The Company’s financial instruments include cash and cash equivalents, marketable securities and accounts receivable. Due to the short-term nature of these instruments, their book value approximates their fair value. The Company’s financial instruments may also include long-term debt, investments in equity securities, interest rate and cross-currency swaps, commodity derivative contracts and foreign currency derivative contracts. All derivative contracts are placed with counterparties that have an S&P, or equivalent, investment grade credit rating at the time of the contracts’ placement. An adjustment for non-performance risk is considered in the estimate of fair value in derivative assets based on the counterparty credit default swap (“CDS”) rate. When the Company is in a net derivative liability position, the non-

performance risk adjustment is based on its CDS rate. At March 31, 2024 and December 31, 2023, the Company had no derivative contracts that contained credit-risk-related contingent features.

The Company, at times, uses certain commodity derivative contracts to protect against commodity price changes related to forecasted raw material and component purchases. At March 31, 2024 and December 31, 2023, the Company had no material commodity derivative contracts.

The Company manages its interest rate risk by balancing its exposure to fixed and variable rates while attempting to optimize its interest costs. The Company, at times, selectively uses interest rate swaps and options to reduce market value risk associated with changes in interest rates. At March 31, 2024 and December 31, 2023, the Company had no outstanding interest rate swaps or options.

The Company uses foreign currency forward and option contracts to protect against exchange rate movements for forecasted cash flows, including capital expenditures, purchases, operating expenses or sales transactions designated in currencies other than the functional currency of the operating unit. Foreign currency derivative contracts require the Company, at a future date, to either buy or sell foreign currency in exchange for the operating units’ local currency.

Effectiveness for cash flow hedges is assessed at the inception of the hedging relationship and quarterly, thereafter. Gains and losses arising from these contracts that are included in the assessment of effectiveness are deferred into accumulated other comprehensive income (loss) (“AOCI”) and reclassified into income as the underlying operating transactions are recognized. These realized gains or losses offset the hedged transaction and are recorded on the same line in the statement of operations. The initial value of any component excluded from the assessment of effectiveness is recognized in income using a systematic and rational method over the life of the hedging instrument. Any difference between the change in fair value of the excluded component and amounts recognized in income under that systematic and rational method is recognized in AOCI.

Foreign currency derivatives (in millions)*

Functional Currency

Traded Currency

Notional in traded currency
March 31,2024

Notional in traded currency
December 31, 2023

Ending Duration

British Pound

Euro

Mar - 26

Chinese Renminbi

U.S. Dollar

260

209

Dec - 25

Euro

British Pound

May - 24

Euro

Hungarian Forint

9,028

8,233

Mar - 26

Euro

Swiss Franc

Mar - 26

Euro

Polish Zloty

629

573

Mar - 26

Euro

U.S. Dollar

230

152

Mar - 26

Thai Baht

U.S. Dollar

Dec - 24

U.S. Dollar

Chinese Renminbi

582

Jun - 24

U.S. Dollar

Korean Won

28,808

34,209

Nov - 24

U.S. Dollar

Mexican Peso

3,978

3,280

Mar - 26

U.S. Dollar

Thai Baht

2,100

Jun - 24

*Table above excludes non-significant traded currency pairings with total notional amounts less than $10 million U.S. Dollar equivalent as of March 31, 2024 and December 31, 2023.

The Company selectively uses cross-currency swaps to hedge that foreign currency exposure. At March 31, 2024 and December 31, 2023, the following cross-currency swap contracts were outstanding:


	Cross-currency swaps
(in millions)	March 31, 2024		December 31, 2023		Ending duration
U.S. Dollar to Euro:
Fixed receiving notional	$	1,100	$	1,100	Jul - 27
Fixed paying notional	€	976	€	976	Jul - 27
U.S. Dollar to Euro:
Fixed receiving notional	$	500	$	500	Mar - 25
Fixed paying notional	€	450	€	450	Mar - 25
U.S. Dollar to Japanese yen:
Fixed receiving notional	$	100	$	100	Feb - 29
Fixed paying notional	¥	12,724	¥	12,724	Feb - 29

In addition, the Company has designated the €1,000 million 1.000% Senior Notes due May 19, 2031, as a net investment hedge of the foreign currency exposure of its investments in certain Euro-denominated subsidiaries. Refer to Note 13 - “Debt” to the Condensed Consolidated Financial Statements in Item 1 of this report for more information.

