Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Market Risk and Sensitivity Analysis

Our primary exposures to market risks include fluctuations in interest rates on our Term Loan Facility, as defined and as described further in Item 7 of this Annual Report on Form 10-K, as well as fluctuations in foreign currency exchange rates.

Foreign Exchange Rate Risk

Our currency risk consists primarily of foreign currency denominated firm commitments, forecasted foreign currency denominated intercompany and third-party transactions, and net investments in certain subsidiaries. We use both nonderivative and derivative instruments to manage our earnings and cash flow exposure to changes in currency exchange rates.

We mainly enter into foreign exchange forward contracts to reduce currency exposure arising from intercompany sales of inventory and certain of our foreign subsidiaries' operating expenses. We also enter into foreign exchange forward contracts to reduce foreign exchange risks arising from the change in fair value of certain foreign currency denominated assets and liabilities.

We had foreign exchange forward contracts designated as cash flow hedges with notional amounts totaling $5 million and $74 million outstanding at December 31, 2025 and December 31, 2024, respectively. The Canadian dollar was the only notional contract designated as a cash flow hedging instrument for 2025, and the Japanese yen and the South Korean won were the largest notional contracts designated as cash flow hedging instruments for 2024. We had foreign exchange forward contracts not designated as hedging instruments with notional amounts totaling $367 million and $154 million outstanding at December 31, 2025 and December 31, 2024, respectively. For 2025, the Euro, Chinese yuan, British pound and New Taiwan dollar were the largest notional contracts and for 2024 British pound and Chinese yuan were the largest notional contracts for balance sheet hedges not designated as a hedging instrument. The potential fair value loss for a hypothetical 10% adverse change in the currency exchange rate on our foreign exchange forward contracts at December 31, 2025 and 2024 would be immaterial.

We designated certain Euro-denominated debt as a net investment hedge to hedge a portion of our net investments in certain of our entities with functional currencies denominated in the Euro. As of December 31, 2025, we designated as a net investment hedge €587 million in aggregate principal amount of our Euro Tranche B loan. On February 4, 2026, in connection with the 2034 Notes Offering, we also designated as a net investment hedge €1.0 billion in aggregate principal amount of 2034 Notes. For these nonderivative instruments, we defer recognition of the foreign currency remeasurement gains and losses within the foreign currency translation adjustment component of OCI.

Interest Rate Risk

We hold our cash and cash equivalents for working capital purposes. Some of the cash equivalents are subject to market risk. This means that a change in prevailing interest rates may cause the principal amount of such cash equivalents to fluctuate. To minimize this risk, we maintain a portion of our portfolio of cash and cash equivalents in money market funds. Due to the short-term nature of these instruments, we believe that we do not have any material exposure to changes in the fair value of our cash equivalents as a result of changes in interest rates. Declines in interest rates, however, would reduce future interest income. The effect of a hypothetical 10% increase or decrease in overall interest rates would not have had a material impact on our operating results or the total fair value of our portfolio.

We have various interest rate swap agreements as described further in "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates-Derivatives" that exchange the one-month Term SOFR interest rate to a fixed rate in order to manage the exposure to interest rate fluctuations associated with the variable Term SOFR interest rate paid on the outstanding balance of the Term Loan Facility.

We are exposed to market risks related to fluctuations in interest rates related to our Term Loan Facility. As of December 31, 2025, the principal outstanding on our Term Loan Facility was $2.9 billion, at a weighted average interest rate of 5.4%. A 10% increase or decrease in the weighted average interest rate as of December 31, 2025 would increase or decrease annual interest expense by approximately $9 million, excluding the effect of our interest rate hedges. Because the notional amount of our interest rate hedges as of December 31, 2025 equaled approximately 66% of the principal outstanding on our Term Loan Facility, the resulting net impact to interest expense would be approximately $4 million. The quantitative information presented reflects the terms of our Term Loan Facility as of December 31, 2025 and does not reflect the Sixth Amendment and 2034 Notes Offering completed in 2026. For a discussion of the expected impact on our future interest expense and liquidity, see Part II-Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations- Liquidity and Capital Resources.

Equity Price Risk

We are exposed to equity price risk related to the conversion options embedded in our Convertible Notes. We issued $1.4 billion of Convertible Notes in May 2024. The Convertible Notes bear interest at a fixed rate and therefore have no financial statement risk associated with changes in market interest rates. However, the fair value of Convertible Notes fluctuates when interest rates change. We carry the Convertible Notes at face value less an unamortized discount on our consolidated balance sheet, and we present the fair value for required disclosure purposes only. Additionally, the fair value can be affected when the market price of our common stock fluctuates. The potential value of the shares to be distributed to the holders of our Convertible Notes changes when the market price of our stock fluctuates. The Convertible Notes will mature on June 1, 2030 unless earlier repurchased by us or converted pursuant to their terms. Additional details about the terms of the Convertible Notes can be found in Note 14 to the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K.