v3.25.3
Derivative instruments
 9 Months Ended
Sep. 30, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative instruments Derivative instruments
The Company is exposed to foreign currency exchange rate and interest rate risks related to its business operations. To reduce our risks related to such exposures, we use or have used certain derivative instruments, including foreign currency forward, foreign currency option, cross-currency swap, forward interest rate and interest rate swap contracts. We have designated certain of our derivatives as cash flow and fair value hedges; we also have derivatives not designated as hedges. We do not use derivatives for speculative trading purposes.
Cash flow hedges
We are exposed to possible changes in the values of certain anticipated foreign currency cash flows resulting from changes in foreign currency exchange rates primarily associated with our euro-denominated international product sales. The foreign currency exchange rate fluctuation exposure associated with cash inflows from our international product sales is partially offset by corresponding cash outflows from our international operating expenses. To further reduce our exposure, we enter into foreign currency forward contracts to hedge a portion of our projected international product sales up to a maximum of three years into the future; and at any given point in time, a higher percentage of nearer-term projected product sales is being hedged than in successive periods.
As of September 30, 2025 and December 31, 2024, we had outstanding foreign currency forward contracts with aggregate notional amounts of $7.7 billion and $7.2 billion, respectively. We have designated these foreign currency forward contracts, which are primarily euro based, as cash flow hedges. Accordingly, we record the unrealized gains and losses on these contracts in AOCI in the Condensed Consolidated Balance Sheets, and we reclassify them to Product sales in the Condensed Consolidated Statements of Income in the same periods during which the hedged transactions affect earnings.
To hedge our exposure to foreign currency exchange rate risk associated with certain of our long-term debt denominated in foreign currencies, we enter into cross-currency swap contracts. Under the terms of such contracts, we paid euros and pounds sterling and received U.S. dollars for the notional amounts at the inception of the contracts; and based on these notional amounts, we exchange interest payments at fixed rates over the terms of the contracts by paying U.S. dollars and receiving euros and pounds sterling. In addition, we will pay U.S. dollars to and receive euros and pounds sterling from the counterparties at the maturities of the contracts for these same notional amounts. The terms of these contracts correspond to the related hedged debt, thereby effectively converting the interest payments and principal repayment on the debt from euros and pounds sterling to U.S. dollars. We have designated these cross-currency swap contracts as cash flow hedges. Accordingly, the unrealized gains and losses on these contracts are recorded in AOCI in the Condensed Consolidated Balance Sheets and reclassified to Other income, net, in the Condensed Consolidated Statements of Income in the same periods during which the hedged debt affects earnings.
The notional amounts and interest rates of our cross-currency swaps as of September 30, 2025, were as follows (notional amounts in millions):
Foreign currencyU.S. dollars
Hedged notesNotional amountsInterest ratesNotional amountsInterest rates
2.00% 2026 euro Notes
€750 2.0 %$833 3.9 %
5.50% 2026 pound sterling Notes
£475 5.5 %$747 6.0 %
4.00% 2029 pound sterling Notes
£700 4.0 %$1,111 4.7 %
In connection with the anticipated issuance of long-term fixed-rate debt, we occasionally enter into forward interest rate contracts in order to hedge the variability in cash flows due to changes in the applicable U.S. Treasury rate between the time we enter into these contracts and the time the related debt is issued. Gains and losses on forward interest rate contracts, which are designated as cash flow hedges, are recognized in AOCI in the Condensed Consolidated Balance Sheets and are amortized into Interest expense, net, in the Condensed Consolidated Statements of Income over the terms of the associated debt issuances. Amounts recognized in connection with forward interest rate contracts during the nine months ended September 30, 2025 and 2024, and amounts expected to be recognized during the next 12 months are not material.