Effectiveness for net investment hedges is assessed at the inception of the hedging relationship and quarterly, thereafter. Gains and losses arising from these contracts that are included in the assessment of effectiveness are deferred into foreign currency translation adjustments and only released when the subsidiary being hedged is sold or substantially liquidated. The initial value of any component excluded from the assessment of effectiveness is recognized in income using a systematic and rational method over the life of the hedging instrument. Any difference between the change in fair value of the excluded component and amounts recognized in income under that systematic and rational method is recognized in AOCI.

At March 31, 2024 and December 31, 2023, the following amounts were recorded in the Condensed Consolidated Balance Sheets as being payable to or receivable from counterparties for derivative instruments under ASC Topic 815, “Derivatives and Hedging”:


(in millions)	Assets					Liabilities
Derivatives designated as hedging instruments Under 815:	Location	March 31, 2024		December 31, 2023		Location	March 31, 2024		December 31, 2023
Foreign currency	Prepayments and other current assets	$	34	$	30	Other current liabilities	$	1	$	2
Foreign currency	Other non-current assets	$	5	$	1	Other non-current liabilities	$	1	$	—
Net investment hedges	Prepayments and other current assets	$	16	$	—	Other current liabilities	$	—	$	—
Net investment hedges	Other non-current assets	$	32	$	14	Other non-current liabilities	$	—	$	2



Derivatives not designated as hedging instruments:
Foreign currency	Prepayments and other current assets	$	3	$	2	Other current liabilities	$	2	$	1

The table below shows deferred gains (losses) reported in AOCI as well as the amount expected to be reclassified to income in one year or less for designated net investment hedges. The amount expected to be reclassified to income in one year or less assumes no change in the current relationship of the hedged item at March 31, 2024 market rates.


(in millions)	Deferred gain (loss) in AOCI at				Gain (loss) expected to be reclassified to income in one year or less
Contract Type	March 31, 2024		December 31, 2023
Net investment hedges:

Cross-currency swaps	$	48	$	12	$	—
Foreign currency-denominated debt	124		100		—
Total	$	172	$	112	$	—


	Three Months Ended March 31, 2024
(in millions)	Net sales		Cost of sales		Selling, general and administrative expenses		Other comprehensive income (loss)
Total amounts of earnings and other comprehensive income (loss) line items in which the effects of cash flow hedges are recorded	$	3,595	$	2,951	$	329	$	(55)
Gain (loss) on cash flow hedging relationships:
Foreign currency:
Gain (loss) recognized in other comprehensive income							$	8


	Three Months Ended March 31, 2023
(in millions)	Net sales		Cost of sales		Selling, general and administrative expenses		Other comprehensive income (loss)
Total amounts of earnings and other comprehensive income (loss) line items in which the effects of cash flow hedges are recorded	$	3,383	$	2,806	$	299	$	52
Gain (loss) on cash flow hedging relationships:
Foreign currency:
Gain (loss) recognized in other comprehensive income							$	14

The gains or losses recorded in income related to components excluded from the assessment of effectiveness for derivative instruments designated as cash flow hedges were immaterial for the periods presented.

Derivatives designated as net investment hedge instruments, as defined by ASC Topic 815, held during the period resulted in the following gains recorded in Interest expense on components excluded from the assessment of effectiveness:

There were no gains or losses recorded in income related to components excluded from the assessment of effectiveness for foreign currency-denominated debt designated as net investment hedges. There were no gains and losses reclassified from AOCI for net investment hedges during the periods presented.

Derivatives not designated as hedging instruments are used to hedge remeasurement exposures of monetary assets and liabilities denominated in currencies other than the operating units’ functional currency. These derivatives resulted in the following gains (losses) recorded in income: