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Debt

12 Months Ended

Dec. 28, 2019

DEBT

The following table presents the components of notes payable at year end December 28, 2019 and December 29, 2018:



(millions)	2019				2018
	Principal amount		Effective interest rate		Principal amount		Effective interest rate
U.S. commercial paper	$	3	1.78	%	$	15	2.75	%
Europe commercial paper	—		—		—		—
Bank borrowings	104				161
Total	$	107			$	176

The following table presents the components of long-term debt at year end December 28, 2019 and December 29, 2018:



(millions)	2019			2018
(a) 4.50% U.S. Dollar Notes due 2046	$	638		$	638
(b) 7.45% U.S. Dollar Debentures due 2031	621			621
(c) 4.30% U.S. Dollar Notes due 2028	595			595
(d) 3.40% U.S. Dollar Notes due 2027	596			595
(e) 3.25% U.S. Dollar Notes due 2026	741			731
(f) 1.25% Euro Notes due 2025	689			693
(g) 1.00% Euro Notes due 2024	692			697
(h) 2.65% U.S. Dollar Notes due 2023	539			585
(i) 2.75% U.S. Dollar Notes due 2023	201			198
(j) 3.125% U.S. Dollar Notes due 2022	353			351
(k) 0.80% Euro Notes due 2022	669			684
(l) 1.75% Euro Notes due 2021	558			570
(m) 3.25% U.S. Dollar Notes due 2021	198			399
(n) 4.0% U.S. Dollar Notes due 2020	601			848
(o) 4.15% U.S. Dollar Notes due 2019	—			503
Other	124			9
	7,815			8,717
Less current maturities	(620		)	(510		)
Balance at year end	$	7,195		$	8,207

(a)

In March 2016, the Company issued $650 million of thirty-year 4.50% U.S. Dollar Notes, using the net proceeds for general corporate purposes, which included repayment of a portion of the Company's 7.45% U.S. Dollar Debentures due 2031 and a portion of its commercial paper borrowings. The effective interest rate on the Notes, reflecting issuance discount and hedge settlement, was 4.59% at December 28, 2019.

(b)

In March 2001, the Company issued long-term debt instruments, primarily to finance the acquisition of Keebler Foods Company, of which $625 million of thirty-year 7.45% Debentures remain outstanding. The effective interest rate on the Debentures, reflecting issuance discount and hedge settlement, was 7.56% at December 28, 2019. The Debentures contain standard events of default and covenants, and can be redeemed in whole or in part by the Company at any time at prices determined under a formula (but not less than 100% of the principal amount plus unpaid interest to the redemption date).

(c)

In May 2018, the Company issued $600 million of ten-year 4.30% Senior Notes due 2028, using the net proceeds for general corporate purposes, which included repayment of the Company's $400 million, seven-year 3.25% U.S. Dollar Notes due 2018 at maturity, and the repayment of a portion of the Company's commercial paper borrowings used to finance the acquisition of ownership interests in TAF and Multipro. The effective interest rate on the Notes, reflecting issuance discount and hedge settlement, was 4.34% at December 28, 2019.

(d)

In November 2017, the Company issued $600 million of ten-year 3.40% U.S. Dollar Notes, using the net proceeds for general corporate purposes, which included repayment of a portion of the Company's commercial paper borrowings used to finance the acquisition of Chicago Bar Company LLC, the maker of RXBAR. The effective interest rate on the Notes, reflecting issuance discount and hedge settlement, was 3.49% at December 28, 2019.

(e)

In March 2016, the Company issued $750 million of ten-year 3.25% U.S. Dollar Notes, using the net proceeds for general corporate purposes, which included repayment of a portion of the Company's 7.45% U.S. Dollar Debentures due 2031 and a portion of its commercial paper borrowings. The effective interest rate on these Notes, reflecting issuance discount, hedge settlement and interest rate swaps was 4.11% at December 28, 2019. In September 2016, the Company entered into interest rate swaps with notional amounts totaling $300 million, which effectively converted a portion of these Notes from a fixed rate to a floating rate obligation. These derivative instruments were designated as fair value hedges of the debt obligation. In October 2018, the Company entered into interest rate swaps with notional amounts totaling $450 million, which effectively converted a portion of these Notes from a fixed rate to a floating rate obligation. These derivative instruments were designated as fair value hedges of the debt obligation. The Company subsequently terminated the interest rate swaps, and the resulting unamortized loss of $6 million at December 28, 2019 will be amortized to interest expense over the remaining term of the Notes.

