v3.25.2
Fair Value Measurements
 6 Months Ended
Jun. 29, 2025
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair value measurements
The Company uses forward foreign exchange contracts to manage its exposure to the variability of cash flows, primarily related to the foreign exchange rate changes of future intercompany product and third-party purchases of materials denominated in a foreign currency. The Company uses cross currency interest rate swaps to manage currency risk primarily related to borrowings. Both types of derivatives are designated as cash flow hedges.
Additionally, the Company uses interest rate swaps as an instrument to manage interest rate risk related to fixed rate borrowings. These derivatives are designated as fair value hedges. The Company uses cross currency interest rate swaps and forward foreign exchange contracts designated as net investment hedges. Additionally, the Company uses forward foreign exchange contracts to offset its exposure to certain foreign currency assets and liabilities. These forward foreign exchange contracts are not designated as hedges, and therefore, changes in the fair values of these derivatives are recognized in earnings, thereby offsetting the current earnings effect of the related foreign currency assets and liabilities.
The Company does not enter into derivative financial instruments for trading or speculative purposes, or that contain credit risk related contingent features. The Company maintains credit support agreements (CSA) with certain derivative counterparties establishing collateral thresholds based on respective credit ratings and netting agreements. As of June 29, 2025, the cumulative amount of cash collateral paid by the Company under the CSA amounted to $5.2 billion net, related to net investment and cash flow hedges. On an ongoing basis, the Company monitors counter-party credit ratings. The Company considers credit non-performance risk to be low because the Company primarily enters into agreements with commercial institutions that have at least an investment grade credit rating. Refer to the table on significant financial assets and liabilities measured at fair value contained in this footnote for receivables and payables with these commercial institutions. As of June 29, 2025, the Company had notional amounts outstanding for forward foreign exchange contracts, cross currency interest rate swaps and interest rate swaps of $47.7 billion, $40.9 billion and $9.0 billion, respectively. As of December 29, 2024, the Company had notional amounts outstanding for forward foreign exchange contracts, cross currency interest rate swaps and interest rate swaps of $45.1 billion, $40.5 billion and $9.0 billion, respectively.
All derivative instruments are recorded on the balance sheet at fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether the derivative is designated as part of a hedge transaction, and if so, the type of hedge transaction.
The designation as a cash flow hedge is made at the entrance date of the derivative contract. At inception, all derivatives are expected to be highly effective. Foreign exchange contracts designated as cash flow hedges are accounted for under the forward method and all gains/losses associated with these contracts will be recognized in the income statement when the hedged item impacts earnings. Changes in the fair value of these derivatives are recorded in accumulated other comprehensive income until the underlying transaction affects earnings and are then reclassified to earnings in the same account as the hedged transaction.
Gains and losses associated with interest rate swaps and changes in fair value of hedged debt attributable to changes in interest rates are recorded to interest expense in the period in which they occur. Gains and losses on net investment hedges are accounted for through the currency translation account within accumulated other comprehensive income. The portion excluded from effectiveness testing is recorded through interest (income) expense using the spot method. On an ongoing basis, the Company assesses whether each derivative continues to be highly effective in offsetting changes of hedged items. If and when a derivative is no longer expected to be highly effective, hedge accounting is discontinued.
The Company designated its Euro denominated notes with due dates ranging from 2028 to 2055 as a net investment hedge of the Company's investments in certain of its international subsidiaries that use the Euro as their functional currency in order to reduce the volatility caused by changes in exchange rates.
As of June 29, 2025, the balance of deferred net loss on derivatives included in accumulated other comprehensive income was $0.7 billion after-tax. For additional information, see the Consolidated Statements of Comprehensive Income and Note 7. The Company expects that substantially all of the amounts related to forward foreign exchange contracts will be reclassified into earnings over the next 12 months as a result of transactions that are expected to occur over that period. The maximum length of time over which the Company is hedging transaction exposure is 18 months, excluding interest rate contracts and net investment hedge contracts. The amount ultimately realized in earnings may differ as foreign exchange rates change. Realized gains and losses are ultimately determined by actual exchange rates at maturity of the derivative.
The following table is a summary of the activity related to derivatives and hedges for the fiscal second quarters ended June 29, 2025 and June 30, 2024, net of tax:


