XML 30 R18.htm IDEA: XBRL DOCUMENT v3.10.0.1
Financial Instruments
 6 Months Ended
Jun. 16, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Financial Instruments
Note 9 - Financial Instruments
We are exposed to market risks arising from adverse changes in:
•
commodity prices, affecting the cost of our raw materials and energy;
•
foreign exchange rates and currency restrictions; and
•
interest rates.
There have been no material changes during the 24 weeks ended June 16, 2018 with respect to our risk management policies or strategies and valuation techniques used in measuring the fair value of the financial assets or liabilities disclosed in Note 9 to our consolidated financial statements in our 2017 Form 10-K.
The notional amounts of our financial instruments used to hedge the above risks as of June 16, 2018 and December 30, 2017 are as follows:
 
Notional Amounts(a)
 
6/16/2018

 
12/30/2017

Commodity
$
0.9

 
$
0.9

Foreign exchange
$
1.8

 
$
1.6

Interest rate
$
11.9

 
$
14.2

Net investment
$
1.4

 
$
1.5

(a)
In billions.
Ineffectiveness for all derivatives and non-derivatives that qualify for hedge accounting treatment was not material for all periods presented.
As of June 16, 2018, approximately 45% of total debt, after the impact of the related interest rate derivative instruments, was subject to variable rates, compared to approximately 43% as of December 30, 2017.
Fair Value Measurements
The fair values of our financial assets and liabilities as of June 16, 2018 and December 30, 2017 are categorized as follows:
 
 
 
6/16/2018
 
12/30/2017
 
Fair Value Hierarchy Levels
 
Assets(a)
 
Liabilities(a)
 
Assets(a)
 
Liabilities(a)
Available-for-sale debt securities (b)
2
 
$
13,043

 
$
—

 
$
14,510

 
$
—

Short-term investments (c)
1
 
$
233

 
$
—

 
$
228

 
$
—

Prepaid forward contracts (d)
2
 
$
21

 
$
—

 
$
27

 
$
—

Deferred compensation (e)
2
 
$
—

 
$
490

 
$
—

 
$
503

Derivatives designated as fair value hedging instruments:
 
 
 
 
 
 
 
 
 
Interest rate (f)
2
 
$
—

 
$
244

 
$
24

 
$
130

Derivatives designated as cash flow hedging instruments:
 
 
 
 
 
 
 
 
 
Foreign exchange (g)
2
 
$
41

 
$
7

 
$
15

 
$
31

Interest rate (g)
2
 
—

 
222

 
—

 
213

Commodity (h)
1
 
—

 
1

 
—

 
2

Commodity (i)
2
 
2

 
—

 
2

 
—

 
 
 
$
43

 
$
230

 
$
17

 
$
246

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
 
Foreign exchange (g)
2
 
$
1

 
$
12

 
$
10

 
$
3

Commodity (h)
1
 
1

 
15

 
—

 
19

Commodity (i)
2
 
58

 
21

 
85

 
12

 
 
 
$
60

 
$
48

 
$
95

 
$
34

Total derivatives at fair value (j)
 
