DERIVATIVE FINANCIAL INSTRUMENTS
 9 Months Ended
Sep. 30, 2015
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE FINANCIAL INSTRUMENTS
DERIVATIVE FINANCIAL INSTRUMENTS
The Company is exposed to, among other risks, the impact of changes in commodity prices, foreign currency exchange rates, and interest rates in the normal course of business. The Company’s risk management program is designed to manage the exposure and volatility arising from these risks, and utilizes derivative financial instruments to offset a portion of these risks. The Company uses derivative financial instruments only to the extent necessary to hedge identified business risks, and does not enter into such transactions for trading purposes.
The Company generally does not require collateral or other security with counterparties to these financial instruments and is therefore subject to credit risk in the event of nonperformance; however, the Company monitors credit risk and currently does not anticipate nonperformance by other parties. Contracts with counterparties generally contain right of offset provisions. These provisions effectively reduce the Company’s exposure to credit risk in situations where the Company has gain and loss positions outstanding with a single counterparty. It is the Company’s policy to offset on the Consolidated Balance Sheets the amounts recognized for derivative instruments with any cash collateral arising from derivative instruments executed with the same counterparty under a master netting agreement. As of September 30, 2015, and December 31, 2014, the Company did not have any amounts on deposit with any of its counterparties, nor did any of its counterparties have any amounts on deposit with the Company.
The following table presents the fair value of derivatives and hedging instruments and the respective location on the Consolidated Balance Sheets (in millions):
  
  
Fair Value at
  
Location
September 30, 2015
December 31, 2014
Derivative assets designated as hedging instruments:
 
 
 
Net investment hedges:
 
 
 
Cross currency swaps
Other current assets
$
5

$
—

Cross currency swaps
Other non current assets
$
3

$
—

Amount of gain recognized in OCI (effective portion)
OCI
$
9

$
—

Fair value hedges:
 
 
 
Interest rate swaps
Other current assets
$
1

$
—

Interest rate swaps
Other non current assets
$
5

$
—

Derivative liabilities designated as hedging instruments:
 
 
 
Cash flow hedges:
 
 
 
Natural gas and electricity, and foreign exchange contracts
Accounts payable and
accrued liabilities
$
4

$
9

Amount of loss recognized in OCI (effective portion)
OCI
$
6

$
8

Fair value hedges:
 
 
 
Interest rate swaps
Other liabilities
$
—

$
(3
)
Derivative assets not designated as hedging instruments:
 
 
 
Foreign exchange contracts
Other current assets
$
1

$
1

Derivative liabilities not designated as hedging instruments:
 
 
 
Foreign exchange contracts
Accounts payable and
accrued liabilities
$
1

$
2



The following table presents the impact and respective location of derivative activities on the Consolidated Statements of Earnings (in millions):
 
  
  
Three Months Ended 
 September 30,
Nine Months Ended 
 September 30,
  
Location
2015
2014
2015
2014
Derivative activity designated as hedging instruments:
 
 
 
 
 
Natural gas and electricity:
 
 
 
 
 
Amount of loss reclassified from OCI into earnings (effective portion)
Cost of sales
$
2

$
1

$
8

$
—

Interest rate swaps:
 
 
 
 
 
Amount of (gain) loss recognized in earnings
Interest expense, net
$
—

$
(1
)
$
—

$
—

Derivative activity not designated as hedging instruments:
 
 
 
 
 
Natural gas and electricity:
 
 
 
 
 
Amount of (gain) recognized in earnings
Other expenses (income), net
$
—

$
(5
)
$
(1
)
$
(5
)
Foreign currency exchange contract:
 
 
 
 
 
Amount of (gain) loss recognized in earnings (a)
Other expenses (income), net
$
(3
)
$
—

$
(3
)
$
1

 
(a)
Losses related to foreign currency derivatives were substantially offset by net revaluation impacts on foreign denominated balance sheet exposures, which were also recorded in Other expenses (income), net.
Cash Flow Hedges
The Company uses forward and swap contracts, which qualify as cash flow hedges, to manage forecasted exposure to natural gas and electricity prices. The effective portion of the change in the fair value of cash flow hedges is deferred in accumulated OCI and is subsequently recognized in Cost of Sales on the Consolidated Statements of Earnings for commodity hedges, when the hedged item impacts earnings. Changes in the fair value of derivative assets and liabilities designated as hedging instruments are shown in Other within operating activities on the Consolidated Statements of Cash Flows. Any portion of the change in fair value of derivatives designated as hedging instruments that is determined to be ineffective is recorded in Other expenses (income), net on the Consolidated Statements of Earnings.
The Company currently has natural gas derivatives designated as hedging instruments that mature within 15 months. The Company’s policy for natural gas exposures is to hedge up to 75% of its total forecasted exposures for the next two months, up to 60% of its total forecasted exposures for the following four months, and lesser amounts for the remaining periods. The Company's policy for electricity exposures is to hedge up to 75% of its total forecasted exposures for the current calendar year and up to 65% of its total forecasted exposures for the first calendar year forward. Based on market conditions, approved variation from the standard policy may occur. The Company performs an analysis for effectiveness of its derivatives designated as hedging instruments at the end of each quarter based on the terms of the contract and the underlying item being hedged.
As of September 30, 2015, $6 million of losses included in accumulated OCI on the Consolidated Balance Sheets relate to contracts that are expected to impact earnings during the next 12 months. Transactions and events that are expected to occur over the next 12 months that will necessitate recognizing these deferred amounts include the recognition of the hedged item through earnings.
Fair Value Hedges
The Company manages its interest rate exposure by balancing the mixture of its fixed and variable rate instruments through interest rate swaps. The swaps are carried at fair value and recorded as other assets or liabilities, with the offset to long-term debt on the Consolidated Balance Sheets. Changes in the fair value of these swaps and that of the related debt are recorded in Interest expense, net on the Consolidated Statements of Earnings.
Net Investment Hedges
During the first quarter of 2015, the Company entered into cross currency forward contracts to hedge a portion of the net investment in foreign subsidiaries against fluctuations in foreign exchange rates. For derivative instruments that are designated and qualify as hedges of net investments in foreign operations, settlements and changes in fair values of the derivative instruments are recognized in Currency translation adjustment, a component of Accumulated OCI, to offset the changes in the values of the net investments being hedged. Any portion of net investment hedges that is determined to be ineffective is recorded in Other expenses (income), net on the Consolidated Statements of Earnings.
Other Derivatives
The Company uses forward currency exchange contracts to manage existing exposures to foreign exchange risk related to assets and liabilities recorded on the Consolidated Balance Sheets. Gains and losses resulting from the changes in fair value of these instruments are recorded in Other expenses (income), net on the Consolidated Statements of Earnings.