(f)

In March 2015, the Company issued €600 million (approximately $671 million at December 28, 2019, which reflects the discount, fees and translation adjustments) of ten-year 1.25% Euro Notes due 2025, using the proceeds from these Notes for general corporate purposes, which included repayment of a portion of the Company’s commercial paper borrowings. The effective interest rate on the Notes, reflecting issuance discount, hedge settlement and interest rate swaps, was 1.58% at December 28, 2019. The Notes were designated as a net investment hedge of the Company’s investment in its Europe subsidiary when issued. In May 2017, the Company entered into interest rate swaps with notional amounts totaling €600 million, which effectively converted these Notes from a fixed rate to a floating rate obligation. These derivative instruments were designated as fair value hedges of the debt obligation. The Company subsequently terminated the interest rate swaps, and the resulting unamortized gain of $20 million at December 28, 2019 will be amortized to interest expense over the remaining term of the Notes.

(g)

In May 2016, the Company issued €600 million (approximately $671 million USD at December 28, 2019, which reflects the discount, fees and translation adjustments) of eight-year 1.00% Euro Notes due 2024. The proceeds from these Notes were used for general corporate purposes, including, together with cash on hand and additional commercial paper borrowings, repayment of the Company's $750 million, seven-year 4.45% U.S. Dollar Notes due 2016 at maturity. The Notes were designated as a net investment hedge of the Company’s investment in its Europe subsidiary when issued. The effective interest rate on these Notes, reflecting issuance discount, hedge settlement and interest rate swaps was 0.21% at December 28, 2019. In November 2016, the Company entered into interest rate swaps with notional amounts totaling €300 million, which effectively converted a portion of these Notes from a fixed rate to a floating rate obligation. These derivative instruments were designated as fair value hedges of the debt obligation. In October 2018, the Company

entered into interest rate swaps with notional amounts totaling €300 million, which effectively converted a portion of these Notes from a fixed rate to a floating rate obligation. The Company subsequently terminated these swaps. In May of 2019, the Company entered into interest rate swaps with notional amounts totaling €600 million, which effectively converted a portion of these Notes from a fixed rate to a floating rate obligation. These derivative instruments were designated as fair value hedges of the debt obligation. The fair value adjustment for the interest rate swaps was $3 million at December 28, 2019, recorded as an increase in the hedged debt balance.

(h)

In November 2016, the Company issued $600 million of seven-year 2.65% U.S. Dollar Notes, using the net proceeds for general corporate purposes, which included repayment of the Company's 1.875% U.S. Dollar Notes due 2016 at maturity and a portion of its commercial paper borrowings. The effective interest rate on these Notes, reflecting issuance discount, hedge settlement and interest rate swaps was 3.39% at December 28, 2019. In 2016, the Company entered into interest rate swaps with notional amounts totaling $300 million, which effectively converted a portion of these Notes from a fixed rate to a floating rate obligation. These derivative instruments were designated as fair value hedges of the debt obligation. The Company subsequently terminated the interest rate swaps, and the resulting unamortized loss of $9 million at December 28, 2019 will be amortized to interest expense over the remaining term of the Notes. In 2019, the Company redeemed $50 million of the Notes. In connection with the debt redemption, the Company incurred $2 million of interest expense, consisting primarily of a premium on the tender offer.

(i)

In February 2013, the Company issued $400 million ($189 million previously redeemed) of ten-year 2.75% U.S. Dollar Notes, using net proceeds from these Notes for general corporate purposes, including, together with cash on hand, to repay a portion of the Company’s $750 million 4.25% U.S. Dollar Notes that matured in March 2013. The effective interest rate on these Notes, reflecting issuance discount hedge settlement and interest rate swaps, was 4.11%. In September 2016, the Company entered into interest rate swaps with notional amounts totaling $211 million, which effectively converted these Notes from a fixed rate to a floating rate obligation. These derivative instruments were designated as fair value hedges of the debt obligation. The Company subsequently terminated the interest rate swaps, and the resulting unamortized loss of $9 million at December 28, 2019 will be amortized to interest expense over the remaining term of the Notes.

