XML 32 R17.htm IDEA: XBRL DOCUMENT
v3.24.1.u1

Financial Instruments | 3 Months Ended
--- | ---
Mar. 31, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Financial Instruments | Note 9. Financial Instruments Fair Value of Derivative Instruments Derivative instruments were recorded at fair value in the condensed consolidated balance sheets as follows:
| As of March 31, 2024 |  | As of December 31, 2023
| Asset Derivatives |  | Liability Derivatives |  | Asset Derivatives |  | Liability Derivatives
| (in millions)
Derivatives designated as accounting hedges: |  |  |  |  |  |  |
Interest rate contracts | $ | 133 |  |  | $ | 55 |  |  | $ | 120 |  |  | $ | 57 |
Currency exchange contracts | — |  |  | 1 |  |  | — |  |  | — |
Net investment hedge derivative contracts (1) | 194 |  |  | 195 |  |  | 163 |  |  | 382 |
| $ | 327 |  |  | $ | 251 |  |  | $ | 283 |  |  | $ | 439 |
Derivatives not designated as accounting hedges: |  |  |  |  |  |  |
Currency exchange contracts | $ | 210 |  |  | $ | 114 |  |  | $ | 195 |  |  | $ | 134 |
Commodity contracts | 8,722 |  |  | 7,486 |  |  | 1,119 |  |  | 984 |
Interest rate contracts | 1 |  |  | 3 |  |  | — |  |  | 2 |
Equity method investment contracts (2) | — |  |  | — |  |  | — |  |  | — |
| $ | 8,933 |  |  | $ | 7,603 |  |  | $ | 1,314 |  |  | $ | 1,120 |
Total fair value | $ | 9,260 |  |  | $ | 7,854 |  |  | $ | 1,597 |  |  | $ | 1,559 |
(1)Net investment hedge derivative contracts consist of cross-currency interest rate swaps, forward contracts and options. We also designate some of our non-U.S. dollar denominated debt to hedge a portion of our net investments in our non-U.S. operations. This debt is not reflected in the table above, but is included in long-term debt discussed in Note 8, Debt and Borrowing Arrangements. Both net investment hedge derivative contracts and non-U.S. dollar denominated debt acting as net investment hedges are also disclosed in the Derivative Volume table and the Hedges of Net Investments in International Operations section appearing later in this footnote. (2)Equity method investment contracts consist of the bifurcated embedded derivative option that was a component of the September 20, 2021 €300 million exchangeable bonds issuance and terminates on September 20, 2024. Refer to Note 8, Debt and Borrowing Arrangements.. We recorded the fair value of our derivative instruments in the condensed consolidated balance sheet as follows:
| As of March 31, 2024 | As of December 31, 2023
| (in millions)
Other current assets | $ | 8,969 |  |  | $ | 1,347 |  |
Other assets | 291 |  |  | 250 |  |
Other current liabilities | 7,637 |  |  | 1,209 |  |
Other liabilities | 217 |  |  | 350 |  |
The fair values (asset/(liability)) of our derivative instruments were determined using:
| As of March 31, 2024
| Total Fair Value of Net Asset/(Liability) |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
| (in millions)
Currency exchange contracts | $ | 95 |  |  | $ | — |  |  | $ | 95 |  |  | $ | — |
Commodity contracts | 1,236 |  |  | (101) |  |  | 1,337 |  |  | — |
Interest rate contracts | 76 |  |  | — |  |  | 76 |  |  | — |
Net investment hedge contracts | (1) |  |  | — |  |  | (1) |  |  | — |
Total derivatives | $ | 1,406 |  |  | $ | (101) |  |  | $ | 1,507 |  |  | $ | — |
| As of December 31, 2023
| Total Fair Value of Net Asset/(Liability) |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
| (in millions)
Currency exchange contracts | $ | 61 |  |  | $ | — |  |  | $ | 61 |  |  | $ | — |
Commodity contracts | 135 |  |  | 28 |  |  | 107 |  |  | — |
Interest rate contracts | 61 |  |  | — |  |  | 61 |  |  | — |
Net investment hedge contracts | (219) |  |  | — |  |  | (219) |  |  | — |
Total derivatives | $ | 38 |  |  | $ | 28 |  |  | $ | 10 |  |  | $ | — |
