Quarterly report pursuant to Section 13 or 15(d)

Hedging Transactions and Derivative Financial Instruments (Tables)

v2.4.0.6
Hedging Transactions and Derivative Financial Instruments (Tables)
 9 Months Ended
Sep. 28, 2012
Hedging Transactions and Derivative Financial Instruments  
Derivative instruments, fair value, designated as hedging instruments
The following table presents the fair values of the Company's derivative instruments that were designated and qualified as part of a hedging relationship (in millions):
 
 
Fair Value1,2
Derivatives Designated as
Hedging Instruments
Balance Sheet Location1
September 28,
2012

December 31, 2011

Assets
 
 
 
Foreign currency contracts
Prepaid expenses and other assets
$
58

$
170

Foreign currency contracts
Other assets
3

—

Commodity contracts
Prepaid expenses and other assets
—

2

Interest rate swaps
Prepaid expenses and other assets
1

—

Interest rate swaps
Other assets
356

246

Total assets
 
$
418

$
418

Liabilities
 
 
 
Foreign currency contracts
Accounts payable and accrued expenses
$
90

$
41

Foreign currency contracts
Other liabilities
3

—

Commodity contracts
Accounts payable and accrued expenses
2

1

Interest rate swaps
Other liabilities
11

—

Total liabilities
 
$
106

$
42

1 All of the Company's derivative instruments are carried at fair value in our condensed consolidated balance sheets after considering the impact of legally enforceable master netting agreements and cash collateral held or placed with the same counterparties, as applicable. Current disclosure requirements mandate that derivatives must also be disclosed without reflecting the impact of master netting agreements and cash collateral. Refer to Note 14 for the net presentation of the Company's derivative instruments.
2 Refer to Note 14 for additional information related to the estimated fair value.
Schedule of Other Derivatives Not Designated as Hedging Instruments, Statements of Financial Performance and Financial Position, Location [Table Text Block]
The following table presents the fair values of the Company's derivative instruments that were not designated as hedging instruments (in millions):
 
 
Fair Value1,2
Derivatives Not Designated as
Hedging Instruments
Balance Sheet Location1
September 28,
2012

December 31, 2011

Assets
 
 
 
Foreign currency contracts
Prepaid expenses and other assets
$
53

$
29

Commodity contracts
Prepaid expenses and other assets
93

54

Other derivative instruments
Prepaid expenses and other assets
4

5

Total assets
 
$
150

$
88

Liabilities
 
 
 
Foreign currency contracts
Accounts payable and accrued expenses
$
40

$
116

Commodity contracts
Accounts payable and accrued expenses
30

47

Other derivative instruments
Accounts payable and accrued expenses
—

1

Total liabilities
 
$
70

$
164

1 All of the Company's derivative instruments are carried at fair value in our condensed consolidated balance sheets after considering the impact of legally enforceable master netting agreements and cash collateral held or placed with the same counterparties, as applicable. Current disclosure requirements mandate that derivatives must also be disclosed without reflecting the impact of master netting agreements and cash collateral. Refer to Note 14 for the net presentation of the Company's derivative instruments.
2 Refer to Note 14 for additional information related to the estimated fair value.
Derivative instruments, designated as hedging instruments, gain (loss) in statement of financial performance
The following table presents the pretax impact that changes in the fair values of derivatives designated as cash flow hedges had on AOCI and earnings during the three months ended September 28, 2012 (in millions):
 
Gain (Loss)
Recognized
in Other
Comprehensive
Income ("OCI")

Location of Gain (Loss)
Recognized in Income1
Gain (Loss)
Reclassified from
AOCI into Income
(Effective Portion)

Gain (Loss)
Recognized in Income
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)

 
Foreign currency contracts
$
(82
)
Net operating revenues
$
(6
)
$
—

2 
Foreign currency contracts
(7
)
Cost of goods sold
(4
)
—

 
Interest rate contracts
(11
)
Interest expense
(3
)
—

 
Commodity contracts
—

Cost of goods sold
—

—

 
Total
$
(100
)
 
$
(13
)
$
—

 

1 The Company records gains and losses reclassified from AOCI into income for the effective portion and the ineffective portion, if any, to the same line items in our condensed consolidated statements of income.
2 Includes a de minimis amount of ineffectiveness in the hedging relationship.
The following table presents the pretax impact that changes in the fair values of derivatives designated as cash flow hedges had on AOCI and earnings during the nine months ended September 28, 2012 (in millions):
 
Gain (Loss)
Recognized
in OCI

Location of Gain (Loss)
Recognized in Income1
Gain (Loss)
Reclassified from
AOCI into Income
(Effective Portion)

Gain (Loss)
Recognized in Income
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)

 
Foreign currency contracts
$
(11
)
Net operating revenues
$
(32
)
$
2

 
Foreign currency contracts
5

Cost of goods sold
(16
)
—

 
Interest rate contracts
(11
)
Interest expense
(9
)
—

 
Commodity contracts
(4
)
Cost of goods sold
—

—

 
Total
$
(21
)
 
$
(57
)
$
2

 
1 The Company records gains and losses reclassified from AOCI into income for the effective portion and the ineffective portion, if any, to the same line items in our condensed consolidated statements of income.
The following table presents the pretax impact that changes in the fair values of derivatives designated as cash flow hedges had on AOCI and earnings during the three months ended September 30, 2011 (in millions):
 