 
$
103

 
$
522

 
$
136

 
$
410

Total
 
 
$
13,400

 
$
1,012

 
$
14,901

 
$
913

(a)
Unless otherwise noted, financial assets are classified on our balance sheet within prepaid expenses and other current assets and other assets. Financial liabilities are classified on our balance sheet within accounts payable and other current liabilities and other liabilities.
(b)
Based on quoted broker prices or other significant inputs derived from or corroborated by observable market data. As of June 16, 2018, $8.9 billion and $4.1 billion of debt securities were classified as cash equivalents and short-term investments, respectively. As of December 30, 2017, $5.8 billion and $8.7 billion of debt securities were classified as cash equivalents and short-term investments, respectively. Unrealized gains and losses on our investments in debt securities as of June 16, 2018 and December 30, 2017 were not material. All of our available-for-sale debt securities have maturities of one year or less.
(c)
Based on the price of index funds. These investments are classified as short-term investments and are used to manage a portion of market risk arising from our deferred compensation liability.
(d)
Based primarily on the price of our common stock.
(e)
Based on the fair value of investments corresponding to employees’ investment elections.
(f)
Based on LIBOR forward rates.
(g)
Based on recently reported market transactions of spot and forward rates.
(h)
Based on quoted contract prices on futures exchange markets.
(i)
Based on recently reported market transactions of swap arrangements.
(j)
Derivative assets and liabilities are presented on a gross basis on our balance sheet. Amounts subject to enforceable master netting arrangements or similar agreements which are not offset on the balance sheet as of June 16, 2018 and December 30, 2017 were not material. Collateral received or posted against our asset or liability positions was not material. Collateral posted is classified as restricted cash. See Note 13 for further information.
The carrying amounts of our cash and cash equivalents and short-term investments approximate fair value due to their short-term maturity. The fair value of our debt obligations was $41 billion as of June 16, 2018 and December 30, 2017, based upon prices of similar instruments in the marketplace, which are considered Level 2 inputs.
Losses/(gains) on our hedging instruments are categorized as follows:
 
12 Weeks Ended
 
Fair Value/Non-
designated Hedges
 
Cash Flow and Net Investment Hedges
 
Losses/(Gains)
Recognized in
Income Statement(a)
 
Losses/(Gains)
Recognized in
Accumulated Other
Comprehensive Loss
 
Losses/(Gains)
Reclassified from
Accumulated Other
Comprehensive Loss
into Income
Statement(b)
 
6/16/2018

 
6/17/2017

 
6/16/2018

 
6/17/2017

 
6/16/2018

 
6/17/2017

Foreign exchange
$
9

 
$
(7
)
 
$
(35
)
 
$
16

 
$
10

 
$
(6
)
Interest rate
27

 
(41
)
 
105

 
(35
)
 
117

 
(48
)
Commodity
(22
)
 
17

 
—

 
(1
)
 
1

 
1

Net investment
—

 
—

 
(64
)
 
48

 
—

 
—

Total
$
14

 
$
(31
)
 
$
6

 
$
28

 
$
128

 
$
(53
)
 
24 Weeks Ended
 
Fair Value/Non-
designated Hedges
 
Cash Flow and Net Investment Hedges
 
Losses/(Gains)
Recognized in
Income Statement(a)
 
Losses/(Gains)
Recognized in
Accumulated Other
Comprehensive Loss
 
Losses/(Gains)
Reclassified from
Accumulated Other
Comprehensive Loss
into Income
Statement(b)
 
6/16/2018

 
6/17/2017

 
6/16/2018

 
6/17/2017

 
6/16/2018

 
6/17/2017

Foreign exchange
$
(3
)
 
$
(12
)
 
$
(30
)
 
$
36

 
$
16

 
$
(11
)
Interest rate
138

 
(19
)
 
9

 
(54
)
 
55

 
(78
)
Commodity
(3
)
 
20

 
(2
)
 
1

 
2

 
3

Net investment
—

 
—

 
(55
)
 
66

 
—

 
—

Total
$
132

 
$
(11
)
 
$
(78
)
 
$
49

 
$
73

 
$
(86
)

(a)
Foreign exchange derivative losses/gains are primarily included in selling, general and administrative expenses. Interest rate derivative losses/gains are primarily from fair value hedges and are included in interest expense. These losses/gains are substantially offset by decreases/increases in the value of the underlying debt, which are also included in interest expense. Commodity derivative losses/gains are included in either cost of sales or selling, general and administrative expenses, depending on the underlying commodity.
(b)
Foreign exchange derivative losses/gains are included in cost of sales. Interest rate derivative losses/gains are included in interest expense. Commodity derivative losses/gains are included in either cost of sales or selling, general and administrative expenses, depending on the underlying commodity.
Based on current market conditions, we expect to reclassify net gains of $15 million related to our cash flow hedges from accumulated other comprehensive loss into net income during the next 12 months.
See further unaudited information in “Items Affecting Comparability” in Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Available-for-Sale Equity Securities
In the second quarter of 2017, we recognized a pre-tax gain of $95 million ($85 million after-tax or $0.06 per share), net of discount and fees, associated with the sale of our minority stake in Britvic. This gain was recorded in our ESSA segment in selling, general and administrative expenses.