v3.26.1
Derivatives
 6 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives Risk Management and Financial Instruments
We are exposed to market risks arising from adverse changes in interest rates, FX rates, and commodity prices. We manage these risks through a variety of strategies, including the use of interest rate contracts, cross-currency interest rate contracts, FX forward contracts, commodity forward, future, swap, and option contracts, supplier pricing agreements, and other non-derivative financial instruments. We do not hold or issue derivative financial instruments for trading or speculative purposes.
All derivative instruments are recorded on a gross basis, including those subject to master netting arrangements.
We formally designate and account for certain interest rate contracts and FX forward contracts that meet established accounting criteria under U.S. GAAP as cash flow hedges. For such contracts, the effective portion of the gain or loss on the derivative instruments is recorded, net of applicable taxes, in AOCI. When net income is affected by the variability of the underlying transaction, the applicable offsetting amount of the gain or loss from the derivative instrument deferred in AOCI is reclassified to net income. Cash flows from derivative instruments designated in a qualifying hedging relationship are classified in the same category as the cash flows from the hedged items.
We also formally designate certain of our foreign-denominated debt instruments that meet the established accounting criteria under U.S. GAAP as net investment hedges. For such designated instruments, the effective portion of the FX translation gains or losses on the foreign-denominated debt is recorded in foreign currency translation adjustments in AOCI, and will remain in AOCI until the net investment in the foreign operation is sold or otherwise disposed of. Any ineffective portion of the hedge is recognized in earnings in the period in which it arises. We use the spot method to assess the effectiveness of our net investment hedges.
If a cash flow hedge or net investment hedge were to cease to qualify for hedge accounting, or were terminated, the derivatives would continue to be carried on the balance sheet at fair value until settled, and hedge accounting would be discontinued prospectively. If the underlying hedged transaction ceases to exist, any associated amounts reported in AOCI would be reclassified to earnings at that time.
For derivatives that are not designated or for which the designated hedging relationship is discontinued, the gain or loss on the instrument is recognized in earnings in the period of change.
We have exposure to credit losses from derivative instruments in an asset position in the event of nonperformance by the counterparties to the agreements. Historically, we have not experienced material credit losses as a result of counterparty nonperformance. We select and periodically review counterparties based on credit ratings, limit our exposure to a single counterparty under defined guidelines, and monitor the market position of the programs upon execution of a hedging transaction and at least on a quarterly basis.
INTEREST RATE RISK
Economic Hedges
We are exposed to interest rate risk related to our borrowing arrangements and obligations. We enter into interest rate contracts to provide predictability in our overall cost structure and to manage the balance of fixed-rate and variable-rate debt. We primarily enter into receive-fixed, pay-variable and receive-variable, pay-fixed swaps, and swaption contracts. A natural hedging relationship exists in which changes in the fair value of the instruments act as an economic offset to changes in the fair value of the underlying items. Changes in the fair value of these instruments are recorded in earnings throughout the term of the derivative instrument and are generally reported in Interest expense, net in the unaudited Condensed Consolidated Statements of Income. As of June 30, 2026, economic interest rate derivative instruments have maturities ranging from September 2031 to November 2046.
Cash Flow Hedges
From time to time, we designate certain interest rate contracts as cash flow hedges in order to manage the exposures resulting from changes in interest rates as described above. In the fourth quarter of 2025 and the first quarter of 2026, we entered into forward starting swaps with an aggregate notional of approximately $3.5 billion and designated them as cash flow hedges. In March 2026, we terminated these contracts and issued the related Maple Notes, as described in Note 3. Upon termination, we received approximately $70 million to settle the contracts with the counterparties, which was recorded to accumulated other comprehensive income and will be amortized to interest expense over the respective terms of the Maple Notes. We had no designated interest rate contracts outstanding as of June 30, 2026.
