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Derivatives and Net Investment Hedge | 3 Months Ended
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Mar. 31, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives and Net Investment Hedge | (5) Derivatives and Net Investment Hedge 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. The following tables summarize the primary net hedging positions and fair values of foreign exchange forward contracts outstanding as of March 31, 2024 and December 31, 2023:
|  | March 31, 2024 |
Currency Hedged (Buy/Sell) |  | Net Notional Value |  |  | Fair Value Asset (Liability) |
U.S. dollar/Japanese yen |  | $ | 62 |  |  | $ | 3 |
U.S. dollar/South Korean won |  |  | 65 |  |  |  | 1 |
U.S. dollar/Taiwan dollar |  |  | 20 |  |  |  | 1 |
U.S. dollar/Singapore dollar |  |  | 1 |  |  |  | — |
U.S. dollar/Chinese renminbi |  |  | 5 |  |  |  | — |
Euro/U.S. dollar |  |  | 77 |  |  |  | — |
Euro/Chinese renminbi |  |  | 2 |  |  |  | — |
Euro/Canadian dollar |  |  | 1 |  |  |  | — |
U.S. dollar/Mexican peso |  |  | 4 |  |  |  | — |
U.K. pound sterling/U.S. dollar |  |  | 24 |  |  |  | — |
Canadian dollar/U.S. dollar |  |  | 1 |  |  |  | — |
Total |  | $ | 262 |  |  | $ | 5 |
|  | December 31, 2023 |
Currency Hedged (Buy/Sell) |  | Net Notional Value |  |  | Fair Value (Liability) Asset |
U.S. dollar/Japanese yen |  | $ | 65 |  |  | $ | — |
U.S. dollar/South Korean won |  |  | 70 |  |  |  | (3 | )
U.S. dollar/Taiwan dollar |  |  | 22 |  |  |  | — |
U.S. dollar/Singapore dollar |  |  | 1 |  |  |  | — |
U.S. dollar/Chinese renminbi |  |  | 8 |  |  |  | — |
Euro/U.S. dollar |  |  | 71 |  |  |  | — |
Euro/Chinese renminbi |  |  | 4 |  |  |  | — |
Euro/Canadian dollar |  |  | 1 |  |  |  | — |
U.S. dollar/Mexican peso |  |  | 5 |  |  |  | — |
U.K. pound sterling/U.S. dollar |  |  | 19 |  |  |  | — |
Total |  | $ | 266 |  |  | $ | (3 | )
The following table summarizes the net gains (losses) on derivatives designated as cash flow hedging instruments:
|  | Three Months Ended March 31, |
|  | 2024 |  |  | 2023 |
Foreign exchange forward contracts and interest rate hedges: |  |  |  |  |  |
Net gains (losses) recognized in accumulated OCI |  | $ | 32 |  |  | $ | (15 | )
Net gains (losses) reclassified from accumulated OCI into income |  | $ | — |  |  | $ | 1 |
In the above table, the Company corrected for an immaterial presentation error in the prior period net gains (losses) reclassified from accumulated OCI into income. The net amount of existing gains as of March 31, 2024 expected to be reclassified from OCI into earnings within the next 12 months is immaterial. Net Investment Hedges On January 1, 2023, the Company designated certain Euro-denominated debt as a net investment hedge to hedge a portion of its net investments in certain of its entities with functional currencies denominated in the Euro. On January 22, 2024, the Company prepaid its USD Tranche A in full using, in part, a €250 incremental borrowing under its Euro Tranche B, each as defined and further described in Note 8. On January 22, 2024, the Company designated the additional €250 of its Euro Tranche B as a net investment hedge. As of March 31, 2024, the total outstanding under its Euro Tranche B was €840 and the entire balance was designated as a net investment hedge. As of December 31, 2023, the Company designated as a net investment hedge €593 of its Euro Tranche B. For these net investment hedges, the Company defers recognition of the foreign currency remeasurement gains and losses within the foreign currency translation adjustment component of OCI. Interest Rate 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 Term Loan Facility, as defined and further described in Note 8, to a fixed rate. The Company acquired USD London Interbank Offered