Quarterly report pursuant to Section 13 or 15(d)

Hedging Transactions and Derivative Financial Instruments (Tables)

v3.2.0.727
Hedging Transactions and Derivative Financial Instruments (Tables)
 6 Months Ended
Jul. 03, 2015
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
July 3,
2015

December 31, 2014

Assets:
 
 
 
Foreign currency contracts
Prepaid expenses and other assets
$
655

$
923

Foreign currency contracts
Other assets
560

346

Interest rate contracts
Prepaid expenses and other assets
6

14

Interest rate contracts
Other assets
93

146

Total assets
 
$
1,314

$
1,429

Liabilities:
 
 
 
Foreign currency contracts
Accounts payable and accrued expenses
$
24

$
24

Foreign currency contracts
Other liabilities
16

249

Commodity contracts
Accounts payable and accrued expenses
—

1

Interest rate contracts
Accounts payable and accrued expenses
11

11

Interest rate contracts
Other liabilities
226

35

Total liabilities
 
$
277

$
320

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
July 3,
2015

December 31, 2014

Assets:
 
 
 
Foreign currency contracts
Prepaid expenses and other assets
$
28

$
44

Foreign currency contracts
Other assets
253

231

Commodity contracts
Prepaid expenses and other assets
38

9

Commodity contracts
Other assets
—

1

Other derivative instruments
Prepaid expenses and other assets
3

14

Other derivative instruments
Other assets
2

2

Total assets
 
$
324

$
301

Liabilities:
 
 
 
Foreign currency contracts
Accounts payable and accrued expenses
$
44

$
33

Foreign currency contracts
Other liabilities
3

21

Commodity contracts
Accounts payable and accrued expenses
120

156

Commodity contracts
Other liabilities
12

17

Interest rate contracts
Other liabilities
2

2

Other derivative instruments
Accounts payable and accrued expenses
21

11

Total liabilities
 
$
202

$
240

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 July 3, 2015 (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
$
(38
)
Net operating revenues
$
178

$
—

2 
Foreign currency contracts
11

Cost of goods sold
16

—

2 
Foreign currency contracts
—

Interest expense
(2
)
—

 
Interest rate contracts
168

Interest expense
—

—

 
Commodity contracts
—

Cost of goods sold
(1
)
—

 
Total
$
141

 
$
191

$
—

 
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 six months ended July 3, 2015 (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
$
726

Net operating revenues
$
298

$
—

2 
Foreign currency contracts
30

Cost of goods sold
28

—

2 
Foreign currency contracts
18

Interest expense
(4
)
—

 
Interest rate contracts
36

Interest expense
(3
)
—

 
Commodity contracts
(1
)
Cost of goods sold
(1
)
—

 
Total
$
809

 
$
318

$
—

 
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 three months ended June 27, 2014 (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
$
(50
)
Net operating revenues
$
18

$
—

2 
Foreign currency contracts
(9
)
Cost of goods sold
7

—

2 
Interest rate contracts
(40
)
Interest expense
—

—

 
Commodity contracts
(1
)
Cost of goods sold
—

—

 
Total
$
(100
)
 
$
25

$
—

 
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 six months ended June 27, 2014 (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
$
(112
)
Net operating revenues
$
43

$
—

2 
Foreign currency contracts
(21
)
Cost of goods sold
20

—

2 
Interest rate contracts
(91
)
Interest expense
—

—

 
Commodity contracts
1

Cost of goods sold
1

—

 
Total
$
(223
)
 
$
64

$
—

 
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.
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 July 3, 2015 and June 27, 2014 (in millions):
Hedging Instruments and Hedged Items
Location of Gain (Loss)
Recognized in Income
Gain (Loss)
Recognized in Income 1
Three Months Ended
July 3,
2015

June 27,
2014

Interest rate contracts
Interest expense
$
(251
)
$
21

Fixed-rate debt
Interest expense
250

(12
)
Net impact to interest expense
 
$
(1
)
$
9

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

$
(37
)
Available-for-sale securities
Other income (loss) — net
(26
)
30

Net impact to other income (loss) — net

$
(3
)
$
(7
)
Net impact of fair value hedging instruments

$
(4
)
$
2

1 The net impacts represent the ineffective portions of the hedge relationships and the amounts excluded from the assessment of hedge effectiveness.
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 six months ended July 3, 2015 and June 27, 2014 (in millions):
Hedging Instruments and Hedged Items
Location of Gain (Loss)
Recognized in Income
Gain (Loss)
Recognized in Income 1
Six Months Ended
July 3,
2015

June 27,
2014

Interest rate contracts
Interest expense
$
(222
)
$
26

Fixed-rate debt
Interest expense
231

(15
)
Net impact to interest expense
 
$
9

$
11

Foreign currency contracts
Other income (loss) — net
$
135

$
(19
)
Available-for-sale securities
Other income (loss) — net
(144
)
8

Net impact to other income (loss) — net

$
(9
)
$
(11
)
Net impact of fair value hedging instruments

$
—

$
—

1 The net impacts represent the ineffective portions of the hedge relationships and the amounts excluded from the assessment of hedge effectiveness.
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 Amount
 
Gain (Loss) Recognized in OCI
 
As of
 
Three Months Ended
 
Six Months Ended
 
July 3,
2015

December 31,
2014

 
July 3,
2015

June 27,
2014

 
July 3,
2015

June 27,
2014

Foreign currency contracts
$
1,847

$
2,047

 
$
(18
)
$
(74
)
 
$
406

$
(142
)
Foreign currency denominated debt
11,396

—

 
(356
)
—

 
(282
)
—

Total
$
13,243

$
2,047

 
$
(374
)
$
(74
)
 
$
124

$
(142
)

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):
 
 
Three Months Ended
Derivatives Not Designated
as Hedging Instruments
Location of Gain (Loss)
Recognized in Income
July 3,
2015

June 27,
2014

Foreign currency contracts
Net operating revenues
$
—

$
(6
)
Foreign currency contracts
Other income (loss) — net
(32
)
21

Foreign currency contracts
Cost of goods sold
1

—

Commodity contracts
Net operating revenues
4

2

Commodity contracts
Cost of goods sold
5

13

Commodity contracts
Selling, general and administrative expenses
6

4

Other derivative instruments
Selling, general and administrative expenses
1

17

Other derivative instruments
Other income (loss) — net
6

8

Total
 
$
(9
)
$
59


 
 
Six Months Ended
Derivatives Not Designated
as Hedging Instruments
Location of Gain (Loss)
Recognized in Income
July 3,
2015

June 27,
2014

Foreign currency contracts
Net operating revenues
$
9

$
(18
)
Foreign currency contracts
Other income (loss) — net
(49
)
23

Foreign currency contracts
Cost of goods sold
1

—

Commodity contracts
Net operating revenues
1

—

Commodity contracts
Cost of goods sold
(19
)
35

Commodity contracts
Selling, general and administrative expenses
1

1

Other derivative instruments
Selling, general and administrative expenses
1

14

Other derivative instruments
Other income (loss) — net
(62
)
8

Total
 
$
(117
)
$
63