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Derivatives | 3 Months Ended
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Mar. 31, 2022
Derivative Instruments And Hedging Activities Disclosure [Abstract] |
Derivatives | 5) 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 Forward 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 other comprehensive income ("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 in earnings in the period it occurs. The cash flows resulting from foreign exchange forward contracts are classified in the condensed 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 March 31, 2022 and December 31, 2021, the Company had outstanding foreign exchange forward contracts with gross notional values of $155 and $241, respectively. The following tables provide a summary of the primary net hedging positions and corresponding fair values held as of March 31, 2022 and December 31, 2021:
|  | March 31, 2022 |
Currency Hedged (Buy/Sell) |  | Gross Notional Value |  |  | Fair Value(1) |
U.S. dollar/Japanese yen |  | $ | 34 |  |  | $ | 3 |
U.S. dollar/South Korean won |  |  | 72 |  |  |  | 2 |
U.S. dollar/Euro |  |  | 11 |  |  |  | 1 |
U.S. dollar/U.K. pound sterling |  |  | 7 |  |  |  | — |
U.S. dollar/Taiwan dollar |  |  | 31 |  |  |  | 1 |
Total |  | $ | 155 |  |  | $ | 7 |
|  | December 31, 2021 |
Currency Hedged (Buy/Sell) |  | Gross Notional Value |  |  | Fair Value(1) |
U.S. dollar/Japanese yen |  | $ | 60 |  |  | $ | 2 |
U.S. dollar/South Korean won |  |  | 108 |  |  |  | 1 |
U.S. dollar/Euro |  |  | 15 |  |  |  | — |
U.S. dollar/U.K. pound sterling |  |  | 11 |  |  |  | — |
U.S. dollar/Taiwan dollar |  |  | 47 |  |  |  | — |
Total |  | $ | 241 |  |  | $ | 3 |
(1) Represents receivable amount included in other current assets in the condensed 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 interest rate swap agreements that exchange the variable LIBOR interest rate paid on the outstanding balance of its Term Loan Facility, as defined and further described in Note 9, to a fixed rate. The table below summarizes interest rate hedges outstanding at December 31, 2021 and March 31, 2022:
|  |  |  |  |  |  |  |  |  |  |  | March 31, 2022 |  |  | March 31, 2022 |  |  | December 31, 2021 |
Trade Date |  | Effective Date |  | Maturity |  | Fixed Rate |  |  | Notional Amount at Effective Date |  |  | Notional Amount |  |  | Fair Value Asset (Liability) |  |  | Fair Value Asset (Liability) |
April 3, 2019 |  | April 5, 2019 |  | March 31, 2023 |  |  | 2.309 | % |  | $ | 200 |  |  | $ | 200 |  |  | $ | (1 | ) |  | $ | (5 | )
October 29, 2020 |  | October 26, 2021 |  | February 28, 2025 |  |  | 0.485 | % |  | $ | 200 |  |  | $ | 200 |  |  |  | 11 |  |  |  | 4 |
October 29, 2020 |  | March 31, 2022 |  | February 28, 2025 |  |  | 0.623 | % |  | $ | 100 |  |  | $ | 100 |  |  |  | 14 |  |  |  | 5 |
|  |  |  |  |  |  |  |  |  |  |  | Total |  |  | $ | 24 |  |  | $ | 4 |
The interest rate swaps are recorded at fair value on the balance sheet and changes in the fair value are recognized in OCI. To the extent these arrangements are no longer effective hedges, any ineffectiveness measured in the hedging relationships is recorded immediately in earnings in the period it occurs. The net amount of existing gains as of March 31, 2022 expected to be reclassified from OCI into earnings within the next 12 months is immaterial. Currency Option Agreements In connection with financing the proposed acquisition of Atotech Limited ("Atotech"), the Company expected to issue EUR 500 in term loan debt. The Company purchased foreign currency option contracts to fix the conversion of EUR 300 into U.S. dollars and the options settled on January 31, 2022, as noted below:
|  |  |  |  |  |  |  |  |  |  | March 31, 2022 |  |  | March 31, 2022 |  |  | December 31, 2021 |
Trade Date |  | Effective Date |  | Maturity |  | Fixed Rate |  | Notional Amount in EUR |  |  | Notional Amount in U.S. dollars |  |  | Fair Value Asset (Liability) |  |  | Fair Value Asset (Liability) |
October 26, 2021 |  | October 26, 2021 |  | January 31, 2022 |  | 1.1615 |  | € | 300 |  |  | $ | — |  |  | $ | — |  |  | $ | 3 |
The currency options were recorded at fair value on the balance sheet and changes in the fair value were recognized immediately in earnings. The fair value asset was classified in other current assets in the condensed consolidated balance sheet. The Company recorded a gain of $5 in 2022, net of premiums, which is included in other (income) expense, net. The following table provides a summary of the gains (losses) on derivatives designated as cash flow hedging instruments:
|  | Three Months Ended March 31, |
|  | 2022 |  |  | 2021 |
Foreign exchange forward contracts: |  |  |  |  |  |
Net gains recognized in accumulated OCI |  | $ | 18 |  |  | $ | 11 |
Net gains (losses) reclassified from accumulated OCI into income |  | $ | 1 |  |  | $ | (2 | )
The following table provides a summary of the gains (losses) on derivatives not designated as hedging instruments:
|  | Three Months Ended March 31, |
|  | 2022 |  |  | 2021 |
Foreign exchange forward contracts: |  |  |  |  |  |
Net gains (losses) recognized in income(1) |  | $ | 6 |  |  | $ | (1 | )
(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 (income) 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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