XML 40 R25.htm IDEA: XBRL DOCUMENT

Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2019



	Gain/(Loss) Recognized In Accumulated OCI				Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income Into Income	Gain/(Loss) Reclassified From Accumulated OCI Into Income
(Dollars in Millions)	June 30, 2019			July 1, 2018		June 30, 2019	July 1, 2018
Debt	$	(57	)	306	Other (income) expense	—	—
Cross Currency interest rate swaps	$	(57	)	37	Other (income) expense	—	—

The following table is the effect of net investment hedges for the fiscal six months ended in 2019 and 2018:



	Gain/(Loss) Recognized In Accumulated OCI			Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income Into Income	Gain/(Loss) Reclassified From Accumulated OCI Into Income
(Dollars in Millions)	June 30, 2019		July 1, 2018		June 30, 2019	July 1, 2018
Debt	$	14	156	Other (income) expense	—	—
Cross Currency interest rate swaps	$	313	37	Other (income) expense	—	—



	June 30, 2019										July 1, 2018
(Dollars in Millions)	Sales			Cost of Products Sold		R&D Expense	Interest (Income) Expense		Other (Income) Expense		Sales		Cost of Products Sold		R&D Expense		Interest (Income) Expense		Other (Income) Expense
The effects of fair value, net investment and cash flow hedging:
Gain (Loss) on fair value hedging relationship:
Interest rate swaps contracts:
Hedged items	$	—		—		—	1		—		—		—		—		5		—
Derivatives designated as hedging instruments	—			—		—	(1	)	—		—		—		—		(5	)	—

Gain (Loss) on net investment hedging relationship:
Cross currency interest rate swaps contracts:
Amount of gain or (loss) recognized in income on derivative amount excluded from effectiveness testing	—			—		—	39		—		—		—		—		2		—
Amount of gain or (loss) recognized in AOCI	—			—		—	39		—		—		—		—		2		—

Gain (Loss) on cash flow hedging relationship:
Forward foreign exchange contracts:
Amount of gain or (loss) reclassified from AOCI into income	(14		)	(101	)	36	—		2		17		76		(14	)	—		(10	)

Amount of gain or (loss) recognized in AOCI	—			(50	)	18	—		(3	)	(49	)	(57	)	21		—		3

Cross currency interest rate swaps contracts:
Amount of gain or (loss) reclassified from AOCI into income	—			—		—	64		—		—				—		32		—
Amount of gain or (loss) recognized in AOCI	$	—		—		—	82		—		—		—		—		19		—

The following table is a summary of the activity related to derivatives and hedges for the fiscal six months ended in 2019 and 2018:



	June 30, 2019										July 1, 2018
(Dollars in Millions)	Sales			Cost of Products Sold		R&D Expense		Interest (Income) Expense		Other (Income) Expense	Sales		Cost of Products Sold		R&D Expense		Interest (Income) Expense		Other (Income) Expense
The effects of fair value, net investment and cash flow hedging:
Gain (Loss) on fair value hedging relationship:
Interest rate swaps contracts:
Hedged items	$	—		—		—		1		—	—		—		—		10		—
Derivatives designated as hedging instruments	—			—		—		(1	)	—	—		—		—		(10	)	—

Gain (Loss) on net investment hedging relationship:
Cross currency interest rate swaps contracts:
Amount of gain or (loss) recognized in income on derivative amount excluded from effectiveness testing	—			—		—		78		—	—		—		—		2		—
Amount of gain or (loss) recognized in AOCI	—			—		—		78		—	—		—		—		2		—

Gain (Loss) on cash flow hedging relationship:
Forward foreign exchange contracts:
Amount of gain or (loss) reclassified from AOCI into income	(35		)	(136	)	(103	)	—		8	46		78		(252	)	—		(21	)

Amount of gain or (loss) recognized in AOCI	(6		)	(346	)	(92	)	—		10	(18	)	(54	)	(216	)	—		(15	)

Cross currency interest rate swaps contracts:
Amount of gain or (loss) reclassified from AOCI into income	—			—		—		118		—	—		—		—		72		—
Amount of gain or (loss) recognized in AOCI	$	—		—		—		140		—	—		—		—		76		—

