Anticipated gains (losses) cash flows hedges, estimated reclassification to earnings during next twelve months

  
liabilities due to changes in exchange rates. The changes in fair values of the cross-currency swap derivatives are recorded in AOCI with an immediate reclassification into earnings for the changes in fair values attributable to fluctuations in foreign currency exchange rates. The total notional values of derivatives that were designated as cash flow hedges for the Company’s foreign currency denominated assets and liabilities were $1,524 million and $1,994 million as of April 1, 2022 and December 31, 2021.The Company has entered into commodity futures contracts and other derivative instruments on various commodities to mitigate the price risk associated with forecasted purchases of materials used in our manufacturing process. These derivative instruments were designated as part of the Company’s commodity cash flow hedging program. The objective of this hedging program is to reduce the variability of cash flows associated with future purchases of certain commodities. The total notional value of derivatives that were designated and qualified for this program was $10 million as of December 31, 2021. As of April 1, 2022, we did not have any commodity futures contracts nor other derivative instruments on various commodities designated as a cash flow hedge. Our Company monitors our mix of short-term debt and long-term debt regularly. We manage our risk to interest rate fluctuations through the use of derivative financial instruments. From time to time, the Company enters into interest rate swap agreements and designates these instruments as part of the Company’s interest rate cash flow hedging program. The objective of this hedging program is to mitigate the risk of adverse changes in benchmark interest rates on the Company’s future interest payments. As of April 1, 2022 and December 31, 2021, we did not have any interest rate swaps designated as a cash flow hedge. The following table presents the pretax impact that changes in the fair values of derivatives designated as cash flow hedges had on other comprehensive income (“OCI”), AOCI and earnings (in millions):

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Gain (Loss)Recognized in OCI |  | Location of Gain (Loss) Recognized in Income | Gain (Loss) Reclassified from AOCI into Income |
| Three Months Ended April 1, 2022 |  |  |  |  |
| Foreign currency contracts | $ | 81  |  |  | Net operating revenues | $ | 8  |  |
| Foreign currency contracts | 6  |  |  | Cost of goods sold | 1  |  |
| Foreign currency contracts | —  |  |  | Interest expense | (1) |  |
| Foreign currency contracts | (5) |  |  | Other income (loss) — net | (11) |  |
|  |  |  |  |  |
|  |  |  |  |  |
| Total | $ | 82  |  |  |  | $ | (3) |  |
| Three Months Ended April 2, 2021 |  |  |  |  |
| Foreign currency contracts | $ | (23) |  |  | Net operating revenues | $ | (23) |  |
| Foreign currency contracts | (5) |  |  | Cost of goods sold | (1) |  |
| Foreign currency contracts | —  |  |  | Interest expense | (1) |  |
| Foreign currency contracts | 87  |  |  | Other income (loss) — net | 66  |  |
| Interest rate contracts | 121  |  |  | Interest expense | (5) |  |
|  |  |  |  |  |
| Total | $ | 180  |  |  |   | $ | 36  |  |

As of April 1, 2022, the Company estimates that it will reclassify into earnings during the next 12 months net gains of $93 million from the pretax amount recorded in AOCI as the anticipated cash flows occur.Fair Value Hedging StrategyThe Company uses interest rate swap agreements designated as fair value hedges to minimize exposure to changes in the fair value of fixed-rate debt that result from fluctuations in benchmark interest rates. The Company also uses cross-currency interest rate swaps to hedge the changes in the fair value of foreign currency denominated debt relating to fluctuations in foreign currency exchange rates and benchmark interest rates. The changes in the fair values of derivatives designated as fair value hedges and the offsetting changes in the fair values of the hedged items are recognized in earnings. As a result, any difference is reflected in earnings as ineffectiveness. When a derivative is no longer designated as a fair value hedge for any reason, including termination and maturity, the remaining unamortized difference between the carrying value of the hedged item at that time and the face value of the hedged item is amortized to earnings over the remaining life of the hedged item, or immediately if the hedged item has matured or has been extinguished. The total notional values of derivatives that were designated and qualified as fair value hedges of this type were $11,717 million and $12,113 million as of April 1, 2022 and December 31, 2021, respectively.12
