Annual report pursuant to Section 13 and 15(d)

DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT (Tables)

v2.4.0.6
DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT (Tables)
 12 Months Ended
Dec. 31, 2011
Notional Amounts of Outstanding Derivative Positions

The notional amounts of our outstanding derivative positions were as follows:

 

     December 31, 2011
Notional Value		      December 31, 2010
Notional Value		  

Currency Hedges:

      

Euro

    € 1,685       € 1,732   

British Pound Sterling

    £ 870       £ 871   

Canadian Dollar

    C$ 318       C$ 289   

Interest Rate Hedges:

      

Fixed to Floating Interest Rate Swaps

    $ 6,424       $ 6,000   

Floating to Fixed Interest Rate Swaps

    $ 791       $ 53
Balance sheet location of derivative assets and liabilities and their related fair values

The following table indicates the location on the balance sheet in which our derivative assets and liabilities have been recognized, 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		     December 31, 2011
Fair Value		     December 31, 2010
Fair Value		  

Derivatives designated as hedges:

        

Foreign exchange contracts

   Other current assets     Level 2      $ 164      $ 36   

Interest rate contracts

   Other non-current assets     Level 2        401        182   

Derivatives not designated as hedges:

        

Foreign exchange contracts

   Other current assets     Level 2        2        —     

Interest rate contracts

   Other non-current assets     Level 2        82        —     
     

 

 

    

 

 

  

Total Asset Derivatives

       $ 649      $ 218   
     

 

 

    

 

 

  

Liability Derivatives

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

Derivatives designated as hedges:

        

Foreign exchange contracts

   Other current liabilities     Level 2      $ —        $ 9   

Foreign exchange contracts

   Other non-current liabilities     Level 2        185        99   

Interest rate contracts

   Other non-current liabilities     Level 2        13        29   

Derivatives not designated as hedges:

        

Foreign exchange contracts

   Other current liabilities     Level 2        —          3   

Interest rate contracts

   Other non-current liabilities     Level 2        10        1   
     

 

 

    

 

 

  

Total Liability Derivatives

       $ 208      $ 141   
     

 

 

    

 

 

  
Amount and Location in the Income Statement for Derivatives Designed as Cash Flow Hedges

The following table indicates the amount and location in the statements of consolidated income 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 for the years ended December 31, 2011 and 2010 (in millions):

 

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

   $ (6 )    $ 7      Interest Expense   $ (19 )    $ (18 ) 

Foreign exchange contracts

     (85 )      (48 )    Interest Expense     13        (27 ) 

Foreign exchange contracts

     5        —        Other Operating Expense     —          —     

Foreign exchange contracts

     35        30      Revenue     (101 )      96   

Commodity contracts

     9        —        Fuel Expense     9        —     
 

 

 

    

 

 

      

 

 

    

 

 

  

Total

   $ (42 )    $ (11 )      $ (98 )    $ 51   
 

 

 

    

 

 

      

 

 

    

 

 

  
Fair Values of Derivative Assets and Liabilities by Hedge Type

rates and commodity forward prices, and therefore are classified as Level 2. The fair values of our derivative assets and liabilities as of December 31, 2011 and 2010 by hedge type are as follows (in millions):

 

     Quoted Prices in
Active Markets for
Identical Assets
(Level 1)		      Significant
Other
Observable
Inputs
(Level 2)		      Significant
Unobservable
Inputs
(Level 3)		      Balance as of
December 31, 2011		  

2011:

            

Assets

            

Foreign Exchange Contracts

    $ —         $ 166       $ —         $ 166   

Interest Rate Contracts

      —           483         —           483   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ —         $ 649       $ —         $ 649   
  

 

 

     

 

 

     

 

 

     

 

 

  

Liabilities

            

Foreign Exchange Contracts

    $ —         $ 185       $ —         $ 185   

Interest Rate Contracts

      —           23         —           23   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ —         $ 208       $ —         $ 208   
  

 

 

     

 

 

     

 

 

     

 

 

  
      Quoted Prices in
Active Markets for
Identical Assets
(Level 1)		      Significant
Other
Observable
Inputs
(Level 2)		      Significant
Unobservable
Inputs
(Level 3)		      Balance as of
December 31, 2010		  

2010:

            

Assets

            

Foreign Exchange Contracts

    $ —         $ 36       $ —         $ 36   

Interest Rate Contracts

      —           182         —           182   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ —         $ 218       $ —         $ 218   
  

 

 

     

 

 

     

 

 

     

 

 

  

Liabilities

            

Foreign Exchange Contracts

    $ —         $ 111       $ —         $ 111   

Interest Rate Contracts

      —           30         —           30   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ —         $ 141       $ —         $ 141   
  

 

 

     

 

 

     

 

 

     

 

 

  
Designated as Hedging Instrument
  
Amount and Location in the Income Statement for Derivatives Designated as Fair Value Hedges

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 years ended December 31, 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		  

Interest rate contracts

  

 

Interest Expense

  

  

$

320

  

  

$

134

  

   Fixed-Rate Debt
and Capital Leases		  

Interest Expense

  

$

(320

) 

  

$

(134

)
Not Designated as Hedging Instrument
  
Amount and Location in the Income Statement for Derivatives Designated as Fair Value Hedges

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 and interest rate swap contracts not designated as hedges for the years ended December 31, 2011 and 2010 (in millions):

 

Derivative Instruments Not Designated in
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		  

Foreign Exchange Contracts

    Other Operating Expenses    $ 2      $ 13   

Interest Rate Swap Contracts

    Interest Expense      (8 )      —