Schedule of Derivatives Recorded in Consolidated Balance Sheet

As of June 30, 2019, and December 30, 2018, the following amounts were recorded on the Consolidated Balance Sheet related to cumulative basis adjustment for fair value hedges:



Line item in the Consolidated Balance Sheet in which the hedged item is included	Carrying Amount of the Hedged Liability			Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liability
(Dollars in Millions)	June 30, 2019		December 30, 2018	June 30, 2019	December 30, 2018
Current Portion of Long-term Debt	$	498	494	1	5
Long-term Debt	—		—	—	—

Schedule of Effect of Derivatives not Designated as Hedging Instruments

The following table is the effect of derivatives not designated as hedging instrument for the fiscal second quarter and fiscal six months ended in 2019 and 2018:

Gain/(Loss)

Recognized In

Income on Derivative

Gain/(Loss)

Recognized In

Income on Derivative

(Dollars in Millions)

Location of Gain /(Loss) Recognized in Income on Derivative

Fiscal Second Quarter Ended

Fiscal Six Months Ended

Derivatives Not Designated as Hedging Instruments

June 30, 2019

July 1, 2018

June 30, 2019

July 1, 2018

Foreign Exchange Contracts

Other (income) expense

(50

)

(53

)

(88

)

(72

)

Summary of Activity Related to Equity Investments

The following table is a summary of the activity related to equity investments:



(Dollars in Millions)	December 30, 2018					June 30, 2019
	Carrying Value		Changes in Fair Value Reflected in Net Income ⁽¹⁾		Sales/ Purchases/Other ⁽²⁾	Carrying Value	Non Current Other Assets
Equity Investments with readily determinable value	$	511	292		160	963	963

Equity Investments without readily determinable value	$	681	(23	)	19	677	677

⁽¹⁾ Recorded in Other Income/Expense

⁽²⁾ Other includes impact of currency

Financial Assets and Liabilities at Fair Value

The Company’s significant financial assets and liabilities measured at fair value as of June 30, 2019 and December 30, 2018 were as follows:



	June 30, 2019					December 30, 2018
(Dollars in Millions)	Level 1		Level 2	Level 3	Total	Total⁽¹⁾
Derivatives designated as hedging instruments:
Assets:
Forward foreign exchange contracts	$	—	251	—	251	501
Interest rate contracts ⁽²⁾⁽⁴⁾	—		325	—	325	161
Total	—		576	—	576	662
Liabilities:
Forward foreign exchange contracts	—		481	—	481	548
Interest rate contracts ⁽³⁾⁽⁴⁾	—		394	—	394	292
Total	—		875	—	875	840
Derivatives not designated as hedging instruments:
Assets:
Forward foreign exchange contracts	—		23	—	23	32
Liabilities:
Forward foreign exchange contracts	—		55	—	55	32
Other Investments:
Equity investments ⁽⁵⁾	963		—	—	963	511
Debt securities⁽⁶⁾	$	—	2,767	—	2,767	9,734
Other Liabilities
Contingent consideration ⁽⁷⁾				1,479	1,479	335



Gross to Net Derivative Reconciliation	June 30, 2019			December 30, 2018
(Dollars in Millions)
Total Gross Assets	$	599		694
Credit Support Agreement (CSA)	(437		)	(423	)
Total Net Asset	162			271

Total Gross Liabilities	930			872
Credit Support Agreement (CSA)	(821		)	(605	)
Total Net Liabilities	$	109		267


⁽¹⁾	December 30, 2018 assets and liabilities are all classified as Level 2 with the exception of equity investments of $511 million, which are classified as Level 1 and $335 million, classified as Level 3.


⁽²⁾	Includes $6 million of non-current other assets as of December 30, 2018.


⁽³⁾	Includes $1 million and $3 million of non-current other liabilities as of June 30, 2019 and December 30, 2018, respectively.


⁽⁴⁾	Includes cross currency interest rate swaps and interest rate swaps.


⁽⁵⁾	Classified as non-current other assets. The carrying amount of the equity investments were $963 million and $511 million as of June 30, 2019 and December 30, 2018, respectively.


