XML 205 R15.htm IDEA: XBRL DOCUMENT v3.25.3
Derivatives and Hedging Activities
 9 Months Ended
Sep. 30, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Hedging Activities Derivatives and Hedging Activities
We use fixed to fixed and float to float cross-currency swaps to hedge our exposure to changes in foreign exchange rates on certain foreign investments as well as foreign currency denominated loans. These swaps are designated as either fair value or net investment hedges. Derivative financial instruments that are not designated as hedges were immaterial as of September 30, 2025 and December 31, 2024.
We are exposed to credit risk in the event of nonperformance of counterparties, and we manage our exposure to credit risk by selecting major global banks and financial institutions as counterparties and monitoring their credit ratings on an on-going basis. We do not enter into derivative transactions for trading or speculative purposes. Certain of these contracts are subject to a credit support annex (CSA) establishing thresholds for posting collateral at certain future dates. There are currently no requirements for the company to post collateral.
None of our derivative transactions are subject to master netting arrangements that allow net settlement of contracts with the same counterparties.
The following table summarizes the fair value of outstanding cross-currency swaps as of September 30, 2025 and December 31, 2024 (dollars in millions):
Derivative AssetsDerivative Liabilities
Balance Sheet
Line Item
Fair Value
Balance Sheet
Line Item
Fair Value
September 30, 2025December 31, 2024September 30, 2025December 31, 2024
Derivatives designated as hedging instruments (1)
Fair Value HedgeOther current assets$3 $8 Other current liabilities$1 $— 
Fair Value Hedge
Other assets
1 12 Other liabilities53 — 
Subtotal4 20 54 — 
Net Investment HedgeOther current assets45 18 Other current liabilities— — 
Net Investment Hedge
Other assets
1 5 Other liabilities400 — 
Subtotal46 23 400 — 
Total Derivatives designated as Hedging$50 $43 $454 $— 
________________________________________________________________________________________________________________________________________
(1)As of September 30, 2025 and December 31, 2024, the gross notional amount of currency swaps designated as fair value hedges was $479 million and $346 million, respectively; and the gross notional amount of currency swaps designated as net investment hedges was $3.7 billion and $1.0 billion, respectively.
Fair value hedges
On July 10, 2023 and March 14, 2025, we entered into cross-currency swaps, designated as fair value hedges, to manage foreign currency exposure from the Tranche A (USD) Term Loans and Incremental USD Term Loans entered into by Relam Amsterdam Holdings B.V., which has a Euro functional currency (see Note 10 – Long-Term Debt and Short-Term Borrowings). As of September 30, 2025 and December 31, 2024, the total principal outstanding balance of the loans was $453 million, $24 million of which was current, and $346 million, $17 million of which was current, respectively. The swaps have an aggregate notional value of $453 million and $346 million as of September 30, 2025 and December 31, 2024, respectively, and will mature on July 10, 2028.
We also entered into two additional cross-currency swaps designated as fair value hedges to manage foreign currency exposure related to intercompany loans. The total notional amount of the swaps as of September 30, 2025 was $26 million.
We measure the effectiveness of fair value hedges on a spot-to-spot basis. Accordingly, the spot-to-spot change in the derivative fair values are recorded in the consolidated statements of operations. The fair value hedges offset the spot-to-spot change in the underlying loans, and as such, these hedges are deemed highly effective.
The gains and losses on the fair value hedges outstanding resulting from the change in foreign currency rates for the three and nine months ended September 30, 2025 were gains of $1 million and losses of $49 million, respectively, and recorded in operating, administrative, and other on the consolidated statements of operations. These losses were offset by foreign currency transaction gains on the hedged loans resulting in no net loss for the three and nine months ended September 30, 2025. Additionally, gains of $2 million and $5 million were reclassified from accumulated other comprehensive loss (AOCL) and recognized in interest expense, net of interest income on the consolidated statements of operations for the three and nine months ended September 30, 2025, respectively. Gains and losses for the three and nine months ended September 30, 2024 were immaterial.
Net investment hedges
During the third quarter of 2025 and during 2024, we entered into cross-currency swaps, designated as net investment hedges, to manage our foreign currency exposure to net investments of a USD subsidiary’s investment in Japanese Yen and Euro functional currency foreign subsidiaries. As of September 30, 2025 and December 31, 2024, the total notional amount of these swaps was $1.2 billion and $1.0 billion, respectively. The swaps will mature between 2026 and 2034.
During the second quarter of 2025, a GBP denominated subsidiary of the company entered cross-currency swap agreements, designated as net investment hedges, to manage its foreign currency exposure to a EUR denominated subsidiary. The total notional amount of the swaps was £1.9 billion, £0.7 billion of which was scheduled to mature on February 15, 2040, and £1.2 billion of which was scheduled to mature on February 15, 2045. We subsequently amended the critical terms of the swaps to extend the maturity dates to August 15, 2040 and August 15, 2045.
The following table summarizes the impact of the outstanding net investment hedges in AOCL and the pre-tax impact on the consolidated statement of operations for the three and nine months ended September 30, 2025 (dollars in millions):
Three Months Ended September 30, 2025Nine Months Ended September 30, 2025
Derivative instruments designated as net investment hedges:
Losses recognized in AOCL on cross-currency swaps
$(81)$(377)
Gains recognized in income (amount excluded from effectiveness testing):
Interest expense, net of interest income$(14)$(32)
The impact of the outstanding derivatives in AOCL and the pre-tax impact to the consolidated statement of operations for the three and nine months ended September 30, 2024 was not material.