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Derivatives | 12 Months Ended
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Dec. 31, 2021
Derivative Instruments And Hedging Activities Disclosure [Abstract] |
Derivatives |
9) | Derivatives
The Company enters into derivative instruments for risk management purposes only, including derivatives designated as hedging instruments and those utilized as economic hedges. The Company operates internationally and, in the normal course of business, is exposed to fluctuations in interest rates and foreign exchange rates. These fluctuations can increase the costs of financing, investing and operating the business. The Company has used derivative instruments, such as foreign exchange forward contracts and options, to manage certain foreign currency exposure, and interest rate swaps to manage interest rate exposure. By nature, all financial instruments involve market and credit risks. The Company enters into derivative instruments with major investment grade financial institutions, for which no collateral is required. The Company has policies to monitor the credit risk of these counterparties. While there can be no assurance, the Company does not anticipate any material non-performance by any of these counterparties. Foreign Exchange Contracts The Company hedges a portion of its forecasted foreign currency-denominated intercompany sales of inventory, over a maximum period of eighteen months, using foreign exchange forward contracts accounted for as cash-flow hedges related to British, Euro, Japanese, South Korean and Taiwanese currencies. To the extent these derivatives are effective in off-setting the variability of the hedged cash flows, and otherwise meet the hedge accounting criteria, changes in the derivatives’ fair value are not included in current earnings but are included in OCI in stockholders’ equity. These changes in fair value will subsequently be reclassified into earnings, as applicable, when the forecasted transaction occurs. To the extent that a previously designated hedging transaction is no longer an effective hedge, any ineffectiveness measured in the hedging relationship is recorded immediately in earnings in the period it occurs. The cash flows resulting from forward exchange contracts are classified in the consolidated statements of cash flows as part of cash flows from operating activities. The Company does not enter into derivative instruments for trading or speculative purposes. As of December 31, 2021 and 2020, the Company had outstanding foreign exchange forward contracts with gross notional values of $240.4 and $176.2, respectively. The following tables provide a summary of the primary net hedging positions and corresponding fair values held as of December 31, 2021 and 2020:
|  | December 31, 2021 |
Currency Hedged (Buy/Sell) |  | Gross Notional Value |  |  | Fair Value (1) |
U.S. dollar/Japanese yen |  | $ | 60.2 |  |  | $ | 1.7 |
U.S. dollar/South Korean won |  |  | 107.7 |  |  |  | 1.1 |
U.S. dollar/Euro |  |  | 15.1 |  |  |  | 0.3 |
U.S. dollar/U.K. pound sterling |  |  | 10.7 |  |  |  | — |
U.S. dollar/Taiwan dollar |  |  | 46.7 |  |  |  | (0.1 | )
Total |  | $ | 240.4 |  |  | $ | 3.0 |
|  | December 31, 2020 |
Currency Hedged (Buy/Sell) |  | Gross Notional Value |  |  | Fair Value (1) |
U.S. dollar/Japanese yen |  | $ | 61.5 |  |  | $ | (1.1 | )
U.S. dollar/South Korean won |  |  | 62.2 |  |  |  | (3.1 | )
U.S. dollar/Euro |  |  | 13.1 |  |  |  | (0.6 | )
U.S. dollar/U.K. pound sterling |  |  | 6.1 |  |  |  | (0.3 | )
U.S. dollar/Taiwan dollar |  |  | 33.3 |  |  |  | (1.4 | )
Total |  | $ | 176.2 |  |  | $ | (6.5 | )
| (1) | Represents the (payable) receivable amount included in the consolidated balance sheet.
