Fair Value Measurements and Financial Instruments

9 Months Ended

Sep. 30, 2025

Fair Value Measurements and Financial Instruments

8. Fair Value Measurements and Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The levels of inputs used to measure fair value are:

•Level 1—Quoted prices for identical instruments in active markets;

•Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets; and

•Level 3—Valuations based on inputs that are unobservable, generally utilizing pricing models or other valuation techniques that reflect management’s judgment and estimates.

Assets and Liabilities

The Company bases its fair value estimates on market assumptions and available information. The carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and current maturities of long-term debt approximated their fair values as of September 30, 2025 and December 31, 2024, due to their short-term nature.

Debt

The fair value of debt was as follows:


		September 30, 2025				December 31, 2024
(In millions)	Level	Fair Value		Carrying Value		Fair Value		Carrying Value
Unsecured notes due 2026	2	$	392	$	400	$	380	$	399
Unsecured notes due 2029	2	630		594		617		593
Unsecured notes due 2031	2	356		398		336		397
Unsecured notes due 2034	2	537		491		514		490
Three-Year Term Loan due 2025	2	—		—		49		50
Five-Year Term Loan due 2027	2	394		399		394		399

Financial Instruments

The Company directly manages its exposure to risks arising from business operations and economic factors, including fluctuations in interest rates and foreign currencies. The Company uses derivative instruments to manage the volatility related to these exposures.

The notional amount and fair value of derivative instruments were as follows:


	September 30, 2025				December 31, 2024				Balance Sheet Location
(In millions)	Notional Amount		Fair Value		Notional Amount		Fair Value
Derivatives designated as net investment hedges(1):
Cross-currency swap agreements	$	—	$	—	$	270	$	12	Other current assets
Cross-currency swap agreements	—		—		1,177		48		Other long-term assets
Cross-currency swap agreements	624		55		98		7		Other current liabilities
Cross-currency swap agreements	1,400		145		325		2		Other long-term liabilities
Derivatives designated as cash flow hedge:
Interest rate swaps	$	125	$	1	$	125	$	3	Other long-term assets
Derivatives not designated as hedges(2):
Foreign currency option contracts	$	261	$	2	$	300	$	13	Other current assets
Foreign currency option contracts	37		1		—		—		Other long-term assets
Foreign currency option contracts	246		6		26		—		Other current liabilities
Foreign currency option contracts	39		1		—		—		Other long-term liabilities

Foreign currency forward contracts	329		1		125		1		Other current liabilities

(1) During the nine months ended September 30, 2025, the Company terminated a cross-currency swap with a notional amount of $100 million scheduled to mature in November 2025, amended one cross-currency swap with a notional amount of $98 million to $102 million scheduled to mature in December 2025, entered into three cross-currency swap agreements with an aggregate notional amount of $250 million, of which $100 million is scheduled to mature in November 2025 and $150 million are scheduled to mature in November 2030, and amended one cross-currency swap with a notional amount of $70 million, extending its maturity from September 2025 to November 2030.

(2) As of September 30, 2025, four foreign currency option contracts not designated as hedges had an aggregate notional amount of $25 million and fair value of zero.

As of September 30, 2025 and December 31, 2024, the derivatives were classified as Level 2 within the fair value hierarchy. The derivatives are valued using inputs other than quoted prices such as foreign exchange rates and yield curves.

The effect of hedges on AOCIL and in the Condensed Consolidated Statements of Operations was as follows:


	Three Months Ended September 30, 2025						Nine Months Ended September 30, 2025
(In millions)	Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative		Gain (Loss) Reclassified from AOCIL into Net Income(1)		Gain (Loss) Recognized in Net Income on Derivative (Excluded from effectiveness testing)(1)		Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative		Gain (Loss) Reclassified from AOCIL into Net Income(1)		Gain (Loss) Recognized in Net Income on Derivative (Excluded from effectiveness testing)(1)
Derivatives designated as net investment hedges
Cross-currency swap agreements	$	18	$	—	$	1	$	(253)	$	(3)	$	3


Derivatives designated as cash flow hedges
Interest rate swaps	$	—	$	—	$	—	$	(2)	$	—	$	—

(1) Amounts reclassified to Net income are reported in Interest expense, net in the Condensed Consolidated Statements of Operations.


	Three Months Ended September 30, 2024						Nine Months Ended September 30, 2024
(In millions)	Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative		Gain (Loss) Reclassified from AOCIL into Net Income(1)		Gain (Loss) Recognized in Net Income on Derivative (Excluded from effectiveness testing)(1)		Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative		Gain (Loss) Reclassified from AOCIL into Net Income(1)		Gain (Loss) Recognized in Net Income on Derivative (Excluded from effectiveness testing)(1)
Derivatives designated as net investment hedges
Cross-currency swap agreements	$	(71)	$	(2)	$	1	$	(24)	$	—	$	2


Derivatives designated as cash flow hedges
Interest rate swaps	$	(5)	$	—	$	—	$	(4)	$	—	$	—

(1) Amounts reclassified to Net income are reported in Interest expense, net in the Condensed Consolidated Statements of Operations.

Derivatives Not Designated as Hedges

Gains and losses recognized in Other income (expense), net in the Condensed Consolidated Statements of Operations for foreign currency options and forward contracts were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2025		2024		2025		2024
Foreign currency gain (loss) on foreign currency contracts	$	3	$	(12)	$	(11)	$	(10)

GXO Logistics, Inc. 10-Q