Derivative Financial Instruments

9 Months Ended

Sep. 30, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives recorded on the Condensed Consolidated Balance Sheets:

The following table is a summary of the fair value of derivatives outstanding at September 30, 2024 and December 31, 2023:


	Fair Value
	September 30, 2024				December 31, 2023
	Assets(a)		Accrued Liabilities		Assets(a)		Accrued Liabilities
Derivatives Designated as Cash Flow Hedges
Currency Contracts	$	6	$	—	$	—	$	—
Interest Rate Swaps	$	5	$	4	$	18	$	—
Natural Gas Hedges	$	—	$	—	$	—	$	1
Total Hedges	$	11	$	4	$	18	$	1
Derivatives Not Designated as Cash Flow Hedges
Currency Contracts	$	3	$	—	$	1	$	1
Total Derivatives	$	14	$	4	$	19	$	2

(a) At September 30, 2024 and December 31, 2023, current assets of $14 million and $19 million, respectively, are recorded in prepaid and other current assets on the Condensed Consolidated Balance Sheets.

Derivatives' Impact on the Condensed Consolidated Statement of Operations:

The following table summarizes the impact of the Company's derivatives on the unaudited Condensed Consolidated Statement of Operations:


	Amount of Pre-Tax Gain (Loss) Recognized in Earnings						Amount of Pre-Tax Gain (Loss) Recognized in Earnings
	Revenue		Cost of Goods Sold		Other (expense) income, net		Cost of Goods Sold		Other (expense) income, net
	Three Months Ended September 30, 2024						Three Months Ended September 30, 2023

Derivatives Not Designated as Hedging Instruments
Currency Contracts	$	—	$	—	$	(2)	$	—	$	2
Derivatives Designated as Hedging Instruments
Currency Contracts	$	2	$	—	$	—	$	—	$	—
Natural Gas Hedges	$	—	$	—	$	—	$	(1)	$	—
Total Derivatives	$	2	$	—	$	(2)	$	(1)	$	2


	Amount of Pre-Tax Gain (Loss) Recognized in Earnings						Amount of Pre-Tax Gain (Loss) Recognized in Earnings
	Revenue		Cost of Goods Sold		Other (expense) income, net		Cost of Goods Sold		Other (expense) income, net
	Nine Months Ended September 30, 2024						Nine Months Ended September 30, 2023

Derivatives Not Designated as Hedging Instruments
Currency Contracts	$	—	$	—	$	(5)	$	—	$	(2)
Derivatives Designated as Hedging Instruments
Currency Contracts	$	2	$	—	$	—	$	(4)	$	—
Natural Gas Hedges	$	—	$	(1)	$	—	$	(4)	$	—
Total Derivatives	$	2	$	(1)	$	(5)	$	(8)	$	(2)

Interest Rate Risk

As a result of the 2024 Amendment (discussed in Note 11), the Company noted that the hedged transaction associated with the interest rate swap with a notional value of $200 million (which converted the variable rate to a fixed rate for a portion of the 2022 Term Loan Facility) had changed as the hedged transaction would now convert the variable rate to a fixed rate for a portion of the 2024 Term Loan Facility. There were no amendments to the terms of the $200 million interest rate swap, including the notional value, index rate, or expiration date as a result of the 2024 Amendment. However, given the change in the hedged transaction, we completed a hedge effectiveness test and determined that this hedge instrument continues to be highly effective at achieving offsetting cash flows related to the hedged transaction, enabling us to continue to apply hedge accounting over the remaining term of this hedge relationship.

In line with the original maturity date, one of the interest rate swap agreements (notional value of $250 million) expired in September 2024. As a result of this, on September 26, 2024, the Company entered into two new interest-rate swap agreements for a notional of $125 million each with two counterparty banks, for an aggregate notional of $250 million. These new agreements are effective as of September 30, 2024 and will mature on September 30, 2031, in line with the maturity date of the 2024-B Term Loan Facility following Amendment No.6 (discussed in Note 11). The Company has designated these two new hedges as cash flow hedges with the objective of ensuring that the Company continues to achieve the offsetting effect to the interest rate volatility associated with the $250 million portion of the 2024-B Term Loan Facility.

Additionally, on September 26, 2024, the counterparty bank associated with one of the existing interest rate swap contracts (notional value of $250 million) novated its rights and obligations in the interest rate swap contracts to a new counterparty. No other terms and conditions of the interest rate swap contract were impacted by this transaction. We also determined that it is probable the new counterparty will perform its obligations under the interest rate swap agreements. However, following the novation, the Company terminated the existing interest rate swap agreement and simultaneously entered into a new interest rate swap agreement with the new counterparty bank with an effective date of September 30, 2024 and expiring on September 30, 2031 (in line with the maturity date of the 2024-B Term Loan Facility). At the time of this change, the Company determined that the interest payments hedged are still probable to occur, therefore, the gains accumulated of $3 million on the previous interest rate swap are being amortized into interest expense through March 11, 2028, the original maturity of the previous term loan agreement. As a result of this transaction, we completed a hedge effectiveness test and determined that this hedge instrument is highly effective at achieving offsetting cash flows related to the hedged transaction, enabling us to apply hedge accounting over the term of the new hedge relationship.