The foreign exchange forward contracts are subject to a master netting agreement with one financial institution. However, the Company has elected to record these contracts on a gross basis in the consolidated balance sheet. Interest Rate Swap Agreements The Company entered into various interest rate swap agreements that exchange the variable LIBOR interest rate to a fixed rate to manage the exposure to interest rate fluctuations associated with the variable LIBOR interest rate paid on the outstanding balance of the Term Loan Facility, as defined and described further in Note 15. The table below summarizes the various interest rate hedges entered into by the Company:
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Years Ended December 31, |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 2021 |  |  | 2020 |
Swap |  | Trade Date |  | Effective Date |  | Maturity |  | Fixed Rate |  |  | Notional Amount at Effective Date |  |  | Notional Amount |  |  | Fair Value Asset (Liability) |  |  | Fair Value (Liability) |
1 |  | April 3, 2019 |  | April 5, 2019 |  | March 31, 2023 |  |  | 2.309 | % |  | $ | 300.0 |  |  | $ | 300.0 |  |  | $ | (5.0 | ) |  | $ | (12.4 | )
2 |  | October 29, 2020 |  | October 26, 2021 |  | February 28, 2025 |  |  | 0.485 | % |  | $ | 200.0 |  |  | $ | 200.0 |  |  |  | 3.9 |  |  |  | (0.7 | )
3 |  | October 29, 2020 |  | March 31, 2022 |  | February 28, 2025 |  |  | 0.623 | % |  | $ | 100.0 |  |  | $ | 100.0 |  |  |  | 4.8 |  |  |  | (0.9 | )
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Total |  |  | $ | 3.7 |  |  | $ | (14.0 | )
The interest rate swaps are recorded at fair value on the balance sheet and changes in the fair value are recognized in OCI, as these hedges have been determined to be effective. To the extent that these arrangements are no longer effective hedge s, any ineffectiveness measured in the hedging relationships is recorded immediately in earnings in the period it occurs. The fair value of the interest rate swaps is classified in other assets or non-current liabilities, accordingly, in the consolidated balance sheet. Currency Option Agreements In conjunction with financing the proposed acquisition of Atotech Limited (“Atotech”), the Company expects to issue EUR 500.0 in term loan debt. At the expected close, a portion of those proceeds will settle Atotech’s existing EUR 200.0 term loan and the EUR 300.0 balance will be converted into USD in support of the USD purchase price. The Company purchased foreign currency option contracts to fix the conversion of EUR 300.0 into USD as noted below:
Trade Date |  | Effective Date |  | Maturity |  | Fixed Rate |  |  | Notional Amount in EUR |  |  | Notional Amount in USD |  |  | Year Ended December 31, 2021 Fair Value Asset |
October 26, 2021 |  | October 26, 2021 |  | January 31, 2022 |  | $ | 1.1615 |  |  | $ | 300.0 |  |  | $ | 348.3 |  |  | $ | 3.0 |
The currency swaps are recorded at fair value on the balance sheet and changes in the fair value are recognized immediately in earnings. The fair value asset is classified in other current assets in the consolidated balance sheet. The Company recorded an unrealized gain of $3.4 in 2021, net of premiums, which is included in other expense, net. In conjunction with the Photon Control Acquisition, which closed in July 2021, the Company entered into a foreign currency contract to hedge the Canadian dollar purchase price. In 2021, the Company recorded a fair value realized loss of $10.3, which is included in other expense, net. The following table provides a summary of the gain (loss) on derivatives designated as cash flow hedging instruments:
Derivatives Designated as Cash Flow Hedging Instruments |  | Years Ended December 31, |
Forward exchange contracts: |  | 2021 |  |  | 2020 |  |  | 2019 |
Net gain (loss) recognized in OCI, net of tax (1) |  | $ | 20.0 |  |  | $ | (10.6 | ) |  | $ | (10.0 | )
Net (loss) gain reclassified from OCI into income (2) |  | $ | (1.5 | ) |  | $ | 1.7 |  |  | $ | 5.7 |
(1) | Net change in the fair value of the effective portion classified in OCI.
(2) | Effective portion classified in cost of products. The tax effect of the gains or losses reclassified from accumulated OCI into income is immaterial.
The following table provides a summary of gain (loss) on derivatives not designated as cash flow hedging instruments:
Derivatives Not Designated as Cash Flow Hedging Instruments |  | Years Ended December 31, |
Forward exchange contracts: |  | 2021 |  |  | 2020 |  |  | 2019 |
Net gain (loss) recognized in income (1) |  | $ | 4.8 |  |  | $ | (1.5 | ) |  | $ | (1.3 | )
(1) | The Company enters into foreign exchange forward contracts to hedge against changes in the balance sheet for certain subsidiaries to mitigate the risk associated with certain foreign currency transactions in the ordinary course of business. These derivatives are not designated as cash flow hedging instruments and gains or losses from these derivatives are recorded immediately in other expense, net.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008 + Details
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