filings.toolsItem 7A. Quantitative and Qualitative Disclosures About Market Risk
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
MARKET RISK
The Company is exposed to certain market risks that exist as part of its ongoing business operations, including fluctuations in currency exchange rates, price volatility for certain commodities and changes in interest rates. The Company does not engage in speculative or leveraged transactions and does not hold or issue financial instruments for trading purposes.
Interest Rate Risk
The Company’s exposure to market risk for changes in interest rates relates primarily to the fair value of the Company’s fixed rate debt. The following table presents the Company’s debt for which fair value is subject to changing market interest rates:
| 0.90% Notes Due | 1.95% Notes Due | 6.25% Notes Due | 4.88% Notes Due thru | 3.375% Notes Due | 1.75% Euro Notes Due | 3.50% Notes Due | 3.00% Euro Notes Due | 4.875% Notes Due | 3.9% Notes Due | |||||||||||||||||||||||||||||||
| In millions | Feb 25, 2017 | Mar 1, 2019 | Apr 1, 2019 | Dec 31, 2020 | Sep 15, 2021 | May 20, 2022 | Mar 1, 2024 | May 19, 2034 | Sep 15, 2041 | Sep 1, 2042 | ||||||||||||||||||||||||||||||
| As of December 31, 2014: | ||||||||||||||||||||||||||||||||||||||||
| Estimated cash outflow by year of principal maturity | ||||||||||||||||||||||||||||||||||||||||
| 2015 | $ | — | $ | — | $ | — | $ | 1 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||
| 2016 | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| 2017 | 650 | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| 2018 | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| 2019 | — | 650 | 700 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| 2020 and thereafter | — | — | — | 4 | 350 | 605 | 700 | 605 | 650 | 1,100 | ||||||||||||||||||||||||||||||
| Estimated fair value | 648 | 651 | 817 | 6 | 369 | 640 | 735 | 702 | 746 | 1,110 | ||||||||||||||||||||||||||||||
| Carrying value | 649 | 649 | 700 | 5 | 349 | 600 | 698 | 594 | 641 | 1,090 | ||||||||||||||||||||||||||||||
| As of December 31, 2013: | ||||||||||||||||||||||||||||||||||||||||
| Total estimated cash outflow | $ | — | $ | — | $ | 700 | $ | 8 | $ | 350 | $ | — | $ | — | $ | — | $ | 650 | $ | 1,100 | ||||||||||||||||||||
| Estimated fair value | — | — | 834 | 8 | 350 | — | — | — | 649 | 944 | ||||||||||||||||||||||||||||||
| Carrying value | — | — | 700 | 7 | 349 | — | — | — | 641 | 1,090 |
Foreign Currency Risk
The Company operates in the U.S. and 56 foreign countries. The initial funding for the foreign manufacturing operations was provided primarily through the permanent investment of equity capital from the U.S. parent company. The Company’s products are primarily manufactured and sold within the same country. Therefore, the Company's manufacturing operations do not have significant assets or liabilities denominated in currencies other than their functional currencies.
In October 2007, the Company, through a wholly-owned European subsidiary, issued €750 million of 5.25% Euro notes due October 1, 2014, which were paid on the due date. In addition, in May 2014, the Company issued €500 million of 1.75% Euro notes due May 20, 2022 and €500 million of 3.0% Euro notes due May 19, 2034. The Company designated the €1.0 billion of Euro notes as a hedge of a portion of its net investment in Euro-denominated foreign operations to reduce foreign currency risk associated with the investment in these operations. Changes in the value of this debt resulting from fluctuations in the Euro to U.S. Dollar exchange rate have been recorded as foreign currency translation adjustments within Accumulated other comprehensive income. The unrealized gain recorded in Accumulated other comprehensive income related to the net investment hedge was $158 million for the year ended December 31, 2014.
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