Rate (“LIBOR”) interest rate cap agreements as a result of its acquisition of Atotech Limited (“Atotech”) on August 17, 2022 (the “Atotech Acquisition”) and had utilized these agreements to offset Term SOFR on its Term Loan Facility. Effective June 30, 2023, the Company’s USD LIBOR based interest rate caps were converted to Term SOFR. The Company also had two USD LIBOR based swaps that were converted to Term SOFR, effective June 30, 2023. The conversions from USD LIBOR to Term SOFR did not have a material impact on the Company’s results of operations. The following table summarizes the terms and fair values of interest rate swaps and interest rate caps outstanding at March 31, 2024 and December 31, 2023:
|  |  |  |  |  |  |  |  |  |  |  |  | March 31, 2024 |  |  | December 31, 2023 |
Effective Date |  | Maturity |  | Fixed Rate |  |  | Notional Amount at Effective Date |  |  | Notional Amount at March 31, 2024 |  |  | Fair Value Asset (Liability) |  |  | Fair Value Asset (Liability) |
Interest Rate Swaps |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
June 30, 2023 |  | February 28, 2025 |  |  | 0.391 | % |  | $ | 200 |  |  | $ | 200 |  |  | $ | 8 |  |  | $ | 9 |
June 30, 2023 |  | February 28, 2025 |  |  | 0.543 | % |  |  | 300 |  |  |  | 300 |  |  |  | 12 |  |  |  | 14 |
September 30, 2022 |  | September 30, 2026 |  |  | 3.156 | % |  |  | 350 |  |  |  | 350 |  |  |  | 10 |  |  |  | 5 |
January 2, 2024 |  | January 31, 2028 |  |  | 2.841 | % |  |  | 250 |  |  |  | 250 |  |  |  | 11 |  |  |  | 7 |
September 30, 2022 |  | September 30, 2027 |  |  | 3.198 | % |  |  | 350 |  |  |  | 350 |  |  |  | 10 |  |  |  | 5 |
January 2, 2024 |  | January 31, 2029 |  |  | 2.986 | % |  |  | 250 |  |  |  | 250 |  |  |  | 10 |  |  |  | 6 |
September 30, 2022 |  | September 30, 2026 |  |  | 3.358 | % |  |  | 600 |  |  |  | 400 |  |  |  | 9 |  |  |  | 5 |
December 28, 2023 |  | December 31, 2027 |  |  | 4.550 | % |  |  | 500 |  |  |  | 500 |  |  |  | (3 | ) |  |  | (10 | )
|  |  |  |  |  |  |  | 2,800 |  |  |  | 2,600 |  |  |  | 67 |  |  |  | 41 |
Interest Rate Caps |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
June 30, 2023 |  | January 31, 2024 |  |  | 0.805 | % |  |  | 350 |  |  |  | — |  |  |  | — |  |  |  | 1 |
June 30, 2023 |  | January 31, 2024 |  |  | 0.805 | % |  |  | 350 |  |  |  | — |  |  |  | — |  |  |  | 2 |
|  |  |  |  |  |  |  | 700 |  |  |  | — |  |  |  | — |  |  |  | 3 |
|  |  |  | Total |  |  | $ | 3,500 |  |  | $ | 2,600 |  |  | $ | 67 |  |  | $ | 44 |
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, the hedging relationship will be discontinued and changes in the fair value of the hedging instruments from the last assessment period that were effective up to the current period will be recorded immediately in earnings. Amounts previously recorded in OCI will remain in OCI and will be reclassified to earnings when the interest payments impact consolidated earnings. If the Company determines that the interest payments are unlikely to occur, amounts previously recorded in OCI will be reclassified to earnings immediately. 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 summarizes the net losses on derivatives not designated as hedging instruments, consisting of balance sheet hedges and interest rate caps:
|  | Three Months Ended March 31, |
|  | 2024 |  |  | 2023 |
Net gains (losses) recognized in income |  | $ | (4 | ) |  | $ | (10 | )
In the above table, the Company corrected for an immaterial presentation error in the prior period net gains (losses) recognized in income.

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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://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//815/tableOfContent + Details
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