Fair Value Measurements (Tables)

9 Months Ended

Sep. 29, 2024

Fair Value Disclosures [Abstract]

Summary of Derivative Activity

The following table is a summary of the activity related to derivatives and hedges for the fiscal third quarters ended September 29, 2024 and October 1, 2023, net of tax:

	September 29, 2024					October 1, 2023
(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	$—	—	—	343	—	—	—	—	(61)	—
Derivatives designated as hedging instruments	—	—	—	(343)	—	—	—	—	61	—
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	—	—	—	35	—	—	—	—	31	—
Amount of gain or (loss) recognized in AOCI	—	—	—	35	—	—	—	—	31	—
Gain (Loss) on cash flow hedging relationship:
Forward foreign exchange contracts:
Amount of gain or (loss) reclassified from AOCI into income	1	44	—	—	(4)	6	102	(5)	—	4
Amount of gain or (loss) recognized in AOCI	—	(30)	(21)	—	1	(11)	(166)	49	—	38
Cross currency interest rate swaps contracts:
Amount of gain or (loss) reclassified from AOCI into income	—	—	—	72	—	—	—	—	41	—
Amount of gain or (loss) recognized in AOCI	$—	—	—	420	—	—	—	—	(454)	—

The following table is a summary of the activity related to derivatives and hedges for the fiscal nine months ended September 29, 2024 and October 1, 2023, net of tax:

	September 29, 2024					October 1, 2023
(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	$—	—	—	298	—	—	—	—	(67)	—
Derivatives designated as hedging instruments	—	—	—	(298)	—	—	—	—	67	—
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	—	—	—	102	—	—	—	—	98	—
Amount of gain or (loss) recognized in AOCI	—	—	—	102	—	—	—	—	98	—
Gain (Loss) on cash flow hedging relationship:
Forward foreign exchange contracts:
Amount of gain or (loss) reclassified from AOCI into income	1	303	12	—	(3)	3	12	(30)	—	9
Amount of gain or (loss) recognized in AOCI	(1)	17	12	—	6	(1)	230	20	—	42
Cross currency interest rate swaps contracts:
Amount of gain or (loss) reclassified from AOCI into income	—	—	—	162	—	—	—	—	223	—
Amount of gain or (loss) recognized in AOCI	$—	—	—	177	—	—	—	—	(469)	—

The following table is the effect of net investment hedges for the fiscal third quarters ended in 2024 and 2023:

	Gain/(Loss) Recognized In Accumulated OCI		Location of Gain or (Loss) Reclassified from Accumulated OCI Into Income	Gain/(Loss) Reclassified From Accumulated OCI Into Income
(Dollars in Millions)	September 29, 2024	October 1, 2023		September 29, 2024	October 1, 2023
Debt	$(199)	101	Interest (income) expense	—	—
Cross Currency interest rate swaps	$(251)	214	Interest (income) expense	—	—

The following table is the effect of net investment hedges for the fiscal nine months ended in 2024 and 2023:

	Gain/(Loss) Recognized In Accumulated OCI		Location of Gain or (Loss) Reclassified from Accumulated OCI Into Income	Gain/(Loss) Reclassified From Accumulated OCI Into Income
(Dollars in Millions)	September 29, 2024	October 1, 2023		September 29, 2024	October 1, 2023
Debt	$(69)	35	Interest (income) expense	—	—
Cross Currency interest rate swaps	$569	880	Interest (income) expense	—	—

Schedule of Derivative Financial Instruments and Classification on Consolidated Balance Sheet

As of September 29, 2024, and December 31, 2023, 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 Gain/ (Loss) Included in the Carrying Amount of the Hedged Liability
(Dollars in Millions)	September 29, 2024	December 31, 2023	September 29, 2024	December 31, 2023
Long-term Debt	$8,202	8,862	(829)	(1,216)

Schedule of Effect of Derivatives not Designated as Hedging Instruments

The following table is the effect of derivatives not designated as hedging instruments for the fiscal third quarters ended 2024 and 2023:

		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 Third Quarter Ended		Fiscal Nine Months Ended
Derivatives Not Designated as Hedging Instruments		September 29, 2024	October 1, 2023	September 29, 2024	October 1, 2023
Foreign Exchange Contracts	Other (income) expense	$(21)	—	24	2

Summary of Activity Related to Equity Investments

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

	December 31, 2023			September 29, 2024
(Dollars in Millions)	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*	$4,473	36	(4,004)	505	505
Equity Investments without readily determinable value	$696	2	74	772	772

(1)Recorded in Other (income)/expense, net

(2)Other includes impact of currency

* The December 31, 2023 balance includes the 9.5% remaining stake in Kenvue. A debt-for-equity exchange was completed in the fiscal second quarter of 2024.

