Financial Instruments

3 Months Ended

Dec. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

FINANCIAL INSTRUMENTS

Hedging Activities – As of December 31, 2022, the notional amount of foreign currency hedge positions was approximately $5.2 billion, and commodity hedge contracts totaled approximately $115 (primarily 33 million pounds of copper and aluminum). All derivatives receiving hedge accounting are cash flow hedges. The majority of hedging gains and losses deferred as of December 31, 2022 are expected to be recognized over the next 12 months as the underlying forecasted transactions occur. Gains and losses on foreign currency derivatives reported in Other deductions, net reflect hedges of balance sheet exposures that do not receive hedge accounting.

Net Investment Hedge – In fiscal 2019, the Company issued euro-denominated debt of €1.5 billion. The euro notes reduce foreign currency risk associated with the Company's international subsidiaries that use the euro as their functional currency and have been designated as a hedge of a portion of the investment in these operations. Foreign currency gains or losses associated with the euro-denominated debt are deferred in accumulated other comprehensive income (loss) and will remain until the hedged investment is sold or substantially liquidated.

The following gains and losses are included in earnings and other comprehensive income (OCI) for the three months ended December 31, 2021 and 2022:


		Into Earnings				Into OCI
		1st Quarter			1st Quarter
Gains (Losses)	Location	2021		2022		2021	2022
Commodity	Cost of sales	$	7	(8)		13	11
Foreign currency	Sales	1		(1)		—	4
Foreign currency	Cost of sales	2		8		3	(3)
Foreign currency	Other deductions, net	44		5

Net Investment Hedges
Euro denominated debt						44	(123)
Total		$	54	4		60	(111)

Regardless of whether derivatives and non-derivative financial instruments receive hedge accounting, the Company expects hedging gains or losses to be offset by losses or gains on the related underlying exposures. The amounts ultimately recognized will differ from those presented above for open positions, which remain subject to ongoing market price fluctuations until settlement. Derivatives receiving hedge accounting are highly effective and no amounts were excluded from the assessment of hedge effectiveness.

Equity Investment – The Company has an equity investment in National Instruments, valued at $82 as of December 31, 2022, and reported in Other current assets. On January 17, 2023, the Company announced a proposal to acquire National Instruments for $53 per share in cash at an implied enterprise value of $7.6 billion. National Instruments, which had fiscal 2021 sales of approximately $1.5 billion, announced on January 13, 2023 it was undertaking a strategic review which could include the solicitation of interest from other potential acquirors.

Fair Value Measurement – Valuations for all derivatives and the Company's long-term debt fall within Level 2 of the GAAP valuation hierarchy. As of December 31, 2022, the fair value of long-term debt was $7.7 billion, which was lower than the carrying value by $1,169. The fair values of commodity and foreign currency contracts did not materially change since September 30, 2022. Foreign currency contracts were reported in Other current assets and Accrued expenses, while commodity contracts, which primarily relate to discontinued operations, were reported in Current assets and liabilities held-for-sale. The fair value of the Company's equity investment in National Instruments falls within Level 1 and was based on the most recent quoted closing market price from its principal exchange.

Counterparties to derivatives arrangements are companies with investment-grade credit ratings. The Company has bilateral collateral arrangements with counterparties with credit rating-based posting thresholds that vary depending on the arrangement. If credit ratings on the Company's debt fall below pre-established levels, counterparties can require immediate full collateralization of all derivatives in net liability positions. The maximum amount that could potentially have been required was immaterial. The Company also can demand full collateralization of derivatives in net asset positions should any counterparty credit ratings fall below certain thresholds. No collateral was posted with counterparties and none was held by the Company as of December 31, 2022.