Quarterly report pursuant to Section 13 or 15(d)

Hedging Transactions and Derivative Financial Instruments (Tables)

v3.21.2
Hedging Transactions and Derivative Financial Instruments (Tables)
 9 Months Ended
Oct. 01, 2021
Foreign Currency Fair Value Hedge Derivative [Line Items]  
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value [Table Text Block]
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
October 1,
2021		 December 31, 2020
Assets:      
Foreign currency contracts Prepaid expenses and other assets $ 122  $ 26 
Foreign currency contracts Other assets 41  74 
Commodity contracts Prepaid expenses and other assets —  2 
Interest rate contracts Prepaid expenses and other assets 2  — 
Interest rate contracts Other assets 346  659 
Total assets   $ 511  $ 761 
Liabilities:      
Foreign currency contracts Accounts payable and accrued expenses $ 19  $ 29 
Foreign currency contracts Other liabilities 1  — 
Commodity contracts Accounts payable and accrued expenses 2  — 
Interest rate contracts Accounts payable and accrued expenses —  5 
Total liabilities   $ 22  $ 34 
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 15 for the net presentation of the Company’s derivative instruments.
2 Refer to Note 15 for additional information related to the estimated fair value.
Derivatives Not Designated as Hedging Instruments
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
October 1,
2021		 December 31, 2020
Assets:      
Foreign currency contracts Prepaid expenses and other assets $ 28  $ 28 
Foreign currency contracts Other assets 2  1 
Commodity contracts Prepaid expenses and other assets 115  76 
Commodity contracts Other assets 48  9 
Other derivative instruments Prepaid expenses and other assets 1  20 
Other derivative instruments Other assets —  3 
Total assets   $ 194  $ 137 
Liabilities:      
Foreign currency contracts Accounts payable and accrued expenses $ 49  $ 41 
Foreign currency contracts Other liabilities 6  — 
Commodity contracts Accounts payable and accrued expenses 2  15 
Commodity contracts Other liabilities —  1 
Other derivative instruments Accounts payable and accrued expenses 6  — 
Total liabilities   $ 63  $ 57 
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 15 for the net presentation of the Company’s derivative instruments.
2 Refer to Note 15 for additional information related to the estimated fair value.
Schedule of Cash Flow Hedges Included in Accumulated Other Comprehensive Income (Loss) and Other Comprehensive Income (OCI)
The following tables present the pretax impact that changes in the fair values of derivatives designated as cash flow hedges had on other comprehensive income (“OCI”), AOCI and earnings (in millions):
Gain (Loss)
Recognized
in OCI		 Location of Gain (Loss) Recognized in Income Gain (Loss) Reclassified from AOCI into Income
Three Months Ended October 1, 2021
Foreign currency contracts $ 15  Net operating revenues $ (21)
Foreign currency contracts 6  Cost of goods sold (6)
Foreign currency contracts —  Interest expense (1)
Foreign currency contracts (43) Other income (loss) — net (35)
Total $ (22) $ (63)
Three Months Ended September 25, 2020
Foreign currency contracts $ (84) Net operating revenues $ (21)
Foreign currency contracts (4) Cost of goods sold 2 
Foreign currency contracts —  Interest expense (6)
Foreign currency contracts 122  Other income (loss) — net 100 
Interest rate contracts 9  Interest expense (14)
Commodity contracts (2) Cost of goods sold (1)
Total
 $ 41    $ 60 
Gain (Loss)
Recognized
in OCI		 Location of Gain (Loss) Recognized in Income Gain (Loss) Reclassified from AOCI into Income
Nine Months Ended October 1, 2021
Foreign currency contracts $ (1) Net operating revenues $ (71)
Foreign currency contracts (5) Cost of goods sold (9)
Foreign currency contracts —  Interest expense (12)
Foreign currency contracts 15  Other income (loss) — net 49 
Interest rate contracts 110  Interest expense (90)
Total $ 119  $ (133)
Nine Months Ended September 25, 2020
Foreign currency contracts $ (61) Net operating revenues $ (22)
Foreign currency contracts 6  Cost of goods sold 7 
Foreign currency contracts —  Interest expense (10)