Level 1 financial assets and liabilities consist of exchange-traded commodity futures and listed options. The fair value of these instruments is determined based on quoted market prices on commodity exchanges. Level 2 financial assets and liabilities consist primarily of over-the-counter (“OTC”) currency exchange forwards, options and swaps; commodity forwards and options; net investment hedge contracts; and interest rate swaps. Our currency exchange contracts are valued using an income approach based on observable market forward rates less the contract rate multiplied by the notional amount. Commodity derivatives are valued using an income approach based on the observable market commodity index prices less the contract rate multiplied by the notional amount or based on pricing models that rely on market observable inputs such as commodity prices. Our bifurcated exchange options are valued, as derivative instrument liabilities, using the Black-Scholes option pricing model. This model requires assumptions related to the market price of the underlying note and associated credit spread combined with the share of price, expected dividend yield, and expected volatility of the JDE Peet’s shares over the life of the option. Our calculation of the fair value of interest rate swaps is derived from a discounted cash flow analysis based on the terms of the contract and the observable market interest rate curve. Our calculation of the fair value of financial instruments takes into consideration the risk of nonperformance, including counterparty credit risk. Our OTC derivative transactions are governed by International Swap Dealers Association agreements and other standard industry contracts. Under these agreements, we do not post nor require collateral from our counterparties. The majority of our derivative contracts do not have a legal right of set-off. We manage the credit risk in connection with these and all our derivatives by entering into transactions with counterparties with investment grade credit ratings, limiting the amount of exposure with each counterparty and monitoring the financial condition of our counterparties. Derivative Volume The notional values of our hedging instruments were:
| Notional Amount
| As of March 31, 2024 |  | As of December 31, 2023
| (in millions)
Currency exchange contracts: |  |  |
Intercompany loans and forecasted interest payments | $ | 7,133 |  |  | $ | 2,860 |
Forecasted transactions | 6,079 |  |  | 5,550 |
Commodity contracts | 18,833 |  |  | 16,631 |
Interest rate contracts | 3,636 |  |  | 2,384 |
Net investment hedges: |  |  |
Net investment hedge derivative contracts | 8,034 |  |  | 7,456 |
Non-U.S. dollar debt designated as net investment hedges: |  |  |
Euro notes | 3,437 |  |  | 3,516 |
Swiss franc notes | 361 |  |  | 386 |
Canadian dollar notes | 443 |  |  | 453 |
Cash Flow Hedges Cash flow hedge activity, net of taxes, is recorded within accumulated other comprehensive earnings/(losses). Refer to Note 13, Reclassifications from Accumulated Other Comprehensive Income for additional information on current period activity. Based on current market conditions, we would expect to transfer gains of $41 million (net of taxes) for interest rate cash flow hedges to earnings during the next 12 months. Cash Flow Hedge Coverage As of March 31, 2024, our longest dated cash flow hedges were interest rate swaps that hedge forecasted interest rate payments over the next 4 years, 9 months. Hedges of Net Investments in International Operations Net investment hedge ("NIH") derivative contracts We enter into cross-currency interest rate swaps, forwards and options to hedge certain investments in our non-U.S. operations against movements in exchange rates. The aggregate notional value as of March 31, 2024 was $8.0 billion. Net investment hedge derivative contract impacts on other comprehensive earnings and net earnings were:
| For the Three Months Ended March 31, |  |
| 2024 |  | 2023 |  |  |  |
| (in millions)
After-tax gain/(loss) on NIH contracts (1) | $ | 169 |  |  | $ | (5) |  |  |  |  |
(1)Amounts recorded for unsettled and settled NIH derivative contracts are recorded in the cumulative translation adjustment within other comprehensive earnings. The cash flows from the settled contracts are reported within other investing activities in the condensed consolidated statement of cash flows.