⁽⁶⁾	Classified within cash equivalents and current marketable securities.

⁽⁷⁾

Includes $1,370 million (primarily related to Auris Health) and $335 million, classified as non-current other liabilities as of June 30, 2019 and December 30, 2018, respectively. Includes $109 million classified as current liabilities as of

Marketable Securities

The Company's cash, cash equivalents and current marketable securities as of June 30, 2019 comprised:



(Dollars in Millions)	Carrying Amount		Unrecognized Gain	Estimated Fair Value	Cash & Cash Equivalents	Current Marketable Securities
Cash	$	2,615	—	2,615	2,615
Other sovereign securities⁽¹⁾	380		—	380	380
U.S. reverse repurchase agreements	7,014		—	7,014	7,014
Other reverse repurchase agreements	219		—	219	219
Corporate debt securities⁽¹⁾	264		—	264	264
Money market funds	1,368		—	1,368	1,368
Time deposits⁽¹⁾	651		—	651	651
Subtotal	12,511		—	12,511	12,511	—

			Unrealized Gain
Government securities	2,501		1	2,502	1,845	657
Other sovereign securities	—		—	—	—	—
Corporate debt securities	265		—	265	20	245
Subtotal available for sale debt⁽²⁾	$	2,766	1	2,767	1,865	902
Total cash, cash equivalents and current marketable securities	$	15,277	1	15,278	14,376	902

⁽¹⁾Held to maturity investments are reported at amortized cost and gains or losses are reported in earnings.

⁽²⁾Available for sale debt securities are reported at fair value with unrealized gains and losses reported net of taxes in other comprehensive income.

Schedule of Available for Sale Securities Maturities

The contractual maturities of the available for sale securities as of June 30, 2019 are as follows:



(Dollars in Millions)	Cost Basis		Fair Value
Due within one year	$	2,711	2,712
Due after one year through five years	55		55
Due after five years through ten years	—		—
Total debt securities	$	2,766	2,767

Financial Liabilities not Measured at Fair Value

Financial Instruments not measured at Fair Value:

The following financial liabilities are held at carrying amount on the consolidated balance sheet as of June 30, 2019:



(Dollars in Millions)	Carrying Amount		Estimated Fair Value

Financial Liabilities

Current Debt	$	1,719	1,739

Non-Current Debt
3% Zero Coupon Convertible Subordinated Debentures due in 2020	52		99
1.950% Notes due 2020	499		498
2.95% Debentures due 2020	548		554
3.55% Notes due 2021	449		462
2.45% Notes due 2021	349		353
1.65% Notes due 2021	999		993
0.250% Notes due 2022 (1B Euro 1.1364)	1,134		1,150
2.25% Notes due 2022	997		1,004
6.73% Debentures due 2023	250		298
3.375% Notes due 2023	805		852
2.05% Notes due 2023	498		498
0.650% Notes due 2024 (750MM Euro 1.1364)	849		882
5.50% Notes due 2024 (500 MM GBP 1.2709)	631		770
2.625% Notes due 2025	748		762
2.45% Notes due 2026	1,992		2,024
2.95% Notes due 2027	996		1,032
2.90% Notes due 2028	1,493		1,541
1.150% Notes due 2028 (750MM Euro 1.1364)	845		916
6.95% Notes due 2029	297		414
4.95% Debentures due 2033	498		618
4.375% Notes due 2033	856		1,008
1.650% Notes due 2035 (1.5B Euro 1.1364)	1,688		1,910
3.55% Notes due 2036	988		1,049
5.95% Notes due 2037	992		1,377
3.625% Notes due 2037	1,487		1,592
3.40% Notes due 2038	990		1,032
5.85% Debentures due 2038	696		946
4.50% Debentures due 2040	538		635
4.85% Notes due 2041	297		364
4.50% Notes due 2043	495		594
3.70% Notes due 2046	1,973		2,144
3.75% Notes due 2047	991		1,089
3.50% Notes due 2048	742		778
Other	37		37
Total Non-Current Debt	$	27,699	30,275