(j)

In May 2012, the Company issued $700 million ($342 million previously redeemed) of ten-year 3.125% U.S. Dollar Notes, using the net proceeds from these Notes for general corporate purposes, including financing a portion of the acquisition of Pringles. The effective interest rate on these Notes, reflecting issuance discount and interest rate swaps, was 3.74% at December 28, 2019. During 2016 and 2018, the Company entered into interest rate swaps which effectively converted all or a portion of these Notes from a fixed rate to a floating rate obligation. These derivative instruments were designated as fair value hedges of the debt obligation. The Company subsequently terminated the interest rate swaps, and the resulting $4 million loss at December 28, 2019 will be amortized to interest expense over the remaining term of the Notes.

(k)

In May 2017, the Company issued €600 million (approximately $671 million USD at December 28, 2019, which reflects the discount and translation adjustments) of five-year 0.80% Euro Notes due 2022, using the proceeds from these Notes for general corporate purposes, including, repayment of the Company's $400 million, five-year 1.75% U.S. Dollar Notes due 2017 at maturity. The effective interest rate on the Notes, reflecting issuance discount and hedge settlement, was 0.87%. The Notes were designated as a net investment hedge of the Company's investment in its Europe subsidiary when issued.

(l)

In May 2014, the Company issued €500 million (approximately $559 million at December 28, 2019, which reflects the discount and translation adjustments) of seven-year 1.75% Euro Notes due 2021, using the proceeds from these Notes for general corporate purposes, which included repayment of a portion of the Company’s commercial paper borrowings. The effective interest rate on the Notes, reflecting issuance discount and hedge settlement, was 2.37% at December 28, 2019. The Notes were designated as a net investment hedge of the Company’s investment in its Europe subsidiary when issued.

(m)

In May 2018, the Company issued $400 million of three-year 3.25% Senior Notes due 2021, using the net proceeds for general corporate purposes, which included repayment of the Company's $400 million, seven-year 3.25% U.S. Dollar Notes due 2018 at maturity, and the repayment of a portion of the Company's commercial paper borrowings used to finance the acquisition of ownership interests in TAF and Multipro. The effective interest rate on the Notes, reflecting issuance discount, was 3.39% as December 28, 2019. In 2019, the Company redeemed $202 million of the Notes. In connection with the dept redemption, the Company incurred $6 million of interest expense, consisting primarily of a premium on the tender offer.

(n)

In December 2010, the Company issued $1.0 billion ($150 million previously redeemed) of ten-year 4.0% fixed rate U.S. Dollar Notes, using the net proceeds from these Notes for incremental pension and postretirement benefit plan contributions and to retire a portion of its commercial paper. The effective interest rate on these Notes, reflecting issuance discount, hedge settlement and interest rate swaps, was 3.37% at December 28, 2019. During 2016, the Company entered into interest rate swaps, which effectively converted a portion of these Notes from a fixed rate to a floating rate obligation. These derivative instruments were designated as fair value hedges of the debt obligation. The Company subsequently terminated the interest rate swaps and the resulting gain on termination at December 28, 2019 will be amortized to interest expense over the remaining term of the Notes. In 2019, the Company redeemed $248 million of the Notes. In connection with the debt redemption, the Company incurred $6 million of interest expense, consisting primarily of a premium on the tender offer, which was partially offset by accelerated gains on pre-issuance interest rate hedges.

(o)

In November 2009, the Company issued $500 million of ten-year 4.15% fixed rate U.S. Dollar Notes, using net proceeds from these Notes to retire a portion of its 6.6% U.S. Dollar Notes due 2011. In 2012 and 2015, the Company entered into interest rate swaps which effectively converted these Notes from a fixed rate to a floating rate obligation. These derivative instruments were designated as fair value hedges of the debt obligation. In 2019, the Company redeemed $191 million of the Notes. In connection with the August 2019 debt redemption, the Company incurred $1 million of interest expense, consisting primarily of a premium on the tender offer. In September of 2019, the Company redeemed the remaining $309 million of the Notes. In connection with the September 2019 debt redemption, the company incurred $1 million of interest expense, consisting primarily of a premium on the tender offer.

In August 2019, the Company redeemed $191 million of its 4.15% U.S. Dollar Notes due November 2019, $248 million of its 4.00% U.S. Dollar Notes due 2020, $202 million of its 3.25% U.S. Dollar Notes due 2021, and $50 million of its 2.65% U.S. Dollar Notes due 2023. In connection with the debt redemption, the Company incurred $15 million of interest expense, consisting primarily of a premium on the tender offer, acceleration of unamortized debt discount on the redeemed debt, and fees related to the tender offer, partially offset by accelerated gains on pre-issuance interest rate hedges.

