 

 

    

 

 

  

Total Liability Derivatives

       $ (179 )    $ (141 ) 
     

 

 

    

 

 

  
Schedule of Derivative Instruments, Effect on Other Comprehensive Income (Loss)

The following table indicates the amount and location in the income statement for the three and six months ended June 30, 2011 and 2010 in which derivative gains and losses, as well as the related amounts reclassified from AOCI, have been recognized for those derivatives designated as cash flow hedges (in millions).

Three Months Ended June 30:

 

Derivative Instruments in Cash Flow
Hedging Relationships

   2011 Amount of
Gain (Loss)
Recognized in
OCI on
Derivative
(Effective
Portion) 		    2010 Amount of
Gain (Loss)
Recognized in
OCI on
Derivative
(Effective
Portion) 		    Location of Gain
(Loss)  Reclassified
from Accumulated
OCI into Income
(Effective Portion) 		  2011 Amount of
Gain (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective
Portion) 		    2010 Amount of
Gain (Loss)
Reclassified from
Accumulated  OCI
into Income
(Effective
Portion) 		 

Interest rate contracts

   $ (1 )    $ (2 )    Interest Expense   $ (5 )    $ (5 ) 

Foreign exchange contracts

     (21 )      (86 )    Interest Expense     (3 )      5   

Foreign exchange contracts

     (5 )      —        Other Operating
Expense		     —          —     

Foreign exchange contracts

     (31 )      102      Revenue     (42 )      58   

Commodity contracts

     9        —        Fuel Expense     9        —     
 

 

 

    

 

 

      

 

 

    

 

 

  

Total

   $ (49 )    $ 14        $ (41 )    $ 58   
 

 

 

    

 

 

      

 

 

    

 

 

  

Six Months Ended June 30:

 

Derivative Instruments in Cash Flow

Hedging Relationships

   2011 Amount of
Gain (Loss)
Recognized in
OCI on
Derivative
(Effective
Portion) 		    2010 Amount of
Gain (Loss)
Recognized in
OCI on
Derivative
(Effective
Portion) 		    Location of Gain
(Loss)  Reclassified
from Accumulated
OCI into Income
(Effective Portion) 		  2011 Amount of
Gain (Loss)
Reclassified from
Accumulated  OCI
into Income
(Effective Portion) 		    2010 Amount of
Gain (Loss)
Reclassified from
Accumulated  OCI
into Income
(Effective Portion) 		 

Interest rate contracts

   $ (1 )    $ (1 )    Interest Expense   $ (10 )    $ (9 ) 

Foreign exchange contracts

     (3 )      (111 )    Interest Expense     31        (50 ) 

Foreign exchange contracts

     (5 )      —        Other Operating
Expense		     —          —     

Foreign exchange contracts

     (134 )      153      Revenue     (55 )      82   

Commodity contracts

     9        —        Fuel Expense     9        —     
 

 

 

    

 

 

      

 

 

    

 

 

  

Total

   $ (134 )    $ 41        $ (25 )    $ 23   
 

 

 

    

 

 

      

 

 

    

 

 

  
Designated as Hedging Instrument
  
Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance

The following table indicates the amount and location in the statements of consolidated income in which derivative gains and losses, as well as the associated gains and losses on the underlying exposure, have been recognized for those derivatives designated as fair value hedges for the three and six months ended June 30, 2011 and 2010 (in millions).

 

Derivative Instruments in Fair Value
Hedging Relationships

   Location of
Gain (Loss)
Recognized in
Income 		  2011
Amount
of Gain
(Loss)
Recognized
in Income 		    2010
Amount
of Gain
(Loss)
Recognized
in Income 		    Hedged Items in
Fair Value
Hedging
Relationships 		  Location
of Gain
(Loss)
Recognized
In Income 		  2011
Amount of
Gain  (Loss)
Recognized
in Income 		    2010
Amount
of Gain
(Loss)
Recognized
in Income 		 

Three Months Ended June 30:

              

Interest rate contracts

   Interest
Expense		   $ 140      $ 131      Fixed-Rate
Debt and
Capital Leases		   Interest
Expense		   $ (140 )    $ (131 ) 

Six Months Ended June 30:

              

Interest rate contracts

   Interest
Expense		   $ 113      $ 172      Fixed-Rate
Debt and
Capital Leases		   Interest
Expense		   $ (113 )    $ (172 )
Not Designated as Hedging Instrument
  
Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance

The following is a summary of the amounts recorded in the statements of consolidated income related to fair value changes and settlements of these foreign currency forward contracts not designated as hedges (in millions):

 

Derivative Instruments in Fair Value

Hedging Relationships

    Location of Gain (Loss)
Recognized in Income 		   2011 Amount of
Gain  (Loss)
Recognized
in Income 		    2010 Amount of
Gain  (Loss)
Recognized
in Income 		 

Three Months Ended June 30:

        

Foreign Exchange Contracts

    Other Operating Expenses    $ (3 )    $ 7   

Six Months Ended June 30:

        

Foreign Exchange Contracts

    Other Operating Expenses    $ (13 )    $ 25