June 29, 2025June 30, 2024
(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$———52————(53)—
    Derivatives designated as hedging instruments———(52)————53—
Gain (Loss) on net investment hedging relationship:
Cross currency interest rate swaps contracts:
   Amount of gain or (loss) recognized in income on derivative amount excluded from effectiveness testing———48————33—
   Amount of gain or (loss) recognized in AOCI———48————33—
Gain (Loss) on cash flow hedging relationship:
Forward foreign exchange contracts:
   Amount of gain or (loss) reclassified from AOCI into income 2(132)(16)—(3)(1)948—3
   Amount of gain or (loss) recognized in AOCI 11466(72)—(29)26611—1
Cross currency interest rate swaps contracts:
   Amount of gain or (loss) reclassified from AOCI into income———76————42—
   Amount of gain or (loss) recognized in AOCI$———108————(38)—
The following table is a summary of the activity related to derivatives and hedges for the fiscal six months ended June 29, 2025 and June 30, 2024, net of tax:


June 29, 2025June 30, 2024
(Dollars in Millions)SalesCost of Products SoldR&D ExpenseInterest (Income) ExpenseOther (Income) ExpenseSalesCost of Products SoldR&D ExpenseInterest (Income) ExpenseOther (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$———240————(45)—
 Derivatives designated as hedging instruments———(240)————45—
Gain (Loss) on net investment hedging relationship:
Cross currency interest rate swaps contracts:
   Amount of gain or (loss) recognized in income on derivative amount excluded from effectiveness testing———98————67—
   Amount of gain or (loss) recognized in AOCI———98————67—
Gain (Loss) on cash flow hedging relationship:
Forward foreign exchange contracts:
   Amount of gain or (loss) reclassified from AOCI into income 1(122)(15)—(3)—25912—1
   Amount of gain or (loss) recognized in AOCI 14571(108)—(40)(1)4733—5
Cross currency interest rate swaps contracts:
   Amount of gain or (loss) reclassified from AOCI into income———158————91—
   Amount of gain or (loss) recognized in AOCI$———673————(243)—
As of June 29, 2025, and December 29, 2024, 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 includedCarrying 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)June 29, 2025December 29, 2024June 29, 2025December 29, 2024
Long-term Debt$8,2097,935(820)(1,132)

The following table is the effect of derivatives not designated as hedging instruments for the fiscal second quarters ended and fiscal six months ended 2025 and 2024:
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 Second Quarter EndedFiscal Six Months Ended
Derivatives Not Designated as Hedging InstrumentsJune 29, 2025June 30, 2024June 29, 2025June 30, 2024
Foreign Exchange ContractsOther (income) expense$(19)204345

The following table is the effect of net investment hedges for the fiscal second quarters ended in 2025 and 2024:
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)June 29, 2025June 30, 2024June 29, 2025June 30, 2024
Debt$(803)46Interest (income) expense——
Cross Currency interest rate swaps$(700)92Interest (income) expense——

The following table is the effect of net investment hedges for the fiscal six months ended in 2025 and 2024

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)June 29, 2025June 30, 2024June 29, 2025June 30, 2024
Debt$(1,119)130Interest (income) expense——
Cross Currency interest rate swaps$140820Interest (income) expense——
The Company holds equity investments with readily determinable fair values and equity investments without readily determinable fair values. The Company has elected to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.
The following table is a summary of the activity related to equity investments:
December 29, 2024June 29, 2025
(Dollars in Millions)Carrying Value
Changes in Fair Value Reflected in Net Income (1)
(Sales)/ Purchases/Other (2)
Carrying ValueNon Current Other Assets
Equity Investments with readily determinable value$451(57)59453453
Equity Investments without readily determinable value$773(26)76823823
(1)Recorded in Other (income)/expense, net
(2)Other includes impact of currency

