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Derivative Instruments and Hedging Activities | 6 Months Ended
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Apr. 28, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments and Hedging Activities | Derivative Instruments and Hedging Activities Derivative Financial Instruments We conduct business in a number of foreign countries, with certain transactions denominated in local currencies, such as the Japanese yen, Israeli shekel, euro and Taiwanese dollar. We use derivative financial instruments, such as foreign currency forward and option contracts, to hedge certain forecasted foreign currency denominated transactions expected to occur typically within the next 24 months. The purpose of our foreign currency management is to mitigate the effect of exchange rate fluctuations on certain foreign currency denominated revenues, costs and eventual cash flows. The terms of currency instruments used for hedging purposes are generally consistent with the timing of the transactions being hedged. We do not use derivative financial instruments for trading or speculative purposes. Derivative instruments and hedging activities, including foreign exchange and interest rate contracts, are recognized on the balance sheet at fair value. Changes in the fair value of derivatives that do not qualify for hedge accounting treatment are recognized currently in earnings. All of our derivative financial instruments are recorded at their fair value in other current assets or in accounts payable and accrued expenses. Hedges related to anticipated transactions are designated and documented at the inception of the hedge as cash flow hedges and foreign exchange derivatives are typically entered into once per month. Cash flow hedges are evaluated for effectiveness quarterly. The effective portion of the gain or loss on these hedges is reported as a component of AOCI in stockholders’ equity and is reclassified into earnings when the hedged transaction affects earnings. The majority of the after-tax net income or loss related to foreign exchange derivative instruments included in AOCI as of April 28, 2024 is expected to be reclassified into earnings within 12 months. Changes in fair value caused by changes in time value of option contracts designated as cash flow hedges are excluded from the assessment of effectiveness. The initial value of this excluded component is amortized on a straight-line basis over the life of the hedging instrument and recognized in the financial statement line item to which the hedge relates. If the transaction being hedged is probable not to occur, we recognize the gain or loss on the associated financial instrument in the consolidated condensed statement of operations. The amount recognized due to discontinuance of cash flow hedges that were probable of not occurring by the end of the originally specified time period was not significant for the three and six months ended April 28, 2024 and April 30, 2023. Foreign currency forward contracts are generally used to hedge certain foreign currency denominated assets or liabilities. Accordingly, changes in the fair value of these hedges are recorded in earnings to offset the changes in the fair value of the assets or liabilities being hedged. As of April 28, 2024 and October 29, 2023, the total outstanding notional amounts of foreign exchange contracts were $1.8 billion and $1.7 billion. The fair values of foreign exchange derivative instruments as of April 28, 2024 and October 29, 2023 were not material. We are also exposed to interest rate risk associated with our potential future borrowings. During the six months ended April 28, 2024, we entered into a series of interest rate contracts to hedge against the variability of cash flows due to changes in the benchmark interest rate of fixed rate debt. These instruments were designated as cash flow hedges at inception and will be settled upon the issuance of debt. The gain (loss) on derivatives in cash flow hedging relationships recognized in AOCI for derivatives designated as hedging instruments for the indicated periods were as follows:
| Three Months Ended |  | Six Months Ended
| April 28, 2024 |  | April 30, 2023 |  | April 28, 2024 |  | April 30, 2023
| (In millions)
Derivatives in Cash Flow Hedging Relationships: |  |  |  |  |  |  |
Foreign exchange contracts | $ | (6) |  |  | $ | 2 |  |  | $ | 28 |  |  | $ | (47) |
Interest rate contracts | 15 |  |  | — |  |  | 20 |  |  | — |
Total | $ | 9 |  |  | $ | 2 |  |  | $ | 48 |  |  | $ | (47) |
The effects of derivative instruments and hedging activities on the Consolidated Condensed Statements of Operations were as follows:
| Three Months Ended
| April 28, 2024 |  | April 30, 2023
|  |  | Derivatives in Cash Flow Hedging Relationships |  |  |  | Derivatives in Cash Flow Hedging Relationships
