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Derivatives | 9 Months Ended
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Sep. 30, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives | 5) Derivatives 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. To the extent these derivatives are effective in offsetting 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. The Company also 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. As of September 30, 2022 and December 31, 2021, the Company had outstanding foreign exchange forward contracts with gross notional values of $711 and $241, respectively. The following tables provide a summary of the primary net hedging positions and corresponding fair values held as of September 30, 2022 and December 31, 2021:
|  | September 30, 2022 |
Currency Hedged (Buy/Sell) |  | Gross Notional Value |  |  | Fair Value Asset (Liability) |
U.S. dollar/Japanese yen |  | $ | 51 |  |  | $ | 6 |
U.S. dollar/South Korean won |  |  | 105 |  |  |  | 10 |
U.S. dollar/euro |  |  | 13 |  |  |  | 1 |
U.S. dollar/U.K. pound sterling |  |  | 6 |  |  |  | 1 |
U.S. dollar/Taiwan dollar |  |  | 41 |  |  |  | 3 |
euro/Chinese renminbi |  |  | 27 |  |  |  | — |
U.K. pound sterling/euro |  |  | 4 |  |  |  | — |
euro/U.S. dollar |  |  | 426 |  |  |  | (13 | )
Japanese yen/U.S. dollar |  |  | 38 |  |  |  | (2 | )
Total |  | $ | 711 |  |  | $ | 6 |
|  | December 31, 2021 |
Currency Hedged (Buy/Sell) |  | Gross Notional Value |  |  | Fair Value Asset |
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 |
The following table provides a summary of the gains (losses) on derivatives designated as cash flow hedging instruments:
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Foreign exchange forward contracts: |  |  |  |  |  |  |  |  |  |  |  |
Net gains recognized in accumulated OCI |  | $ | 48 |  |  | $ | 3 |  |  | $ | 73 |  |  | $ | 14 |
Net gains (losses) reclassified from accumulated OCI into income |  | $ | 5 |  |  | $ | — |  |  | $ | 9 |  |  | $ | (2 | )
The net amount of existing gains as of September 30, 2022 expected to be reclassified from OCI into earnings within the next 12 months is immaterial. Interest Rate Swap and Interest Rate Cap Agreements The Company has various interest rate swap agreements that exchange a forward-looking term rate based on the variable secured overnight financing rate ("Term SOFR") paid on the outstanding balance of its New Term Loan Facility, as defined and further described in Note 10, to a fixed rate. The Company acquired USD LIBOR interest rate cap agreements as a result of the Atotech Acquisition and is utilizing these agreements to offset the variable Term SOFR rate on its New Term Loan Facility. The Company's USD LIBOR based swaps and USD LIBOR based interest rate caps will convert to Term SOFR after LIBOR's termination in June 2023 according to the terms of each instrument. The table below summarizes interest rate swaps and interest rate caps outstanding at September 30, 2022 and December 31, 2021:
|  |  |  |  |  |  |  |  |  |  |  |  | September 30, 2022 |  |  | December 31, 2021 |
Effective Date |  | Maturity |  | Fixed Rate |  |  | Notional Amount at Effective Date |  |  | Notional Amount at September 30, 2022 |  |  | Fair Value Asset |  |  | Fair Value Asset (Liability) |
April 5, 2019 |  | March 31, 2023 |  |  | 2.309 | % |  | $ | 300 |  |  | $ | 200 |  |  | $ | 2 |  |  | $ | (5 | )
October 26, 2021 |  | February 28, 2025 |  |  | 0.485 | % |  |  | 200 |  |  |  | 200 |  |  |  | 17 |  |  |  | 4 |
March 31, 2022 |  | February 28, 2025 |  |  | 0.623 | % |  |  | 100 |  |  |  | 100 |  |  |  | 22 |  |  |  | 5 |
September 30, 2022 |  | September 30, 2026 |  |  | 3.156 | % |  |  | 350 |  |  |  | 350 |  |  |  | 9 |  |  |  | — |
January 2,2024 |  | January 31, 2028 |  |  | 2.841 | % |  |  | 250 |  |  |  | — |  |  |  | 7 |  |  |  | — |
September 30, 2022 |  | September 30, 2027 |  |  | 3.198 | % |  |  | 350 |  |  |  | 350 |  |  |  | 10 |  |  |  | — |
January 2, 2024 |  | January 31, 2029 |  |  | 2.986 | % |  |  | 250 |  |  |  | — |  |  |  | 6 |  |  |  | — |
September 30, 2022 |  | September 30, 2026 |  |  | 3.358 | % |  |  | 600 |  |  |  | 600 |  |  |  | 10 |  |  |  | — |
|  |  |  |  |  |  |  | 2,400 |  |  |  | 1,800 |  |  |  | 83 |  |  |  | 4 |
March 31, 2020 |  | January 31, 2024 |  |  | 1.000 | % |  |  | 350 |  |  |  | 350 |  |  |  | 16 |  |  |  | — |
March 31, 2020 |  | January 31, 2024 |  |  | 1.000 | % |  |  | 350 |  |  |  | 350 |  |  |  | 16 |  |  |  | — |
|  |  |  |  |  |  |  | 700 |  |  |  | 700 |  |  |  | 32 |  |  |  | — |
|  |  |  |  |  |  | $ | 3,100 |  |  | $ | 2,500 |  |  | $ | 115 |  |  | $ | 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. Changes in the fair value of interest rate caps are recorded immediately in earnings, as the Company has not designated these instruments as hedges and therefore these instruments do not qualify for hedge accounting. The following table provides a summary of the losses on derivatives not designated as hedging instruments, consisting of balance sheet hedges and interest rate caps:
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Net losses recognized in income |  | $ | (11 | ) |  | $ | (2 | ) |  | $ | (4 | ) |  | $ | (9 | )
Currency Option Agreements In connection with financing the Atotech Acquisition, the Company issued euro denominated term loan debt. In anticipation of entering into these euro denominated loans, in 2021 the Company purchased foreign currency option contracts to fix the conversion of EUR 300 into U.S. dollars. The options settled on January 31, 2022 and the Company recorded a gain of $5, net of premiums, which is included 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 https://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 https://asc.fasb.org/extlink&oid=126731327&loc=d3e90205-114008 + Details
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