Fair value is the exit price that would be received to sell an asset or paid to transfer a liability. Fair value is a market-based measurement determined using assumptions that market participants would use in pricing an asset or liability. In accordance with ASC 820, a three-level hierarchy was established to prioritize the inputs used in measuring fair value. The levels within the hierarchy are described below with Level 1 inputs having the highest priority and Level 3 inputs having the lowest.
The fair value of a derivative financial instrument (i.e., forward foreign exchange contracts, interest rate contracts) is the aggregation by currency of all future cash flows discounted to its present value at the prevailing market interest rates and subsequently converted to the U.S. Dollar at the current spot foreign exchange rate. The Company does not believe that fair values of these derivative instruments materially differ from the amounts that could be realized upon settlement or maturity, or that the changes in fair value will have a material effect on the Company’s results of operations, cash flows or financial position. The Company also holds equity investments which are classified as Level 1 and debt securities which are classified as Level 2. The Company holds acquisition related contingent liabilities based upon certain regulatory and commercial events, which are classified as Level 3, whose values are determined using discounted cash flow methodologies or similar techniques for which the determination of fair value requires significant judgment or estimations.
The following three levels of inputs are used to measure fair value:
Level 1 — Quoted prices in active markets for identical assets and liabilities.
Level 2 — Significant other observable inputs.
Level 3 — Significant unobservable inputs.
The Company’s significant financial assets and liabilities measured at fair value as of June 29, 2025 and December 29, 2024 were as follows:
 June 29, 2025December 29, 2024
(Dollars in Millions)Level 1Level 2Level 3Total
Total(1)
Derivatives designated as hedging instruments:     
Assets:     
Forward foreign exchange contracts $—1,006—1,006660
Interest rate contracts(2)
—431—4311,484
Total —1,437—1,4372,144
Liabilities:     
Forward foreign exchange contracts —774—774794
Interest rate contracts(2)
—6,234—6,2343,753
Total —7,008—7,0084,547
Derivatives not designated as hedging instruments:     
Assets:     
Forward foreign exchange contracts —57—5750
Liabilities:     
Forward foreign exchange contracts —72—7217
Other Investments:
Equity investments(3)
453——453451
Debt securities(4)
—2,094—2,0947,216
Other Liabilities:
Contingent consideration(5)
$——1,1571,1571,217
Gross to Net Derivative ReconciliationJune 29, 2025December 29, 2024
(Dollars in Millions)
Total Gross Assets$1,4942,194
Credit Support Agreement (CSA)(1,471)(2,172)
Total Net Asset2322
Total Gross Liabilities7,0804,564
Credit Support Agreement (CSA)(6,666)(4,412)
Total Net Liabilities$414152
Summarized information about changes in liabilities for contingent consideration for the fiscal second quarters ended June 29, 2025 and June 30, 2024 is as follows:
June 29, 2025June 30, 2024
(Dollars in Millions)
Beginning Balance$1,2171,092
Changes in estimated fair value(6)
(60)44
Additions—112
Payments——
Ending Balance$1,1571,248
(1)2024 assets and liabilities are all classified as Level 2 with the exception of equity investments of $451 million, which are classified as Level 1 and contingent consideration of $1,217 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)Includes $1,107 million and $1,217 million classified as non-current other liabilities as of June 29, 2025 and December 29, 2024, respectively. Includes $50 million classified as current liabilities as of June 29, 2025.
(6)Ongoing fair value adjustment amounts are primarily recorded in Research and Development expense.
The Company's cash, cash equivalents and current marketable securities as of June 29, 2025 comprised:
(Dollars in Millions)
Carrying
Amount
Unrealized Gain
Estimated
Fair Value
Cash & Cash
Equivalents
Current
Marketable
Securities
Cash$3,246—3,2463,246—
U.S. reverse repurchase agreements8,040—8,0408,040—
Money market funds4,637—4,6374,637—
Time deposits(1)
863—863863—
   Subtotal 16,786—16,78616,786—
U.S. Gov’t securities1,673—1,6731,65914
Other sovereign securities193—1939499
Corporate debt securities228—22838190
   Subtotal available for sale debt(2)
$2,094—2,0941,791303
Total cash, cash equivalents and current marketable securities$18,880—18,88018,577303
(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.
As of the fiscal year ended December 29, 2024, the carrying amount of cash, cash equivalents and current marketable securities was approximately the same as the estimated fair value.
Fair value of government securities and obligations and corporate debt securities was estimated using quoted broker prices and significant other observable inputs.
The Company classifies all highly liquid investments with stated maturities of three months or less from date of purchase as cash equivalents and all highly liquid investments with stated maturities of greater than three months from the date of purchase as current marketable securities. Available for sale securities with stated maturities of greater than one year from the date of purchase are available to fund current operations and are classified as current marketable securities.
The contractual maturities of the available for sale securities as of June 29, 2025 are as follows:
(Dollars in Millions)Cost BasisFair Value
Due within one year$2,0752,075
Due after one year through five years1919
Due after five years through ten years——
Total debt securities$2,0942,094
Financial instruments not measured at fair value
The following financial liabilities are held at carrying amount on the consolidated balance sheet as of June 29, 2025:
(Dollars in Millions)
Carrying
Amount
Estimated
Fair Value
Financial Liabilities  
Current Debt$11,52611,495
Non-Current Debt  
2.95% Notes due 2027
950984
0.95% Notes due 2027
1,4781,410
4.50% Notes due 2027(1)
749757
2.90% Notes due 2028
1,4981,460
1.150% Notes due 2028 (750MM Euro 1.1704)
881843
4.55% Notes due 2028(1)
748762
4.80% Notes due 2029
1,1461,181
6.95% Notes due 2029
299334
2.70% Notes due 2029 (600MM Euro 1.1704)(1)
706708
1.30% Notes due 2030
1,6761,521
4.70% Notes due 2030(1)
9951,022
4.90% Notes due 2031
1,1461,189
3.20% Notes due 2032 (700MM Euro 1.1704)
821834
4.85% Notes due 2032(1)
1,2421,281
4.95% Notes due 2033
499517
4.375% Notes due 2033
853847
3.050% Notes due 2033 ( 700MM Euro 1.1704)(1)
822822
4.95% Notes due 2034