Financial Assets and Liabilities at Fair Value

The Company’s significant financial assets and liabilities measured at fair value as of September 29, 2024 and December 31, 2023 were as follows:

	September 29, 2024				December 31, 2023
(Dollars in Millions)	Level 1	Level 2	Level 3	Total	Total(1)
Derivatives designated as hedging instruments:
Assets:
Forward foreign exchange contracts	$—	472	—	472	539
Interest rate contracts(2)	—	985	—	985	988
Total	—	1,457	—	1,457	1,527
Liabilities:
Forward foreign exchange contracts	—	461	—	461	624
Interest rate contracts(2)	—	4,487	—	4,487	5,338
Total	—	4,948	—	4,948	5,962
Derivatives not designated as hedging instruments:
Assets:
Forward foreign exchange contracts	—	34	—	34	64
Liabilities:
Forward foreign exchange contracts	—	32	—	32	75
Other Investments:
Equity investments(3)	505	—	—	505	4,473
Debt securities(4)	—	3,818	—	3,818	8,874
Other Liabilities
Contingent consideration(5)	$—	—	1,222	1,222	1,092

Gross to Net Derivative Reconciliation	September 29, 2024	December 31, 2023
(Dollars in Millions)
Total Gross Assets	$1,491	1,591
Credit Support Agreement (CSA)	(1,482)	(1,575)
Total Net Asset	9	16
Total Gross Liabilities	4,980	6,037
Credit Support Agreement (CSA)	(4,808)	(5,604)
Total Net Liabilities	$172	433

Summarized information about changes in liabilities for contingent consideration for the fiscal third quarters ended September 29, 2024 and October 1, 2023 is as follows:

	September 29, 2024	October 1, 2023
(Dollars in Millions)
Beginning Balance	$1,092	1,120
Changes in estimated fair value(6)	93	62
Additions	112	—
Payments	(75)	(4)
Ending Balance	$1,222	1,178

(1)2023 assets and liabilities are all classified as Level 2 with the exception of equity investments of $4,473 million, which are classified as Level 1 and contingent consideration of $1,092 million, classified as Level 3.

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

(3)Classified as non-current other assets.

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

(5)Classified as non-current other liabilities as of September 29, 2024 and December 31, 2023, respectively.

(6)Ongoing fair value adjustment amounts are primarily recorded in Research and Development expense.

Marketable Securities

The Company's cash, cash equivalents and current marketable securities as of September 29, 2024 comprised:

(Dollars in Millions)	Carrying Amount	Unrealized Gain	Estimated Fair Value	Cash & Cash Equivalents	Current Marketable Securities
Cash	$3,328	—	3,328	3,328	—
U.S. Gov't securities	—	—	—	—	—
Non-U.S. sovereign securities	267	—	267	149	118
U.S. reverse repurchase agreements	6,853	—	6,853	6,853	—
Corporate debt securities(1)	—	—	—	—	—
Money market funds	4,848	—	4,848	4,848	—
Time deposits(1)	1,183	—	1,183	1,183	—
Subtotal	16,479	—	16,479	16,361	118
U.S. Gov’t securities	3,596	—	3,596	3,581	15
U.S. Gov’t Agencies	6	—	6	—	6
Other sovereign securities	2	—	2	—	2
Corporate debt securities	214	—	214	38	176
Subtotal available for sale debt(2)	$3,818	—	3,818	3,619	199
Total cash, cash equivalents and current marketable securities	$20,297	—	20,297	19,980	317

(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 September 29, 2024 are as follows:

(Dollars in Millions)	Cost Basis	Fair Value
Due within one year	$3,805	3,805
Due after one year through five years	13	13
Due after five years through ten years	—	—
Total debt securities	$3,818	3,818

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 September 29, 2024:

(Dollars in Millions)	Carrying Amount	Estimated Fair Value
Financial Liabilities
Current Debt	$4,462	4,429
Non-Current Debt
2.46% Notes due 2026	1,998	1,962
2.95% Notes due 2027	943	984
0.95% Notes due 2027	1,463	1,389
2.90% Notes due 2028	1,497	1,465
1.150% Notes due 2028 (750MM Euro 1.1141)	832	797
4.80% Notes due 2029 (1)	1,146	1,198
6.95% Notes due 2029	298	344
1.30% Notes due 2030	1,671	1,522
4.90% Notes due 2031(1)	1,146	1,215
3.20% Notes due 2032 (700MM Euro 1.1141)(1)	776	805
4.95% Notes due 2033	499	536
4.375% Notes due 2033	854	879
4.95% Notes due 2034(1)	846	904
1.650% Notes due 2035 (1.5B Euro 1.1141)	1,660	1,492
3.35% Notes due 2036 (800MM Euro 1.1141)(1)	886	914
3.587% Notes due 2036	902	936
5.95% Notes due 2037	994	1,157
3.625% Notes due 2037	1,395	1,393
3.40% Notes due 2038	993	897
5.85% Notes due 2038	697	804
4.50% Notes due 2040	541	553
2.10% Notes due 2040	885	726
4.85% Notes due 2041	297	313
4.50% Notes due 2043	496	501
3.55% Notes due 2044 (1.0B Euro 1.1141)(1)	1,104	1,140
3.73% Notes due 2046	1,978	1,747
3.75% Notes due 2047	868	873
3.50% Notes due 2048	744	628
2.25% Notes due 2050	859	648
5.25% Notes due 2054(1)	843	921
2.45% Notes due 2060	1,107	782
Other	71	71
Total Non-Current Debt	$31,289	30,496

(1) In the fiscal second quarter of 2024, the Company issued senior unsecured notes for a total of $6.7 billion. The net proceeds from this offering were used to fund the Shockwave acquisition which closed on May 31, 2024, and for general corporate purposes.