Company: ROK
Filing Date: 2025-11-12
Form Type: 10-K
Source: 0001024478-25-000116
Chunk: 290

Company: ROCKWELL AUTOMATION, INC
Filing Date: 2025-11-12
Form: 10-K
Item: Item 7A
Chunk 290
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Table of Contents

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk during the normal course of business from changes in foreign currency exchange rates and interest rates. We manage exposure to these risks through a combination of normal operating and financing activities as well as derivative financial instruments in the form of foreign currency forward exchange contracts.

Foreign Currency Risk

We are exposed to foreign currency risks that arise from normal business operations. These risks include transactions denominated in currencies other than a location’s functional currency, transaction gains and losses associated with intercompany loans with foreign subsidiaries, and translation of local currency balances of foreign subsidiaries. Our objective is to minimize our exposure to these risks through a combination of normal operating activities and the use of financial instruments including, but not limited to, foreign currency forward exchange contracts and cross-currency swaps. We enter into these contracts with major financial institutions that we believe to be creditworthy. We do not enter into derivative financial instruments for speculative purposes. We record all derivatives on the balance sheet at fair value regardless of the purpose for holding them. 

The use of foreign currency forward exchange contracts allows us to manage transactional exposure to exchange rate fluctuations as the gains or losses incurred on these contracts will offset, in whole or in part, losses or gains on the underlying foreign currency exposure. Foreign currency forward exchange contracts are denominated in currencies of major industrial countries in which we operate. The fair value of our foreign currency forward exchange contracts is an asset of $8 million and a liability of $23 million at September 30, 2025. For assets and liabilities denominated in currencies other than a location’s functional currency without offsetting foreign currency forward exchange contracts, a 10 percent adverse change in the underlying foreign currency exchange rates would reduce our pre-tax income by approximately $35 million.

During 2025, we entered into cross-currency swaps in order to manage foreign currency translation risk of local currency balances of foreign subsidiaries. We designated the cross-currency swaps as a partial hedge of our net investment in certain subsidiaries that are not U.S. dollar functional. As a result, changes in the fair value of the cross-currency swaps are recorded in accumulated currency translation adjustments within equity in the Consolidated Balance Sheet. A hypothetical 10 percent adverse change in the cross-currency swaps’ underlying spot rates would result in an additional cash outflow at maturity of $80 million. The fair value of these instruments prior to maturity also includes an interest rate component; however, we currently have no