Foreign currency contracts 21  Other income (loss) — net 71 
Interest rate contracts 21  Interest expense (35)
Commodity contracts (2) Cost of goods sold (1)
Total
 $ (15)   $ 10 
Schedule of Fair Value Hedging Instruments, Statements of Financial Performance and Financial Position, Location
The following tables summarize the pretax impact that changes in the fair values of derivatives designated as fair value hedges had on earnings (in millions):
Hedging Instruments and Hedged Items Location of Gain (Loss) Recognized in Income Gain (Loss)
Recognized in Income
Three Months Ended
October 1,
2021		 September 25,
2020
Interest rate contracts Interest expense $ (56) $ 94 
Fixed-rate debt Interest expense 55  (97)
Net impact to interest expense   $ (1) $ (3)
Foreign currency contracts Other income (loss) — net $ —  $ 3 
Available-for-sale securities Other income (loss) — net —  (3)
Net impact to other income (loss) — net $ —  $ — 
Net impact of fair value hedging instruments $ (1) $ (3)
Hedging Instruments and Hedged Items Location of Gain (Loss) Recognized in Income Gain (Loss)
Recognized in Income
Nine Months Ended
October 1,
2021		 September 25,
2020
Interest rate contracts Interest expense $ (236) $ 284 
Fixed-rate debt Interest expense 237  (281)
Net impact to interest expense   $ 1  $ 3 
Foreign currency contracts Other income (loss) — net $ —  $ 3 
Available-for-sale securities Other income (loss) — net —  (3)
Net impact to other income (loss) — net $ —  $ — 
Net impact of fair value hedging instruments $ 1  $ 3 
The following table summarizes the amounts recorded in our condensed consolidated balance sheets related to hedged items in fair value hedging relationships (in millions):
Cumulative Amount of Fair Value Hedging Adjustments
Carrying Values of Hedged Items
Included in the Carrying Values of Hedged Items1
Remaining for Which Hedge Accounting Has Been Discontinued
Balance Sheet Location of Hedged Items October 1,
2021		 December 31,
2020		 October 1,
2021		 December 31,
2020		 October 1,
2021		 December 31,
2020
Current maturities of long-term debt $ 200  $ —  $ 2  $ —  $ —  $ — 
Long-term debt 8,557  11,129  348  646  236  — 
1 Cumulative amount of fair value hedging adjustments does not include changes due to foreign currency exchange rate fluctuations.
Schedule of Net Investment Hedges in Accumulated Other Comprehensive Income (Loss) [Table Text Block]
The following table summarizes the notional values and pretax impact of changes in the fair values of instruments designated as net investment hedges (in millions):
Notional Values Gain (Loss) Recognized in OCI
as of Three Months Ended Nine Months Ended
  October 1,
2021		 December 31, 2020 October 1,
2021		 September 25,
2020		 October 1,
2021		 September 25,
2020
Foreign currency contracts $ —  $ 451  $ 6  $ (23) $ (1) $ (4)
Foreign currency denominated debt 13,066  13,336  304  (445) 673  (452)
Total $ 13,066  $ 13,787  $ 310  $ (468) $ 672  $ (456)
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 (in millions):
Derivatives Not Designated as Hedging Instruments Location of Gain (Loss) Recognized in Income Gain (Loss)
Recognized in Income
Three Months Ended
October 1,
2021		 September 25,
2020
Foreign currency contracts Net operating revenues $ 2  $ 2 
Foreign currency contracts Cost of goods sold (10) (17)
Foreign currency contracts Other income (loss) — net (43) 53 
Interest rate contracts Interest expense —  2 
Commodity contracts Cost of goods sold (32) 34 
Other derivative instruments Selling, general and administrative expenses (2) 20 
Total   $ (85) $ 94 
Derivatives Not Designated as Hedging Instruments Location of Gain (Loss) Recognized in Income Gain (Loss)
Recognized in Income
Nine Months Ended
October 1,
2021		 September 25,
2020
Foreign currency contracts Net operating revenues $ 2  $ 64 
Foreign currency contracts Cost of goods sold (17) 10 
Foreign currency contracts Other income (loss) — net (39) (33)
Interest rate contracts Interest expense (187) 2 
Commodity contracts Cost of goods sold 178  (33)
Other derivative instruments Selling, general and administrative expenses 18  (12)
Other derivative instruments Other income (loss) — net (3) (55)
Total   $ (48) $ (57)