| Total Amount Presented in the Consolidated Condensed Statement of Operations in which the Effects of Cash Flow Hedges are Recorded |  | Amount of Gain or (Loss) Reclassified from AOCI into Consolidated Condensed Statement of Operations |  | Amount of Gain (Loss) Excluded from Effectiveness Testing Recognized in Consolidated Condensed Statement of Operations |  | Total Amount Presented in the Consolidated Condensed Statement of Operations in which the Effects of Cash Flow Hedges are Recorded |  | Amount of Gain or (Loss) Reclassified from AOCI into Consolidated Condensed Statement of Operations |  | Amount of Gain (Loss) Excluded from Effectiveness Testing Recognized in Consolidated Condensed Statement of Operations
| (In millions)
Foreign Exchange Contracts: |  |  |  |  |  |  |  |  |  |
Net revenue | $ | 6,646 |  |  | $ | 9 |  |  | $ | (1) |  |  | $ | 6,630 |  |  | $ | 14 |  |  | $ | — |
Research, development and engineering | $ | 785 |  |  | (1) |  |  | — |  |  | $ | 775 |  |  | (3) |  |  | — |
Marketing and selling | $ | 209 |  |  | (1) |  |  | — |  |  | $ | 194 |  |  | — |  |  | — |
General and administrative | $ | 247 |  |  | — |  |  | — |  |  | $ | 214 |  |  | (1) |  |  | — |
Interest Rate Contracts: |  |  |  |  |  |  |  |  |  |
Interest expense | $ | 59 |  |  | (3) |  |  | — |  |  | $ | 61 |  |  | (3) |  |  | — |
|  |  | $ | 4 |  |  | $ | (1) |  |  |  |  | $ | 7 |  |  | $ | — |
| Six Months Ended
| April 28, 2024 |  | April 30, 2023
|  |  | Derivatives in Cash Flow Hedging Relationships |  |  |  | Derivatives in Cash Flow Hedging Relationships
| Total Amount Presented in the Consolidated Condensed Statement of Operations in which the Effects of Cash Flow Hedges are Recorded |  | Amount of Gain or (Loss) Reclassified from AOCI into Consolidated Condensed Statement of Operations |  | Amount of Gain (Loss) Excluded from Effectiveness Testing Recognized in Consolidated Condensed Statement of Operations |  | Total Amount Presented in the Consolidated Condensed Statement of Operations in which the Effects of Cash Flow Hedges are Recorded |  | Amount of Gain or (Loss) Reclassified from AOCI into Consolidated Condensed Statement of Operations |  | Amount of Gain (Loss) Excluded from Effectiveness Testing Recognized in Consolidated Condensed Statement of Operations
| (In millions)
Foreign Exchange Contracts: |  |  |  |  |  |  |  |  |  |
Net sales | $ | 13,353 |  |  | $ | 14 |  |  | $ | (1) |  |  | $ | 13,369 |  |  | $ | 39 |  |  | $ | — |
Cost of products sold | $ | 6,996 |  |  | (1) |  |  | — |  |  | $ | 7,130 |  |  | 2 |  |  | — |
Research, development and engineering | $ | 1,539 |  |  | (4) |  |  | — |  |  | $ | 1,546 |  |  | (3) |  |  | — |
Marketing and selling | $ | 416 |  |  | (1) |  |  | — |  |  | $ | 391 |  |  | — |  |  | — |
General and administrative | $ | 523 |  |  | — |  |  | — |  |  | $ | 421 |  |  | (1) |  |  | — |
Interest Rate Contracts: |  |  |  |  |  |  |  |  |  |
Interest expense | $ | 118 |  |  | (6) |  |  | — |  |  | $ | 120 |  |  | (6) |  |  | — |
|  |  | $ | 2 |  |  | $ | (1) |  |  |  |  | $ | 31 |  |  | $ | — |
|  |  | Amount of Gain or (Loss) Recognized in Consolidated Condensed Statement of Operations
|  | Three Months Ended |  | Six Months Ended
Location of Gain or (Loss) Recognized in Consolidated Condensed Statement of Operations |  | April 28, 2024 |  | April 30, 2023 |  | April 28, 2024 |  | April 30, 2023
|  |  | (In millions)
Derivatives Not Designated as Hedging Instruments |  |  |  |  |  |  |  |
Foreign exchange contracts | Interest and other income, net |  | $ | 17 |  |  | $ | 12 |  |  | $ | 18 |  |  | $ | (36) |
Total return swaps - deferred compensation | Cost of products sold |  | 1 |  |  | — |  |  | 4 |  |  | 1 |
Total return swaps - deferred compensation | Operating expenses |  | 8 |  |  | 2 |  |  | 39 |  |  | 14 |
Total return swaps - deferred compensation | Interest and other income, net |  | (4) |  |  | (2) |  |  | (7) |  |  | (4) |
Total |  |  | $ | 22 |  |  | $ | 12 |  |  | $ | 54 |  |  | $ | (25) |
Credit Risk Contingent Features If our credit rating were to fall below investment grade, we would be in violation of credit risk contingent provisions of the derivative instruments discussed above, and certain counterparties to the derivative instruments could request immediate payment on derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with credit-risk related contingent features that were in a net liability position was immaterial as of April 28, 2024. Entering into derivative contracts with banks exposes us to credit-related losses in the event of the banks’ nonperformance. However, our exposure is not considered significant.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//815/tableOfContent + Details
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