FOREIGN EXCHANGE RISK
We are exposed to FX risk in our foreign subsidiaries and with certain counterparties in foreign jurisdictions, which may transact in currencies that are different from the functional currencies of our legal entities. Additionally, the balance sheets of these subsidiaries are subject to exposure from movements in exchange rates.
Economic Hedges
We hold FX forward contracts and cross-currency interest rate contracts to economically manage the balance sheet exposures resulting from changes in the FX rates described above. The intent of these FX contracts is to minimize the impact of FX risk associated with balance sheet positions not in local currency. In these cases, a hedging relationship exists in which changes in the fair value of the instruments act as an economic offset to changes in the fair value of the underlying items.
Changes in the fair value of these instruments are recorded in earnings throughout the term of the derivative instrument and are reported in Other expense (income) in the unaudited Condensed Consolidated Statements of Income as the associated risk. As of June 30, 2026, these FX contracts have maturities ranging from July 2026 to February 2034.
Additionally, in order to complete the JDE Peet's Acquisition on April 1, 2026, we had significant Euro-denominated cash outflows, as described in Note 2. We entered into FX forward contracts in 2025 and 2026 to reduce our exposure to exchange rate fluctuations associated with the acquisition consideration and related financing. As of June 30, 2026, all of these contracts were settled.
Cash Flow Hedges
We designate certain FX forward contracts as cash flow hedges in order to manage the exposures resulting from changes in the FX rates described above. These designated FX forward contracts relate to forecasted inventory purchases in U.S. dollars of our foreign subsidiaries. The intent of these FX contracts is to provide predictability in our overall cost structure. As of June 30, 2026, these FX contracts have maturities ranging from July 2026 to October 2027.
Net Investment Hedges
We designate certain of our Euro-denominated debt instruments as net investment hedges in order to manage the exposure of our investments in certain of our subsidiaries resulting from changes in the FX rates described above. The intent of these hedges is to offset the impact of changes in the FX rate on our consolidated financial statements. During the second quarter of 2026, we designated certain of our Euro Maple Notes, which have maturities from 2028 to 2035, as well as borrowings under our Delayed Draw Term Loan Agreement, as net investment hedges of our investment in a Euro functional currency subsidiary.
As of June 30, 2026, the notional amount of our Euro-denominated debt designated as net investment hedges was $6,601 million. We recognized $69 million of gains in other comprehensive income related to these hedges during the second quarter and first six months of 2026. We did not reclassify any gains or losses related to net investment hedges from AOCI into the unaudited Condensed Consolidated Statements of Income or record any ineffectiveness during the periods presented.
COMMODITY PRICE RISK
Economic Hedges
We centrally manage the exposure to volatility in the prices of certain commodities used in our production process and transportation through various derivative contracts. We generally hold some combination of future, swap, and option contracts that economically hedge certain risks. In these cases, a hedging relationship exists in which changes in the fair value of the instruments act as an economic offset to changes in the fair value of the underlying items or as an offset to certain costs of production. Changes in the fair value of these instruments are recorded in earnings throughout the term of the derivative instrument and are reported in the same line item of the unaudited Condensed Consolidated Statements of Income as the hedged transaction. Unrealized gains and losses are recognized as a component of unallocated corporate costs until our reportable segments are affected by the completion of the underlying transaction, at which time the gain or loss is reflected as a component of the respective segment's income from operations. As of June 30, 2026, these commodity contracts have maturities ranging from July 2026 to January 2028.
NOTIONAL AMOUNTS OF DERIVATIVE INSTRUMENTS
The following table presents the notional amounts of our outstanding derivative instruments by type:
(in millions)June 30, 2026December 31, 2025
Interest rate contracts
Pay-variable interest rate swaps, not designated as hedging instruments$2,014 $— 
Forward starting swaps, not designated as hedging instruments— 2,300 
Forward starting swaps, designated as cash flow hedges— 1,500 
FX contracts
Forward contracts, not designated as hedging instruments3,796 12,436 
Forward contracts, designated as cash flow hedges1,351 597 
Cross-currency pay-fixed interest rate swaps, not designated as hedging instruments1,252 — 
Commodity contracts, not designated as hedging instruments(1)
1,102 595 
(1)Notional value for commodity contracts is calculated as the expected volume times strike price per unit on a gross basis.
