v3.26.3
Derivatives and Hedging Activities
 9 Months Ended
Sep. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Hedging Activities 8.          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 net
investment or fair value hedges. We do not enter into derivative transactions for speculative or trading purposes. Derivative
financial instruments that are not designated as hedges were immaterial as of September 30, 2026 and December 31, 2025.
The following table summarizes the fair value of outstanding cross-currency swaps as of September 30, 2026 and
December 31, 2025 (dollars in millions):
Derivative Assets
Derivative Liabilities
Balance Sheet
Line Item
Fair Value
Balance Sheet
Line Item
Fair Value
September 30,
2026
December 31,
2025
September 30,
2026
December 31,
2025
Derivatives designated as hedging
instruments (1)
Fair Value Hedge
Other current assets
$3
$2
Other current liabilities
$—
$1
Fair Value Hedge
Other assets
1
—
Other liabilities
34
51
Subtotal
4
2
34
52
Net Investment Hedge
Other current assets
82
50
Other current liabilities
—
—
Net Investment Hedge
Other assets
9
11
Other liabilities
327
240
Subtotal
91
61
327
240
Total Derivatives designated as
Hedging
$95
$63
$361
$292
________________________________________________________________________________________________________________________________________
(1)As of September 30, 2026 and December 31, 2025, the gross notional amount of currency swaps designated as fair value hedges was $450 million and
$473 million, respectively; the gross notional amount of currency swaps designated as net investment hedges was $6.0 billion and $3.9 billion,
respectively. The notional amounts of our cross-currency swaps have been translated to U.S. Dollars at the foreign currency rates in effect at
September 30, 2026, and December 31, 2025.
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., a Euro functional currency subsidiary (see Note 10 – Long-Term Debt and Short-Term
Borrowings). As of September 30, 2026 and December 31, 2025, the total principal outstanding balance of the loans was
$429 million, $24 million of which was current, and $447 million, $24 million of which was current, respectively. The swaps
have an aggregate notional value of $429 million and $447 million as of September 30, 2026 and December 31, 2025,
respectively, and will mature on July 10, 2028.
We also utilize additional cross-currency swaps designated as fair value hedges to manage foreign currency exposure
related to intercompany loans. The total notional amount of this portfolio as of September 30, 2026 and December 31, 2025 was
$21 million and $26 million, respectively.
The cross-currency swaps designated in these fair value hedging relationships are accounted for using the spot method,
with changes in the fair value of the contract attributable to the changes in spot rates recorded within Operating, administrative,
and other in the consolidated statements of operations. The company has elected to exclude the changes in the fair value
attributable to the difference between the spot price and the forward price, as well as any cross-currency basis spread (the
“Excluded Fair Value Hedge Components”) from the assessment of hedge effectiveness. The value of the Excluded Fair Value
Hedge Components was not significant to the consolidated financial statements in either the current fiscal period or prior fiscal
period. The changes in fair value attributable to the Excluded Fair Value Hedge Components are recorded in accumulated other
comprehensive loss (AOCL) and are recognized in interest expense in the consolidated statements of operations on a systematic
and rational basis through the swap accrual over the life of the hedging instrument.
The gains and losses on outstanding fair value hedges resulting from the change in foreign currency rates for the three
and nine months ended September 30, 2026 were gains of $6 million and $17 million, respectively, and recorded in Operating,
administrative, and other on the consolidated statements of operations. These were offset by foreign currency transaction gains
and losses on the related hedged loans resulting in no net loss for the three and nine months ended September 30, 2026. Related
to these cross-currency swaps, we recognized net gains of $1 million and $4 million, respectively, in interest income on the
consolidated statements of operations for the three and nine months ended September 30, 2026.
The gains and losses on outstanding fair value hedges 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. Related
to these cross-currency swaps, we recognized net gains of $2 million and $5 million in interest income on the consolidated
statements of operations for the three and nine months ended September 30, 2025, respectively.
Net Investment Hedges
The company has entered into cross-currency swap contracts to manage our foreign currency exposures to net
investments of subsidiaries with local functional currencies that differ from their parent subsidiaries. These contracts are
designated as net investment hedges at the date of contract inception, in accordance with the appropriate accounting guidance.
These contracts are accounted for using the spot method with changes in the fair value of the contracts attributable to changes in
spot rates recorded within foreign currency translation (loss) gain as a component of AOCL, where it will remain until the
hedged net investments are sold or substantially liquidated. The company has elected to exclude the changes in the fair value
attributable to time value and spot-forward rate differences (the “Excluded Net Investment Hedge Components”) from the
assessment of the hedge effectiveness. The changes in fair value attributable to the Excluded Net Investment Hedge
Components on Cross Currency Swap Contracts are recognized in interest expense, net of interest income in the consolidated
statements of operations on a systematic and rational basis through the swap accrual over the life of the hedging instrument. As
of September 30, 2026 and December 31, 2025, the total notional amount of these swaps was $6.0 billion and $3.9 billion,
respectively. The swaps will mature between 2028 and 2045.
The following table summarizes the gains and losses recognized within AOCL and net income related to the cross-
currency swap contracts designated as net investment hedges for the three and nine months ended September 30, 2026 and 2025
(dollars in millions):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2026
2025
2026
2025
Derivative instruments designated as net investment hedges:
Gains (losses) recognized in AOCL on cross-currency swaps related to changes
included in the assessment of hedge effectiveness
$37
$(36)
$124
$(169)
Gains (losses) recognized in AOCL on cross-currency swaps related to changes
excluded from the assessment of hedge effectiveness
(60)
(45)
(194)
(208)
Total gains (losses) recognized in AOCL on cross-currency swaps
$(23)
$(81)
$(70)
$(377)
Net gains recognized in income (amount excluded from effectiveness testing):
Interest income
$22
$14
$58
$32
Concentrations of Credit Risk
The company is exposed to the risk of credit loss in the event of nonperformance by counterparties to derivative
contracts. Counterparties to our derivative contracts are major financial institutions with whom we have negotiated derivatives
agreements (International Swaps and Derivatives Association, Inc., or ISDA, master agreements) and credit support annex
(CSA) agreements which provide rules for collateral exchange.
Certain of these CSA agreements contain date and exposure thresholds after which either we or our counterparties may
be required to hold or post collateral based upon changes in outstanding positions. At both September 30, 2026 and
December 31, 2025, we did not hold any collateral. At September 30, 2026, we posted $100 million of collateral related to
derivative contracts under collateral exchange agreements, which were recorded as Other current assets in our consolidated
balance sheets, and as a cash outflow from investing activities in the Consolidated Statements of Cash Flows. At December 31,
2025, we did not post collateral. We do not offset fair value amounts recognized for derivative instruments and fair value
amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral arising from derivative
instruments recognized at fair value.
While we may be exposed to credit losses due to the nonperformance of our counterparties, we consider the risk
remote and do not expect that any such nonperformance would result in a significant impact on our results of operations or
financial condition due to our diversified pool of counterparties. In addition to the above, the ISDA master agreements contain
master netting provisions providing certain legal rights and abilities to offset exposures across trades with each counterparty.
Notwithstanding any such rights, the company presents derivative balances on a gross basis in the consolidated balance sheets.