| For the Three Months Ended March 31, |  |
| 2024 |  | 2023 |  |  |  |
| (in millions)
Amounts excluded from the assessment of hedge effectiveness (1) | $ | 41 |  |  | $ | 36 |  |  |  |  |
(1)We elected to record changes in the fair value of amounts excluded from the assessment of effectiveness in net earnings within interest and other expense, net. Non-U.S. dollar debt designated as net investment hedges After-tax gains/(losses) related to hedges of net investments in international operations were recorded within the cumulative translation adjustment section of other comprehensive income and were:
| For the Three Months Ended March 31, |  |
| 2024 |  | 2023 |  |  |  |
| (in millions)
Euro notes | $ | 61 |  |  | $ | (33) |  |  |  |  |
Swiss franc notes | 20 |  |  | (5) |  |  |  |  |
Canadian notes | 8 |  |  | (1) |  |  |  |  |
Economic Hedges Pre-tax gains/(losses) recorded in net earnings for economic hedges were:
| For the Three Months Ended March 31, |  |  |  | Location of Gain/(Loss) Recognized in Earnings
| 2024 |  | 2023 |  |  |  |  |
| (in millions) |  |
Currency exchange contracts: |  |  |  |  |  |  |  |  |
Intercompany loans and forecasted interest payments | $ | 56 |  |  | $ | 22 |  |  |  |  |  |  | Interest and other expense, net
Forecasted transactions | 25 |  |  | 2 |  |  |  |  |  |  | Cost of sales
Forecasted transactions | — |  |  | 5 |  |  |  |  |  |  | Interest and other expense, net
Forecasted transactions | 7 |  |  | (5) |  |  |  |  |  |  | Selling, general and administrative expenses
Commodity contracts | 1,184 |  |  | (2) |  |  |  |  |  |  | Cost of sales
Equity method investment contracts | — |  |  | 2 |  |  |  |  |  |  | Gain on equity method investment transactions
Total | $ | 1,272 |  |  | $ | 24 |  |  |  |  |  |  |
Fair Value of Contingent Consideration The following is a summary of our contingent consideration liability activity:
| For the Three Months Ended March 31, |  |
| 2024 |  | 2023 |  |  |  |
| (in millions)
Liability at beginning of period | $ | 680 |  |  | $ | 642 |  |  |  |  |
Changes in fair value | 23 |  |  | 17 |  |  |  |  |
Liability at end of period | $ | 703 |  |  | $ | 659 |  |  |  |  |
Contingent consideration was recorded at fair value in the condensed consolidated balance sheets as follows:
| As of March 31, 2024
| Total Fair Value of Liability |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
| (in millions)
Clif Bar (1) | $ | 560 |  |  | $ | — |  |  | $ | — |  |  | $ | 560 |
Other (2) | 143 |  |  | — |  |  | — |  |  | 143 |
Total contingent consideration | $ | 703 |  |  | $ | — |  |  | $ | — |  |  | $ | 703 |
| As of December 31, 2023
| Total Fair Value of Liability |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
| (in millions)
Clif Bar (1) | $ | 548 |  |  | $ | — |  |  | $ | — |  |  | $ | 548 |
Other (2) | 132 |  |  | — |  |  | — |  |  | 132 |
Total contingent consideration | $ | 680 |  |  | $ | — |  |  | $ | — |  |  | $ | 680 |
(1)In connection with the Clif Bar acquisition, we entered into a contingent consideration arrangement that may require us to pay additional consideration to the sellers for achieving certain net revenue, gross profit and EBITDA targets in 2025 and 2026 that exceed our base financial projections for the business implied in the upfront purchase price. The other contingent consideration liabilities are recorded at fair value within long-term liabilities. The estimated fair value of the contingent consideration obligation at the acquisition date was determined using a Monte Carlo simulation and recorded in other liabilities. Significant assumptions used in assessing the fair value of the liability include financial projections for net revenue, gross profit, and EBITDA, as well as discount and volatility rates. Fair value adjustments are primarily recorded in selling, general and administrative expenses in the condensed consolidated statement of earnings. (2)The other contingent consideration liabilities are recorded at fair value, with $143 million and $132 million classified as other current liabilities at March 31, 2024 and December 31, 2023, respectively. The fair value of this contingent consideration was determined using a Monte Carlo valuation model based on Level 3 inputs, including management's latest estimate of forecasted future results. Other key assumptions included discount rate and volatility. Fair value adjustments are recorded in selling, general and administrative expenses in the condensed consolidated statement of earnings.

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration