The Company’s ongoing business operations expose it to various risks, including fluctuating foreign exchange rates, interest rate risk, and commodity price risk, in particular natural gas. To manage these risks, the Company periodically enters into derivative financial instruments, such as foreign exchange forward contracts, interest rate swap agreements, and commodity swaps, forward contracts, or options. The Company does not hold or enter into financial instruments for trading or speculative purposes. All derivatives are recorded on the condensed consolidated balance sheets at fair value.

Certain subsidiaries have assets and liabilities denominated in currencies other than their respective functional currencies, which creates foreign exchange risk. The Company’s principal strategy in managing its exposure to changes in foreign currency exchange rates is to naturally hedge the foreign currency-denominated liabilities on its balance sheet against corresponding assets of the same currency, such that any changes in liabilities due to fluctuations in exchange rates are offset by changes in their corresponding foreign currency assets. In order to further reduce this exposure, the Company also uses foreign exchange forward contracts to economically hedge the impact of the variability in exchange rates on assets and liabilities denominated in certain foreign currencies. The Company entered into a specific such foreign exchange forward contract in December 2020 in order to economically hedge the euro-denominated purchase price of the PMMA business, which was acquired on May 3, 2021, as discussed in Note 3. These derivative contracts are not designated for hedge accounting treatment.

As of September 30, 2022, the Company had open foreign exchange forward contracts with a notional U.S. dollar equivalent absolute value of $547.6 million. The following table displays the notional amounts of the most significant

Open foreign exchange forward contracts as of September 30, 2022 had maturities occurring over a period of two months.

The Company also enters into forward contracts, as deemed appropriate, with the objective of managing the currency risk associated with forecasted U.S. dollar-denominated raw materials purchases by one of its subsidiaries whose functional currency is the euro. By entering into these forward contracts, which are designated as cash flow hedges, the Company buys a designated amount of U.S. dollars and sells euros at the prevailing market rate to mitigate the risk associated with the fluctuations in the euro-to-U.S. dollar foreign currency exchange rates. The qualifying hedge contracts are marked-to-market at each reporting date and any unrealized gains or losses are included in Accumulated Other Comprehensive Income (“AOCI”) to the extent effective, and reclassified to cost of sales in the period during which the transaction affects earnings or it becomes probable that the forecasted transaction will not occur.

The Company had no open foreign exchange cash flow hedges as of September 30, 2022.

The Company purchases certain commodities, primarily natural gas, to operate facilities and generate heat and steam for various manufacturing processes, which purchases are subject to price volatility. In order to manage the risk of price fluctuations associated with these commodity purchases, as deemed appropriate, the Company may enter into commodity swaps, forward contracts, or options. These commodity derivatives are designated as cash flow hedges, and as such, the contracts are marked-to-market at each reporting date and any unrealized gains or losses are included in AOCI to the extent effective, and reclassified to cost of sales in the period during which the transaction affects earnings or it becomes probable that the forecasted transaction will not occur.

Open commodity cash flow hedges as of September 30, 2022 had maturities occurring over a period of three months and had a notional value of approximately 63 thousand megawatt hours of natural gas purchases.

On September 6, 2017, the Company issued the 2024 Term Loan B, which currently bears an interest rate of LIBOR plus 2.00%, subject to a 0.00% LIBOR floor. In order to reduce the variability in interest payments associated with the Company’s variable rate debt, during 2017 the Company entered into certain interest rate swap agreements to convert a portion of these variable rate borrowings into a fixed rate obligation. These interest rate swap agreements are designated as cash flow hedges, and as such, the contracts are marked-to-market at each reporting date and any unrealized gains or losses are included in AOCI to the extent effective, and reclassified to interest expense in the period during which the transaction affects earnings or it becomes probable that the forecasted transaction will not occur. Under the terms of the swap agreements, with a net notional U.S. dollar equivalent of $200.0 million and an effective date of September 29, 2017, the Company was required to pay the counterparties a stream of fixed interest payments at a rate of 1.81%, and in turn, receives variable interest payments based on 1-month LIBOR from the counterparties. These interest rate swap agreements matured in September 2022, and the Company has no remaining open interest rate swap agreements.

