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DERIVATIVE FINANCIAL INSTRUMENTS | 9 Months Ended
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Sep. 30, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE FINANCIAL INSTRUMENTS | DERIVATIVE FINANCIAL INSTRUMENTS Our operations in foreign countries expose us to market risk associated with foreign currency exchange rate fluctuations between the U.S. dollar and various foreign currencies, primarily the Euro. To manage this risk, we hedge a portion of our foreign currency exposures related to outstanding monetary assets and liabilities as well as forecasted product sales using foreign currency exchange forward contracts. In general, the market risk related to our operations is offset by corresponding gains and losses from our derivative instruments. By working only with major banks and closely monitoring current market conditions, we seek to limit the credit risk that counterparties to these contracts may be unable to perform. We enter into contracts that permit net settlement at maturity. In addition, our overall risk of loss in the event of counterparty default is limited to the amount of any net unrealized gains on outstanding contracts (i.e., including the impact of offsetting unrealized losses). We do not enter into derivative contracts for trading purposes. The derivative instruments we use to hedge our exposures for certain monetary assets and liabilities that are denominated in a non-functional currency are not designated as hedges. The derivative instruments we use to hedge our exposures for forecasted product sales are designated as cash flow hedges and have maturities of 18 months or less. We held foreign currency exchange contracts with outstanding notional amounts of $3.3 billion and $2.9 billion as of September 30, 2025 and December 31, 2024, respectively. While all our derivative contracts allow us the right to offset assets and liabilities, we have presented amounts on our Condensed Consolidated Balance Sheets on a gross basis. Further, our contracts generally do not require financial collateral. The following table summarizes the classification and fair values of derivative instruments, including the potential effect of offsetting:
|  | September 30, 2025
(in millions) |  | Prepaid and other current assets |  | Other long-term assets |  | Total Derivative Assets |  | Other current liabilities |  | Other long-term liabilities |  | Total Derivative Liabilities
Foreign currency exchange contracts designated as hedges |  | $ | 10 |  |  | $ | 2 |  |  | $ | 12 |  |  | $ | 84 |  |  | $ | 2 |  |  | $ | 85 |
Foreign currency exchange contracts not designated as hedges |  | 19 |  |  | — |  |  | 19 |  |  | 6 |  |  | — |  |  | 6 |
Total derivatives presented gross on the Condensed Consolidated Balance Sheets |  |  |  |  |  | $ | 31 |  |  |  |  |  |  | $ | 92 |
Total derivatives not offset on the Condensed Consolidated Balance Sheets |  |  |  |  |  | (29) |  |  |  |  |  |  | (29) |
Net amount (legal offset) |  |  |  |  |  | $ | 2 |  |  |  |  |  |  | $ | 63 |
|  | December 31, 2024
(in millions) |  | Prepaid and other current assets |  | Other long-term assets |  | Total Derivative Assets |  | Other current liabilities |  | Other long-term liabilities |  | Total Derivative Liabilities
Foreign currency exchange contracts designated as hedges |  | $ | 90 |  |  | $ | 10 |  |  | $ | 100 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Foreign currency exchange contracts not designated as hedges |  | 28 |  |  | — |  |  | 28 |  |  | 3 |  |  | — |  |  | 3 |
Total derivatives presented gross on the Condensed Consolidated Balance Sheets |  |  |  |  |  | $ | 128 |  |  |  |  |  |  | $ | 3 |
Total derivatives not offset on the Condensed Consolidated Balance Sheets |  |  |  |  |  | (3) |  |  |  |  |  |  | (3) |
Net amount (legal offset) |  |  |  |  |  | $ | 125 |  |  |  |  |  |  | $ | — |
The following table summarizes the effect of our derivative contracts on our Condensed Consolidated Financial Statements:
|  | Three Months Ended |  | Nine Months Ended
|  | September 30, |  | September 30,
(in millions) |  | 2025 |  | 2024 |  | 2025 |  | 2024
Derivatives designated as hedges: |  |  |  |  |  |  |  |
Net gain (loss) recognized in Accumulated other comprehensive income |  | $ | 44 |  |  | $ | (70) |  |  | $ | (172) |  |  | $ | 23 |
Net (loss) gain reclassified from Accumulated other comprehensive income into Product sales |  | $ | (15) |  |  | $ | 14 |  |  | $ | 25 |  |  | $ | 19 |
Derivatives not designated as hedges: |  |  |  |  |  |  |  |
Net gain (loss) recognized in Other (income) expense, net |  | $ | 22 |  |  | $ | (2) |  |  | $ | (6) |  |  | $ | 51 |
Approximately $81 million of net gains related to the hedged forecasted transactions reported in Accumulated other comprehensive income as of September 30, 2025 are expected to be reclassified to Product sales within 12 months. There were no discontinuances of cash flow hedges for the three and nine months ended September 30, 2025 and 2024. The cash flow effects of our derivative contracts for the three and nine months ended September 30, 2025 and 2024 were included within Net cash provided by operating activities on our Condensed Consolidated Statements of Cash Flows.

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