Unrealized gains and losses recognized in AOCI for our derivative instruments designated as cash flow hedges were as follows (in millions):
 Three months ended
September 30,		Nine months ended
September 30,
Derivatives in cash flow hedging relationships2025202420252024
Foreign currency forward contracts$123 $(238)$(592)$87 
Cross-currency swap contracts(50)80 196 50 
Total unrealized gains (losses)$73 $(158)$(396)$137 
Fair value hedges
To achieve a desired mix of fixed-rate and floating-rate debt, we enter into interest rate swap contracts that qualify for and are designated as fair value hedges. These interest rate swap contracts effectively convert fixed-rate coupons to floating-rate SOFR-based coupons over the terms of the related hedge contracts. As of September 30, 2025 and December 31, 2024, we had interest rate swap contracts with aggregate notional amounts of $6.2 billion and $6.7 billion respectively, that hedge certain portions of our long-term debt. During the nine months ended September 30, 2025 there was a reduction in the aggregate notional amount of these contracts due to the termination of swaps that occurred in connection with the repayment of the 3.125% 2025 Notes (see Note 9, Financing arrangements). In addition, we entered into $550 million of new interest rate swaps to hedge a portion of our 5.25% 2033 Notes, resulting in an interest rate of SOFR plus 1.7% on the $550 million hedged portion.
For interest rate swap contracts that qualify for and are designated as fair value hedges, we recognize in Interest expense, net, in the Condensed Consolidated Statements of Income the unrealized gain or loss on the derivative resulting from the change in fair value during the period, as well as the offsetting unrealized loss or gain of the hedged item resulting from the change in fair value during the period attributable to the hedged risk. If a hedging relationship involving an interest rate swap contract is terminated, the gain or loss realized on contract termination is recorded as an adjustment to the carrying value of the debt and amortized into Interest expense, net, over the remaining term of the previously hedged debt.
The hedged liabilities and related cumulative-basis adjustments for fair value hedges of those liabilities were recorded in the Condensed Consolidated Balance Sheets as follows (in millions):
Carrying amounts of hedged liabilities(1)
Cumulative amounts of fair value hedging adjustments related to the carrying amounts of the hedged liabilities(2)
Condensed Consolidated Balance Sheets locationsSeptember 30, 2025December 31, 2024September 30, 2025December 31, 2024
Current portion of long-term debt$1,266 $1,045 $16 $45 
Long-term debt$4,670 $5,152 $(175)$(388)
____________
(1)     Current portion of long-term debt includes $51 million and $56 million of carrying value with discontinued hedging relationships as of September 30, 2025 and December 31, 2024, respectively. Long-term debt includes $194 million and $232 million of carrying value with discontinued hedging relationships as of September 30, 2025 and December 31, 2024, respectively.
(2)    Current portion of long-term debt includes $51 million and $56 million of hedging adjustments on discontinued hedging relationships as of September 30, 2025 and December 31, 2024, respectively. Long-term debt includes $94 million and $132 million of hedging adjustments on discontinued hedging relationships as of September 30, 2025 and December 31, 2024, respectively.
Impact of hedging transactions
The following tables summarize the amounts recorded in income and expense line items and the effects thereon from fair value and cash flow hedging, including discontinued hedging relationships (in millions):
Three months ended September 30, 2025Nine months ended September 30, 2025
Product salesOther income, netInterest expense, netProduct salesOther income, netInterest expense, net
Total amounts recorded in income and (expense) line items presented in the Condensed Consolidated Statements of Income
$9,137 $2,080 $(685)$25,781 $3,204 $(2,102)
The effects of cash flow and fair value hedging:
(Losses) gains on cash flow hedging relationships reclassified out of AOCI:
Foreign currency forward contracts$(28)$— $— $40 $— $— 
Cross-currency swap contracts$— $(39)$— $— $216 $— 
(Losses) gains on fair value hedging relationships—interest rate swap agreements:
Hedged items(1)
$— $— $(27)$— $— $(184)
Derivatives designated as hedging instruments$— $— $40 $— $— $227 
Three months ended September 30, 2024Nine months ended September 30, 2024
Product salesOther income, netInterest expense, netProduct salesOther income, netInterest expense, net
Total amounts recorded in income and (expense) line items presented in the Condensed Consolidated Statements of Income
$8,151 $1,830 $(776)$23,310 $1,288 $(2,408)
The effects of cash flow and fair value hedging:
Gains on cash flow hedging relationships reclassified out of AOCI:
Foreign currency forward contracts$45 $— $— $151 $— $— 
Cross-currency swap contracts$— $121 $— $— $87 $— 
(Losses) gains on fair value hedging relationships—interest rate swap agreements:
Hedged items(1)
$— $— $(153)$— $— $(122)
Derivatives designated as hedging instruments$— $— $168 $— $— $176 
__________
(1)    Gains (losses) on hedged items do not exactly offset losses (gains) on the related designated hedging instruments due to amortization of the cumulative amounts of fair value hedging adjustments included in the carrying amount of the hedged debt for discontinued hedging relationships and the recognition of gains on terminated hedges when the corresponding hedged item was paid down in the period.
