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, net.

The following tables summarize the primary net hedging positions and fair values of foreign exchange forward contracts outstanding as of March 31, 2023 and December 31, 2022:


	March 31, 2023
Currency Hedged (Buy/Sell)	Net Notional Value		Fair Value Asset (Liability)
U.S. dollar/Japanese yen	$	21	$	1
U.S. dollar/South Korean won		49		(1	)
U.S. dollar/Taiwan dollar		34		—
U.S. dollar/U.K. pound sterling		2		—
Euro/U.S. dollar		44		—
Euro/Chinese renminbi		19		—
Total	$	169	$	—


	December 31, 2022
Currency Hedged (Buy/Sell)	Net Notional Value		Fair Value Asset (Liability)
U.S. dollar/Japanese yen	$	57	$	—
U.S. dollar/South Korean won		75		(4	)
U.S. dollar/Taiwan dollar		33		1
U.S. dollar/U.K. pound sterling		7		—
U.S. dollar/Singapore dollar		1		—
U.S. dollar/Chinese renminbi		9		—
Euro/U.S. dollar		485		1
Euro/Chinese renminbi		31		1
U.K. pound sterling/euro		4		—
Total	$	702	$	(1	)

The net amount of existing losses as of March 31, 2023 expected to be reclassified from OCI into earnings within the next 12 months is immaterial.

During the three months ended March 31, 2023, the Company designated a euro net investment hedge to offset the foreign exchange exposure of the Euro Tranche B, as defined and described further in Note 9. As a result, any mark-to-market foreign exchange impact of the Euro Tranche B is recorded in OCI.

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 9, to a fixed rate. The Company acquired USD London Interbank Offered Rate (“LIBOR”) interest rate cap agreements as a result of the Company’s August 17, 2022 acquisition of Atotech (the “Atotech Acquisition”) and is utilizing these agreements to offset Term SOFR 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 following table summarizes the terms and fair values of interest rate swaps and interest rate caps outstanding at March 31, 2023 and December 31, 2022:


									March 31, 2023		December 31, 2022
Effective Date	Maturity	Fixed Rate			Notional Amount at Effective Date		Notional Amount at March 31, 2023		Fair Value Asset		Fair Value Asset
Interest Rate Swaps
April 5, 2019	March 31, 2023		2.309	%	$	300	$	—	$	—	$	1
October 26, 2021	February 28, 2025		0.485	%		200		200		14		16
March 31, 2022	February 28, 2025		0.623	%		100		300		20		22
September 30, 2022	September 30, 2026		3.156	%		350		350		4		8
January 2, 2024	January 31, 2028		2.841	%		250		—		2		5
September 30, 2022	September 30, 2027		3.198	%		350		350		2		8
January 2, 2024	January 31, 2029		2.986	%		250		—		—		4
September 30, 2022	September 30, 2026		3.358	%		600		600		4		10
						2,400		1,800		46		74
Interest Rate Caps
March 31, 2020	January 31, 2024		1.000	%		350		350		12		15
March 31, 2020	January 31, 2024		1.000	%		350		350		12		15
						700		700		24		30
		Total			$	3,100	$	2,500	$	70	$	104

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.

In connection with financing the Atotech Acquisition, the Company issued euro denominated term loan debt. In anticipation of entering into these euro denominated loans, the Company purchased foreign currency option contracts in 2021 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, in 2022, which is included in other (income) expense, net.