As of September 30, 2024, the Company maintains a total of $950 million of interest rate swaps (with $450 million maturing in March 2028 and $500 million maturing in September 2031) with the objective in using the interest-rate swap agreements to add stability to interest expense and to manage the Company's exposure to interest rate movements. These interest rate swaps have been designated as cash flow hedges and involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Fair value gains or losses on these cash flow hedges are recorded in accumulated other comprehensive loss and are subsequently reclassified into interest expense in the same periods during which the hedged transactions affect earnings.

At September 30, 2024 and December 31, 2023, the net unrealized loss of $7 million and the unrealized gain of $18 million, respectively, was recorded in "Accumulated other comprehensive loss" on the unaudited Condensed Consolidated Balance Sheet. For the three and nine months ended September 30, 2024, the amounts recorded in interest expense related to the interest-rate swap agreements were $7 million and $23 million, respectively, of which a gain of approximately $2 million and $5 million, respectively, was reclassified from "Accumulated other comprehensive loss" to interest expense. For the three and nine months ended September 30, 2023, the net amounts recorded in interest expense related to the interest-rate swap agreements were $8 million and $18 million, respectively, of which $2 million for each period was reclassified from "Accumulated other comprehensive loss" to interest expense.

Foreign Currency Risk

From time to time, we enter into foreign currency contracts used to hedge forecasted third party non-functional currency sales for our South African subsidiaries and forecasted non-functional currency cost of goods sold for our Australian subsidiaries. Historically, we have used a combination of zero-cost collars or forward contracts to reduce the exposure. These foreign currency contracts are designated as cash flow hedges. Changes to the fair value of these foreign currency contracts are recorded as a component of other comprehensive (loss) income, if these contracts remain highly effective, and are recognized in net sales or costs of goods sold in the period in which the forecasted transaction affects earnings or are recognized in other (expense) income, net when the transactions are no longer probable of occurring. As of September 30, 2024, we had notional amounts of 136 million Australian dollars ($94 million at the September 30, 2024 exchange rate) that expire between October 30, 2024 and December 27, 2024 to reduce the exposure of our Australian subsidiaries’ cost of sales to fluctuations in currency rates. As of September 30, 2024, we had notional amounts of 915 million South African Rand ($53 million at the September 30, 2024 exchange rate) that expire between October 30, 2024 and December 27, 2024 to reduce the exposure of our South African subsidiaries' third party sales to fluctuations in currency rates. At September 30, 2024, there was a net unrealized gain of $6 million recorded in "Accumulated other comprehensive loss" on the unaudited Condensed Consolidated Balance Sheet, which is expected to be fully recognized in earnings over the next twelve months. There were no corresponding amounts as of December 31, 2023. At December 31, 2022, there was an unrealized net loss of $4 million recorded in "Accumulated other comprehensive loss" on the unaudited Condensed Consolidated Balance Sheet, which was fully recognized in earnings during the nine months ended September 30, 2023.

From time to time, we enter into foreign currency contracts for the South African Rand, Australian Dollar, Euro, Pound Sterling, and Saudi Riyal to reduce exposure of our subsidiaries’ balance sheet accounts not denominated in our subsidiaries’ functional currency to fluctuations in foreign currency exchange rates. Historically, we have used forward contracts to reduce the exposure. For accounting purposes, these foreign currency contracts are not considered hedges. The change in fair value associated with these contracts is recorded in “Other (expense) income, net” within the unaudited Condensed Consolidated Statement of Operations and partially offsets the change in value of third party and intercompany-related receivables not denominated in the functional currency of the subsidiary. At September 30, 2024, there was (i) 734 billion South African Rand (or approximately $43 million at September 30, 2024 exchange rate), (ii) 254 million Australian dollars (or approximately $176 million at the September 30, 2024 exchange rate), (iii) 32 million Pound Sterling (or approximately $43 million at the September 30, 2024 exchange rate), (iv) 12 million Euro (or approximately $13 million at the September 30, 2024 exchange rate), and (v) 88 million Saudi Riyal (or approximately $24 million at the September 30, 2024 exchange rate) of notional amounts of outstanding foreign currency contracts. At December 31, 2023, there was (i) 837 million South African Rand (or approximately $49 million at the September 30, 2024 exchange rate), (ii) 153 million Australian dollars (or approximately $106 million at the September 30, 2024 exchange rate), (iii) 45 million Pound Sterling (or approximately $60 million at the September 30, 2024 exchange rate), (iv) 45 million Euro (or approximately $50 million at the September 30, 2024 exchange rate) and (v) 67 million Saudi Riyal (or approximately $18 million at the September 30, 2024 exchange rate) of notional amounts of outstanding foreign currency contracts.