No portions of our cash flow hedge contracts were excluded from the assessment of hedge effectiveness. As of September 30, 2025, the amount of net losses on our foreign currency forward and cross-currency swap contracts expected to be reclassified out of AOCI and recognized into earnings during the next 12 months was not material.
Derivatives not designated as hedges
To reduce our exposure to foreign currency fluctuations in certain assets and liabilities denominated in foreign currencies, we enter into foreign currency forward contracts that are not designated as hedging transactions. Most of these exposures are hedged on a month-to-month basis. As of September 30, 2025 and December 31, 2024, the total notional amounts of these foreign currency forward contracts were $245 million and $148 million, respectively. Gains and losses recognized in earnings for our derivative instruments not designated as hedging instruments were not material for the three and nine months ended September 30, 2025 and 2024.
Fair values of derivatives
The fair values of derivatives included in the Condensed Consolidated Balance Sheets were as follows (in millions):
 Derivative assetsDerivative liabilities
September 30, 2025Condensed Consolidated
Balance Sheets locations		Fair valuesCondensed Consolidated
Balance Sheets locations		Fair values
Derivatives designated as hedging instruments:
Foreign currency forward contractsOther current assets/ Other noncurrent assets$93 
Accrued liabilities/ Other noncurrent liabilities
$261 
Cross-currency swap contractsOther current assets/ Other noncurrent assets48 
Accrued liabilities/ Other noncurrent liabilities
337 
Interest rate swap contractsOther current assets/ Other noncurrent assets1 
Accrued liabilities/ Other noncurrent liabilities
306 
Total derivatives designated as hedging instruments
142 904 
Total derivatives$142 $904 
 Derivative assetsDerivative liabilities
December 31, 2024Condensed Consolidated
Balance Sheets locations		Fair valuesCondensed Consolidated
Balance Sheets locations		Fair values
Derivatives designated as hedging instruments:
Foreign currency forward contractsOther current assets/ Other noncurrent assets$420 
Accrued liabilities/ Other noncurrent liabilities
$8 
Cross-currency swap contractsOther current assets/ Other noncurrent assets— 
Accrued liabilities/ Other noncurrent liabilities
483 
Interest rate swap contractsOther current assets/ Other noncurrent assets— 
Accrued liabilities/ Other noncurrent liabilities
531 
Total derivatives designated as hedging instruments
420 1,022 
Total derivatives$420 $1,022 
For additional information, see Note 11, Fair value measurement.
Our derivative contracts that were in liability positions as of September 30, 2025, contain certain credit-risk-related contingent provisions that would be triggered if (i) we were to undergo a change in control and (ii) our or the surviving entity’s creditworthiness deteriorates, which is generally defined as having either a credit rating that is below investment grade or a materially weaker creditworthiness after the change in control. If these events were to occur, the counterparties would have the right, but not the obligation, to close the contracts under early-termination provisions. In such circumstances, the counterparties could request immediate settlement of these contracts for amounts that approximate the then current fair values of the contracts. In addition, our derivative contracts are not subject to any type of master netting arrangement, and amounts due either to or from a counterparty under the contracts may be offset against other amounts due either to or from the same counterparty only if an event of default or termination, as defined, were to occur.
The cash flow effects of our derivative contracts in the Condensed Consolidated Statements of Cash Flows are primarily included in Net cash provided by operating activities, except for the settlement of notional amounts of cross-currency swaps, which are included in Net cash used in financing activities.