{"url_path":"/sec/wat/10-k/2026/item-7a","section_key":"item-7a","section_title":"Item 7A Quantitative and Qualitative Disclosures About Market Risk","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-02-23","source_url":"https://www.sec.gov/Archives/edgar/data/1000697/0001193125-26-062604-index.html","accession_number":"0001193125-26-062604","cik":"0001000697","ticker":"WAT","issuer_name":"WATERS CORP /DE/","edgar_url":"https://www.sec.gov/Archives/edgar/data/1000697/0001193125-26-062604-index.html","primary_entity_key":"0001000697","primary_entity_name":"WATERS CORP /DE/"},"word_count":1552,"has_tables":true,"body_markdown":"Item 7A: Quantitative and Qualitative Disclosures About Market Risk\n\nDerivative Transactions\n\nThe Company is a global company that operates in over 35 countries and, as a result, the Company’s net sales, cost of sales, operating expenses and balance sheet amounts are significantly impacted by fluctuations in foreign currency exchange rates. The Company is exposed to currency price risk on foreign currency exchange rate fluctuations when it translates its non-U.S. dollar foreign subsidiaries’ financial statements into U.S. dollars, and when any of the Company’s subsidiaries purchase or sell products or services in a currency other than its own currency.\n\nThe Company’s principal strategies in managing exposures to changes in foreign currency exchange rates are to (1) naturally hedge the foreign-currency-denominated liabilities on the Company’s balance sheet against corresponding assets of the same currency, such that any changes in liabilities due to fluctuations in foreign currency exchange rates are typically offset by corresponding changes in assets and (2) mitigate foreign exchange risk exposure of international operations by hedging the variability in the movement of foreign currency exchange rates on a portion of its euro-denominated and yen-denominated net asset investments. The Company presents the derivative transactions in financing activities in the statement of cash flows.\n\nForeign Currency Exchange Contracts\n\nThe Company does not specifically enter into any derivatives that hedge foreign-currency-denominated operating assets, liabilities or commitments on its balance sheet, other than a portion of certain third-party accounts receivable and accounts payable, and the Company’s net worldwide intercompany receivables and payables, which are eliminated in consolidation. The Company periodically aggregates these net worldwide balances by currency and then enters into foreign currency exchange contracts that mature within 90 days to hedge a portion of the remaining balance to minimize some of the Company’s currency price risk exposure. The foreign currency exchange contracts are not designated for hedge accounting treatment. Principal hedged currencies include the euro, Japanese yen, British pound, Mexican peso and Brazilian real.\n\nCash Flow Hedges\n\nThe Company’s Credit Facility is a variable borrowing and has interest payments based on a contractually specified interest rate index. The contractually specified index on the Credit Facility is the 3-month Term SOFR. The variable rate interest payments create interest risk for the Company as interest payments will fluctuate based on changes in the contractually specified interest rate index over the life of the Credit Facility. In order to reduce interest rate risk, the Company enters into interest rate swaps that will effectively lock-in the forecasted interest payments on the variable rate borrowing over its term. The interest rate swaps represent cash flow hedges and are assessed for hedge effectiveness each reporting period. When the hedge relationship is highly effective at achieving offsetting changes in cash flows, the Company will record the entire change in fair value of the interest rate swaps in accumulated other comprehensive loss. The amount in accumulated other comprehensive loss is reclassified to earnings in the period that the underlying transaction impacts consolidated earnings. If it becomes probable that the forecasted transaction will not occur, the hedge relationship will be de-designated and amounts accumulated in other comprehensive loss will be reclassified to earnings in the current period. Interest settlements due to benchmark interest rate changes are recorded in interest income or interest expense. For the years ended December 31, 2025 and 2024, the Company did not have any cash flow hedges that were deemed ineffective.\n\nInterest Rate Cross-Currency Swap Agreements\n\nAs of December 31, 2025, the Company had three-year interest rate cross-currency swap derivative agreements with a notional value of $900 million to hedge the variability in the movement of foreign currency exchange rates\n\n \n\n58\n\n##### Table of Contents\n\non a portion of its euro-denominated and yen-denominated net asset investments. Under hedge accounting, the change in fair value of the derivative that relates to changes in the foreign currency spot rate are recorded in the currency translation adjustment in other comprehensive income and remain in accumulated other comprehensive loss in stockholders’ equity until the sale or substantial liquidation of the foreign operation. The difference between the interest rate received and paid under the interest rate cross-currency swap derivative agreement is recorded in interest income in the statement of operations.