Gain (Loss)
Recognized
in OCI

Location of Gain (Loss)
Recognized in Income1
Gain (Loss)
Reclassified from
AOCI into Income
(Effective Portion)

Gain (Loss)
Recognized in Income
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)

 
Foreign currency contracts
$
60

Net operating revenues
$
(80
)
$
—

2 
Interest rate contracts
(11
)
Interest expense
(3
)
(1
)
 
Commodity contracts
(2
)
Cost of goods sold
1

—

 
Total
$
47

 
$
(82
)
$
(1
)
 
1 The Company records gains and losses reclassified from AOCI into income for the effective portion and the ineffective portion, if any, to the same line items in our condensed consolidated statements of income.
2 Includes a de minimis amount of ineffectiveness in the hedging relationship.
The following table presents the pretax impact that changes in the fair values of derivatives designated as cash flow hedges had on AOCI and earnings during the nine months ended September 30, 2011 (in millions):
 
Gain (Loss)
Recognized
in OCI

Location of Gain (Loss)
Recognized in Income1
Gain (Loss)
Reclassified from
AOCI into Income
(Effective Portion)

Gain (Loss)
Recognized in Income
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)

 
Foreign currency contracts
$
(91
)
Net operating revenues
$
(196
)
$
—

2 
Interest rate contracts
(11
)
Interest expense
(9
)
(1
)
 
Commodity contracts
(2
)
Cost of goods sold
—

—

 
Total
$
(104
)
 
$
(205
)
$
(1
)
 
1 The Company records gains and losses reclassified from AOCI into income for the effective portion and the ineffective portion, if any, to the same line items in our condensed consolidated statements of income.
Derivative instruments, fair value hedges, gain (loss) recognized in income
The following table summarizes the pretax impact that changes in the fair values of derivatives designated as fair value hedges had on earnings during the three months ended September 28, 2012, and September 30, 2011 (in millions):
Fair Value Hedging Instruments
Location of Gain (Loss)
Recognized in Income
Gain (Loss)
Recognized in Income
 
September 28,
2012

September 30,
2011

Interest rate swaps
Interest expense
$
42

$
271

Fixed-rate debt
Interest expense
(30
)
(279
)
Net impact to interest expense
 
$
12

$
(8
)
Foreign currency contracts
Other income (loss) — net
$
8

$
—

Available-for-sale securities
Other income (loss) — net
(5
)
—

Net impact to other income (loss) — net
 
$
3

$
—

Net impact of fair value hedging instruments
 
$
15

$
(8
)

The following table summarizes the pretax impact that changes in the fair values of derivatives designated as fair value hedges had on earnings during the nine months ended September 28, 2012, and September 30, 2011 (in millions):
Fair Value Hedging Instruments
Location of Gain (Loss)
Recognized in Income
Gain (Loss)
Recognized in Income
 
September 28,
2012

September 30,
2011

Interest rate swaps
Interest expense
$
111

$
339

Fixed-rate debt
Interest expense
(81
)
(337
)
Net impact to interest expense
 
$
30

$
2

Foreign currency contracts
Other income (loss) — net
$
23

$
—

Available-for-sale securities
Other income (loss) — net
(21
)
—

Net impact to other income (loss) — net
 
$
2

$
—

Net impact of fair value hedging instruments
 
$
32

$
2

Schedule of Net Investment Hedges in Accumulated Other Comprehensive Income (Loss) [Table Text Block]
The following table presents the pretax impact that changes in the fair values of derivatives designated as net investment hedges had on AOCI during the three and nine months ended September 28, 2012, and September 30, 2011 (in millions):
 
Gain (Loss) Recognized in OCI
 
Three Months Ended
 
Nine Months Ended
 
September 28,
2012

September 30,
2011

 
September 28,
2012

September 30,
2011

Foreign currency contracts
$
(100
)
$
13

 
$
(58
)
$
10


Schedule of Derivative Instruments Not Designated as Hedging Instruments Gain (Loss) in Statement of Financial Performance [Table Text Block]
The following tables present the pretax impact that changes in the fair values of derivatives not designated as hedging instruments had on earnings during the three and nine months ended September 28, 2012, and September 30, 2011, respectively (in millions):
 
 
Three Months Ended
Derivatives Not Designated
as Hedging Instruments
Location of Gain (Loss)
Recognized in Income
September 28,
2012

September 30,
2011

Foreign currency contracts
Net operating revenues
$
(2
)
$
4

Foreign currency contracts
Other income (loss) — net
18

11

Foreign currency contracts
Cost of goods sold
(3
)
—

Commodity contracts
Net operating revenues
5

—

Commodity contracts
Cost of goods sold
25

(63
)
Commodity contracts
Selling, general and administrative expenses
19

(23
)
Other derivative instruments
Selling, general and administrative expenses
3

(12
)
Total
 
$
65

$
(83
)

 
 
Nine Months Ended
Derivatives Not Designated
as Hedging Instruments
Location of Gain (Loss)
Recognized in Income
September 28,
2012

September 30,
2011

Foreign currency contracts
Net operating revenues
$
(5
)
$
(1
)
Foreign currency contracts
Other income (loss) — net
(54
)
212

Foreign currency contracts
Cost of goods sold
—

(13
)
Commodity contracts
Net operating revenues
5

—

Commodity contracts
Cost of goods sold
(19
)
(21
)
Commodity contracts
Selling, general and administrative expenses
12

(19
)
Other derivative instruments
Selling, general and administrative expenses
21

(4
)
Total
 
$
(40
)
$
154