In September 2019, the Company redeemed $309 million of its 4.15% U.S. Dollar Notes due November 2019, the

remaining principal balance subsequent to the August redemption. In connection with the debt redemption, the

Company incurred $1 million of interest expense, consisting primarily of a premium and also including accelerated

losses on pre-issuance interest rate hedges, acceleration of fees and debt discount on the redeemed debt and fees

related to the make whole call.

All of the Company’s Notes contain customary covenants that limit the ability of the Company and its restricted subsidiaries (as defined) to incur certain liens or enter into certain sale and lease-back transactions and also contain a change of control provision. There are no significant restrictions on the payment of dividends by the Company. The Company was in compliance with all these covenants as of December 28, 2019.

The Company and two of its subsidiaries (the Issuers) maintain a program under which the Issuers may issue euro-commercial paper notes up to a maximum aggregate amount outstanding at any time of $750 million or its equivalent in alternative currencies. The notes may have maturities ranging up to 364 days and will be senior unsecured obligations of the applicable Issuer. Notes issued by subsidiary Issuers will be guaranteed by the Company. The notes may be issued at a discount or may bear fixed or floating rate interest or a coupon calculated by reference to an index or formula. There were no commercial paper notes outstanding under this program as of December 28, 2019 and December 29, 2018.

At December 28, 2019, the Company had $3.0 billion of short-term lines of credit and letters of credit, of which $2.9 billion were unused and available for borrowing primarily on an unsecured basis. These lines were comprised principally of the January 2018 unsecured $1.5 billion Five-Year Credit Agreement, which expires in 2023, and an unsecured $1.0 billion 364-Day Credit Agreement.

The Five-Year Credit Agreement allows the Company to borrow, on a revolving credit basis, up to $1.5 billion, which includes the ability to obtain letters of credit in an aggregate stated amount up to $75 million and to obtain European swingline loans in an aggregate principal amount up to the equivalent of $300 million.

In January 2020, the Company entered into an unsecured 364-Day Credit Agreement to borrow, on a revolving credit basis, up to $1.0 billion at any time outstanding, to replace the $1.0 billion 364-day facility that expired in January 2020.

The Five-Year and 364 Day Credit Agreements which had no outstanding borrowings as December 28, 2019, contain customary covenants and warranties, including specified restrictions on indebtedness, liens and a specified interest expense coverage ratio. If an event of default occurs, then, to the extent permitted, the administrative agents may terminate the commitments under the credit facilities, accelerate any outstanding loans under the agreements, and demand the deposit of cash collateral equal to the lender's letter of credit exposure plus interest.

During the third quarter of 2019, in connection with the divestiture of selected cookies, fruit and fruit-flavored snacks, pie crusts, and ice cream cones businesses, the Company withdrew from two multi-employer pension plans and recorded withdrawal liabilities of $132 million. While this represents our best estimate of the cost of withdrawing from the plans at this time, we have not yet reached agreement on the ultimate amount of the withdrawal liability. Subsequent to the end of the year, the Company and the lenders under the Five-Year and 364-Day Credit agreements entered into a waiver agreement addressing any matters that arose or may arise from these liabilities under the agreements, as long as the aggregate amount of such liabilities does not exceed $250 million. The Company was in compliance with all financial covenants contained in these agreements at December 28, 2019.

Scheduled principal repayments on long-term debt are (in millions): 2020–$620; 2021–$835; 2022–$1,039; 2023–$771; 2024–$677; 2025 and beyond–$3,896.

Financial institutions have issued standby letters of credit conditionally guaranteeing obligations on behalf of the Company totaling $87 million, including $52 million secured and $35 million unsecured, as of December 28, 2019. These obligations are related primarily to insurance programs. There were no amounts drawn down on the letters of credit as of December 28, 2019.

The Company has issued guarantees for a certain portion of debt of unconsolidated affiliates. These arrangements include cross guarantees back from the other shareholder in proportion to their ownership of the unconsolidated affiliates. These guarantees are not material to the Company.

Interest expense capitalized as part of the construction cost of fixed assets was immaterial for all periods presented.