\n\nThe Company’s foreign currency exchange contracts, interest rate cross-currency swap agreements and interest rate swap agreements designated as cash flow hedges included in the consolidated balance sheets are classified as follows (in thousands):\n\n \n\n \n  \nDecember 31, 2025\n \n \nDecember 31, 2024\n \n\n \n  \nNotional\nValue\n \n  \nFair\nValue\n \n \nNotional\nValue\n \n  \nFair\nValue\n \n\nForeign currency exchange contracts:\n\n  \n\n  \n\n \n\n  \n\nOther current assets\n\n  \n$\n39,053\n \n  \n$\n329\n \n \n$\n14,999\n \n  \n$\n482\n \n\nOther current liabilities\n\n  \n$\n18,979\n \n  \n$\n248\n \n \n$\n24,749\n \n  \n$\n261\n \n\nInterest rate cross-currency swap agreements:\n\n  \n\n  \n\n \n\n  \n\nOther assets\n\n  \n$\n20,000\n \n  \n$\n346\n \n \n$\n625,000\n \n  \n$\n26,196\n \n\nOther liabilities\n\n  \n$\n880,000\n \n  \n$\n50,493\n \n \n$\n— \n \n  \n$\n— \n \n\nAccumulated other comprehensive (loss) income\n\n  \n\n  \n$\n(53,730\n) \n \n \n— \n \n  \n$\n32,979\n \n\nInterest rate swap cash flow hedges:\n\n  \n\n  \n\n \n\n  \n\nOther assets\n\n  \n$\n50,000\n \n  \n$\n34\n \n \n$\n100,000\n \n  \n$\n503\n \n\nOther liabilities\n\n  \n$\n100,000\n \n  \n$\n2,384\n \n \n$\n50,000\n \n  \n$\n641\n \n\nAccumulated other comprehensive (loss) income\n\n  \n\n  \n$\n(2,350\n) \n \n \n— \n \n  \n$\n(138\n) \n\nThe following is a summary of the activity included in the consolidated statements of operations and statements of comprehensive income related to the foreign currency exchange contracts, interest rate cross-currency swap agreements and interest rate swap agreements designated as cash flow hedges (in thousands): \n\n \n\n \n \nFinancial\nStatement\nClassification\n \nYear Ended December 31,\n \n\n \n \n2025\n \n \n2024\n \n \n2023\n \n\nForeign currency exchange contracts:\n\n \n\n \n\n \n\nRealized (losses) gains on closed contracts\n\n \nCost of sales\n \n$\n(1,780\n) \n \n$\n850\n \n \n$\n224\n \n\nUnrealized (losses) gains on open contracts\n\n \nCost of sales\n \n \n(140\n) \n \n \n245\n \n \n \n(156\n) \n\n \n\n \n\n \n\n \n\n \n \n\n \n\n \n\n \n \n\n \n\n \n\n \n\nCumulative net pre-tax (losses) gains\n\n \nCost of sales\n \n$\n(1,920\n) \n \n$\n1,095\n \n \n$\n68\n \n\n \n\n \n\n \n\n \n\n \n \n\n \n\n \n\n \n \n\n \n\n \n\n \n\nInterest rate cross-currency swap agreements:\n\n \n\n \n\n \n\nInterest earned\n\n \nInterest income\n \n$\n10,920\n \n \n$\n10,110\n \n \n$\n10,974\n \n\nUnrealized (losses) gains on open contracts (1)\n\n \nAccumulated other\ncomprehensive loss\n \n$\n(86,709\n) \n \n$\n40,954\n \n \n$\n(18,001\n) \n\nInterest rate swap cash flow hedges:\n\n \n\n \n\n \n\nInterest earned\n\n \nInterest income\n \n$\n468\n \n \n$\n1,281\n \n \n$\n326\n \n\nUnrealized losses on open contracts\n\n \nAccumulated other\ncomprehensive loss\n \n$\n(2,211\n) \n \n$\n(2,835\n) \n \n$\n(2,974\n) \n\n \n\n(1)\n\nUnrealized (losses) gains on open contracts from interest rate cross-currency swap agreements fluctuated year over year primarily due to changes in foreign exchange rates, which resulted in period-to-period variability.\n\nAssuming a hypothetical adverse change of 10% in year-end exchange rates (a strengthening of the U.S. dollar), the fair market value of the foreign currency exchange contracts outstanding as of December 31,\n\n \n\n59\n\n##### Table of Contents\n\n2025 would decrease pre-tax earnings by approximately $3 million. Assuming a hypothetical adverse change of 10% in year-end exchange rates (a strengthening of the U.S. dollar), the fair market value of the interest rate cross-currency swap agreements outstanding as of December 31, 2025 would increase by approximately $95 million and would be recorded to foreign currency translation in other comprehensive income within stockholders’ equity. The related impact on interest income would not have a material effect on pre-tax earnings.\n\nThe Company’s cash and cash equivalents are not subject to significant interest rate risk due to the short maturities of these instruments. The Company’s cash equivalents represent highly liquid investments, with original maturities of 90 days or less, primarily in bank deposits, U.S. treasury bill money market funds and commercial paper. As of December 31, 2025, the carrying value of the Company’s cash and cash equivalents approximated fair value.\n\nThe Company is exposed to the risk of interest rate fluctuations from the investments of cash generated from operations. Investments with maturities greater than 90 days are classified as investments and are held primarily in U.S. dollar-denominated treasury bills and commercial paper, bank deposits and corporate debt securities. As of December 31, 2025, the Company estimates that a hypothetical adverse change of 100 basis points across all maturities would not have a material effect on the fair market value of its portfolio.\n\nThe Company is also exposed to the risk of exchange rate fluctuations. The Company maintains cash balances in various operating accounts in excess of federally insured limits, and in foreign subsidiary accounts in currencies other than the U.S. dollar. As of December 31, 2025 and 2024, $372 million out of $588 million and $275 million out of $325 million, respectively, of the Company’s total cash, cash equivalents and investments were held by foreign subsidiaries. In addition, $306 million out of $588 million and $226 million out of $325 million of cash, cash equivalents and investments were held in currencies other than the U.S. dollar at December 31, 2025 and 2024, respectively. As of December 31, 2025, the Company had no holdings in auction rate securities or commercial paper issued by structured investment vehicles.\n\nAssuming a hypothetical adverse change of 10% in year-end exchange rates (a strengthening of the U.S. dollar), the fair market value of the Company’s cash, cash equivalents and investments held in currencies other than the U.S. dollar as of December 31, 2025 would decrease by approximately $31 million, of which the majority would be recorded to foreign currency translation in other comprehensive income within stockholders’ equity.\n\n \n\n60\n\n##### Table of Contents\n\nThe Company is a global company that operates in over 35 countries and, as a result, the Company’s net sales, cost of sales, operating expenses and balance sheet amounts are significantly impacted by fluctuations in foreign currency exchange rates.238P3YP3YP15YP39YP5YP1YP1Y"}