FAIR VALUE OF DERIVATIVE INSTRUMENTS
The fair values of interest rate contracts, FX forward contracts, cross-currency interest rate contracts, and commodity contracts are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. The fair values of commodity contracts are valued using the market approach based on observable market transactions, primarily underlying commodities futures or physical index prices, at the reporting date. Interest rate contracts are valued using models based primarily on readily observable market parameters, such as SOFR and EURIBOR forward rates, for all substantial terms of our contracts and credit risk of the counterparties. FX forward contracts are valued using quoted FX forward rates at the reporting date. Therefore, we have categorized these contracts as Level 2.
Not Designated as Hedging Instruments
The following table summarizes the location of the fair value of our derivative instruments which are not designated as hedging instruments within the unaudited Condensed Consolidated Balance Sheets. All such instruments are considered Level 2 within the fair value hierarchy.
(in millions)Balance Sheet LocationJune 30, 2026December 31, 2025
Assets:
FX contractsPrepaid expenses and other current assets$63 $5 
Cross-currency interest rate contractsPrepaid expenses and other current assets9 — 
Commodity contractsPrepaid expenses and other current assets102 47 
Interest rate contractsOther non-current assets1 — 
Commodity contractsOther non-current assets9 3 
Liabilities:
Interest rate contractsOther current liabilities21 16 
FX contractsOther current liabilities65 38 
Cross-currency interest rate contractsOther current liabilities33 — 
Commodity contractsOther current liabilities37 9 
Interest rate contractsOther non-current liabilities379 381 
Cross-currency interest rate contractsOther non-current liabilities30 — 
Commodity contractsOther non-current liabilities5 23 
Designated as Hedging Instruments
The following table summarizes the location of the fair value of our derivative instruments which are designated as hedging instruments within the unaudited Condensed Consolidated Balance Sheets. All such instruments are considered Level 2 within the fair value hierarchy.
(in millions)Balance Sheet LocationJune 30, 2026December 31, 2025
Assets:
FX contractsPrepaid expenses and other current assets$11 $2 
FX contractsOther non-current assets14 1 
Interest rate contractsOther non-current assets— 37 
Liabilities:
FX contractsOther current liabilities8 16 
Interest rate contractsOther current liabilities— 2 
IMPACT OF DERIVATIVE INSTRUMENTS NOT DESIGNATED AS HEDGING INSTRUMENTS
The following table presents the amount of losses (gains), net, recognized in the unaudited Condensed Consolidated Statements of Income related to derivative instruments not designated as hedging instruments under U.S. GAAP during the periods presented. Amounts include both realized and unrealized gains and losses.
Income Statement LocationSecond QuarterFirst Six Months
(in millions)2026202520262025
Interest rate contractsInterest expense, net$(5)$(2)$(4)$(34)
FX contractsCost of sales(1)(2)— (3)
FX contractsOther (income) expense, net(28)11 86 14 
Cross-currency interest rate contractsOther (income) expense, net(9)— (9)— 
Commodity contractsCost of sales(28)(10)(73)(27)
Commodity contractsSG&A expenses11 2 (58)— 
IMPACT OF CASH FLOW HEDGES
The following table presents the amount of net (gains) losses reclassified from AOCI into the unaudited Condensed Consolidated Statements of Income related to derivative instruments designated as cash flow hedging instruments:
Income Statement LocationSecond QuarterFirst Six Months
(in millions)2026202520262025
Interest rate contractsInterest expense, net$(6)$(4)$(9)$(7)
FX contractsCost of sales6 (8)9 (13)
We expect to reclassify approximately $22 million of pre-tax net gains and $16 million of pre-tax net gains from AOCI into net income during the next twelve months related to interest rate contracts and FX contracts, respectively.