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Financial Instruments (Tables)

3 Months Ended

Mar. 20, 2021

Derivative [Line Items]

Schedule of Notional Amounts of Outstanding Derivative Positions [Table Text Block]

The notional amounts of our financial instruments used to hedge the above risks as of March 20, 2021 and December 26, 2020 are as follows:

			Notional Amounts(a)
			3/20/2021						12/26/2020
Commodity			$	1.1					$	1.1
Foreign exchange			$	2.0					$	1.9
Interest rate			$	3.0					$	3.0
Net investment (b)			$	2.7					$	2.7

(a)In billions.

(b)The total notional of our net investment hedge consists of non-derivative debt instruments.

Fair Values of Financial Assets and Liabilities

Fair Value Measurements

The fair values of our financial assets and liabilities as of March 20, 2021 and December 26, 2020 are categorized as follows:

									3/20/2021												12/26/2020
			Fair Value Hierarchy Levels(a)						Assets(a)						Liabilities(a)						Assets(a)						Liabilities(a)
Equity securities (b)			1						$	124					$	—					$	—					$	—
Index funds (c)			1						$	240					$	—					$	231					$	—
Prepaid forward contracts (d)			2						$	17					$	—					$	18					$	—
Deferred compensation (e)			2						$	—					$	488					$	—					$	477
Contingent consideration (f)			3						$	—					$	847					$	—					$	861
Derivatives designated as fair value hedging instruments:
Interest rate (g)			2						$	1					$	—					$	2					$	—
Derivatives designated as cash flow hedging instruments:
Foreign exchange (h)			2						$	7					$	68					$	9					$	71
Interest rate (h)			2						28						304						13						307
Commodity (i)			2						59						—						32						—
									$	94					$	372					$	54					$	378
Derivatives not designated as hedging instruments:
Foreign exchange (h)			2						$	5					$	5					$	4					$	8
Commodity (i)			2						32						10						19						7
									$	37					$	15					$	23					$	15
Total derivatives at fair value (j)									$	132					$	387					$	79					$	393
Total									$	513					$	1,722					$	328					$	1,731

(a)Fair value hierarchy levels are categorized consistently by Level 1 (quoted prices in active markets for identical assets), Level 2 (significant other observable inputs) and Level 3 (significant unobservable inputs) in both years. 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 the price of common stock. These are equity securities with readily determinable fair values and are classified as short-term investments. As of December 26, 2020, these equity securities did not have a readily determinable fair value. During the 12 weeks ended March 20, 2021, we recorded a pre-tax unrealized gain on equity securities of $108 million ($82 million after-tax or $0.06 per share). These equity securities were subsequently sold in the second quarter of 2021. See Note 1 for further information.

(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)In connection with our acquisition of Rockstar Energy Beverages (Rockstar), we recorded a liability for tax-related contingent consideration payable over up to 15 years, with an option to accelerate all remaining payments, with estimated maximum payments of approximately $1.1 billion, using current tax rates. The fair value of the liability is estimated using probability-weighted, discounted future cash flows at current tax rates. The significant unobservable inputs (Level 3) used to estimate the fair value include the expected future tax benefits associated with the acquisition, the probability that the option to accelerate all remaining payments will be exercised and discount rates. These unobservable inputs did not materially differ from those used as of December 26, 2020. The expected annual future tax benefits range from approximately $40 million to $110 million, with an average of $70 million. The probability, in any given year, that the option to accelerate will be exercised ranges from 3 to 25 percent, with a weighted-average payment period of approximately 3 years. The discount rates range from less than 1 percent to 5 percent, with a weighted average of 3 percent. The contingent consideration measured at fair value using unobservable inputs as of March 20, 2021 is $847 million, comprised of an $861 million liability as of December 26, 2020, and a fair value decrease of $14 million in the 12 weeks ended March 20, 2021, recorded in selling, general and administrative expenses.

(g)Based on London Interbank Offered Rate forward rates. The carrying amount of hedged fixed-rate debt was $0.2 billion as of March 20,

2021 and December 26, 2020 and classified on our balance sheet within short-term debt obligations. As of March 20, 2021 and December 26, 2020, the cumulative amount of fair value hedging adjustments to hedged fixed-rate debt was a $1 million gain and a $2 million gain, respectively. As of March 20, 2021, the cumulative amount of fair value hedging adjustments on discontinued hedges was a $14 million net loss, which is being amortized over the remaining life of the related debt obligations.

(h)Based on recently reported market transactions of spot and forward rates.

(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 March 20, 2021 and December 26, 2020 were not material. Collateral received or posted against our asset or liability positions was not material. Exchange-traded commodity futures are cash-settled on a daily basis and, therefore, not included in the table.

Effective Portion Of Pre-Tax (Gains)/Losses On Derivative Instruments

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)
			3/20/2021						3/21/2020						3/20/2021						3/21/2020						3/20/2021						3/21/2020
Foreign exchange			$	4					$	(11)					$	11					$	(51)					$	13					$	4
Interest rate			1						(11)						(18)						223						(4)						150
Commodity			(81)						166						(90)						64						(10)						3
Net investment			—						—						(63)						(84)						—						—
Total			$	(76)					$	144					$	(160)					$	152					$	(1)					$	157

(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 net interest expense and other. These losses/gains are substantially offset by decreases/increases in the value of the underlying debt, which are also included in net interest expense and other. 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 primarily included in cost of sales. Interest rate derivative losses/gains are included in net interest expense and other. Commodity derivative losses/gains are included in either cost of sales or selling, general and administrative expenses, depending on the underlying commodity.

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Tabular disclosure of the location and amount of derivative instruments and nonderivative instruments designated as hedging instruments reported before netting adjustments, and the amount of gain (loss) on derivative instruments and nonderivative instruments designated and qualified as hedging instruments.

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Tabular disclosure of assets and liabilities, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, that are measured at fair value on a recurring basis. The disclosures contemplated herein include the fair value measurements at the reporting date by the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3).

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