Derivative Financial Instruments

12 Months Ended

Dec. 31, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

10 – Derivative Financial Instruments

Both our foreign currency forward contracts and the credit default swap are undesignated hedging instruments under ASC 815, Derivatives and Hedging.

Foreign Currency Forward Contracts

We enter into foreign currency forward contracts to economically hedge our exposure to currency fluctuations in various foreign currencies. At December 31, 2024 and December 31, 2023, we had outstanding foreign currency forward contracts with notional amounts aggregating to $543 million and $448 million, respectively. The fair values of these derivatives were not material as of December 31, 2024 and December 31, 2023.

Credit Default Swap

During the fourth quarter of 2024, we entered into a credit default swap (“CDS”) with a third-party financial institution terminating in September of 2026 related to a secured loan between that third-party financial institution and our largest customer in Mexico. The secured loan was utilized by this customer to pay certain of our outstanding receivables and accordingly, in the fourth quarter of 2024, we received $25 million. The fair value of the derivative was not material as of December 31, 2024. Under the CDS terms, within five business days upon notification of default, we could be required to pay the then outstanding notional balance net of recoveries. As of December 31, 2024 we had a notional balance of $25 million outstanding under the CDS. Management expects the total notional balance under the CDS to decrease to $14 million and nil by December 31, 2025 and December 31, 2026.

A CDS was entered into during the fourth quarter of 2023 with the same parties for similar reasons as in the fourth quarter of 2024, and accordingly, in the fourth quarter of 2023 and January of 2024, we received $140 million and $142 million, respectively. As of December 31, 2023, we had a notional balance of $130 million outstanding under the CDS, which increased to $260 million in January of 2024, following the receipt of the $142 million payment. The agreement was terminated in the third quarter of 2024, extinguishing the remaining notional balance.