847880
1.650% Notes due 2035 (1.5B Euro 1.1704)
1,7561,528
5.00% Notes due 2035(1)
1,2441,282
3.35% Notes due 2036 (800MM Euro 1.1704)

937939
3.587% Notes due 2036
905902
5.95% Notes due 2037
9941,103
3.625% Notes due 2037
1,3961,334
3.350% Notes due 2037 (1.0B Euro 1.1704)(1)
1,1751,160
3.40% Notes due 2038
993857
5.85% Notes due 2038
697761
4.50% Notes due 2040
542523
2.10% Notes due 2040
885684
4.85% Notes due 2041
298291
4.50% Notes due 2043
496459
3.55% Notes due 2044 (1.0B Euro 1.1704)
1,1031,135
3.60% Notes due 2045 (700MM Euro 1.1704)(1)
819792
3.73% Notes due 2046
1,9791,592
3.75% Notes due 2047
863798
3.50% Notes due 2048
744567
2.25% Notes due 2050
851580
5.25% Notes due 2054

843837
3.70% Notes due 2055 (1.0B Euro 1.1704)(1)
1,1721,118
2.45% Notes due 2060
1,102694
Other8588
Total Non-Current Debt$39,23537,376
(1) In the fiscal first quarter of 2025, the Company issued senior unsecured notes for approximately $9.2 billion. The net proceeds from this offering were used to fund the Intra-Cellular Therapies, Inc. acquisition which closed on April 2, 2025, and for general corporate purposes.
The weighted average effective interest rate on non-current debt is 3.57%.
The excess of the carrying value over the estimated fair value of debt was $2.0 billion at December 29, 2024.
Fair value of the non-current debt was estimated using market prices, which were corroborated by quoted broker prices and significant other observable inputs.
The current debt balance as of June 29, 2025, includes $8.5 billion of commercial paper which has a weighted average interest rate of 4.28% and a weighted average maturity of approximately two months.