The Company accounts for its cross currency swaps (“CCS”) under the spot method, meaning that changes in the fair value of the hedge included in the assessment of effectiveness (changes due to spot foreign exchange rates) are

recorded within AOCI, where they remain until either the sale or substantially complete liquidation of the subsidiary subject to the hedge. Additionally, the initial value of any component excluded from the assessment of effectiveness is recognized in income using a systematic and rational method over the life of the hedging instrument and any difference between the change in the fair value of the excluded component and amounts recognized in income under that systematic and rational method is recognized in AOCI. When applicable, the Company amortizes any initial excluded component value of a CCS as a reduction of “Interest expense, net” in the condensed consolidated statements of operations using the straight-line method over the remaining term of the related CCS. Additionally, interest receipts and payments are accrued under the terms of the Company’s CCS and are recognized within “Interest expense, net” in the condensed consolidated statements of operations.

The Company entered into a CCS arrangement (the “2017 CCS”) on September 1, 2017, swapping U.S. dollar principal and interest payments of $500.0 million at an interest rate of 5.375% on its 2025 Senior Notes for euro-denominated payments of €420.0 million at a weighted average interest rate of 3.45% for approximately five years. On February 26, 2020, the Company settled its 2017 CCS and replaced it with a new CCS arrangement (the “2020 CCS”) that carried substantially the same terms as the 2017 CCS. Under the 2020 CCS, the Company notionally exchanged $500.0 million at an interest rate of 5.375% for €459.3 million at a weighted average interest rate of 3.672% for approximately 2.7 years, with a final maturity of November 3, 2022. The cash flows under the 2020 CCS are aligned with the Company’s principal and interest obligations on its 5.375% 2025 Senior Notes. Refer to the Annual Report for further information.

On April 7, 2022, the Company settled its existing 2020 CCS, which were set to mature in November 2022. Upon settlement of the 2020 CCS, the Company realized net cash proceeds of $1.9 million.

The following table presents the effect of the Company’s derivative instruments, including those not designated for hedge accounting treatment, on the condensed consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021:

(1)

The $22.0 million loss incurred from the change in fair value of the forward currency hedge arrangement on the euro-denominated purchase price of the PMMA business during the nine months ended September 30, 2021 is presented separately in the condensed consolidated statements of operations from the gains recorded on the Company’s other foreign exchange forward contracts.

The following table presents the effect of cash flow and net investment hedge accounting on AOCI for the three and nine months ended September 30, 2022 and 2021:


`	Gain (Loss) Recognized in AOCI on Balance Sheet
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Designated as Cash Flow Hedges
Foreign exchange cash flow hedges	$	—	$	0.4	$	—	$	3.1
Commodity cash flow hedges		(5.4)		—		(5.4)		—
Interest rate swaps		(0.2)		0.8		2.2		2.5
Total	$	(5.6)	$	1.2	$	(3.2)	$	5.6
Designated as Net Investment Hedges
Cross currency swaps (CCS)	$	—	$	13.1	$	15.8	$	32.1
Total	$	—	$	13.1	$	15.8	$	32.1


	Gain (Loss) Recognized in Other expense, net in Statement of Operations
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Settlements and changes in the fair value of forward contracts (not designated as hedges) ⁽¹⁾	$	33.7	$	23.3	$	81.6	$	43.4
Remeasurement of foreign currency-denominated assets and liabilities	$	(35.4)	$	(23.7)	$	(83.4)	$	(43.0)
Total	$	(1.7)	$	(0.4)	$	(1.8)	$	0.4

(1)

Amount does not include the loss of $22.0 million recorded from the change in fair value of the forward currency hedge arrangement on the euro-denominated purchase price of the PMMA business during the nine months ended September 30, 2021.

The Company expects to reclassify in the next twelve months an approximate $5.4 million net loss from AOCI into earnings related to the Company’s outstanding commodity cash flow hedges as of September 30, 2022.

The following tables summarize the gross and net unrealized gains and losses, as well as the balance sheet classification, of outstanding derivatives recorded in the condensed consolidated balance sheets:


	September 30, 2022
	Foreign
	Exchange		Commodity
Balance Sheet	Forward		Cash Flow
Classification	Contracts		Hedges		Total
Asset Derivatives:
Accounts receivable, net of allowance	$	11.5	$	—	$	11.5
Gross derivative asset position		11.5		—		11.5
Less: Counterparty netting		(0.7)		—		(0.7)
Net derivative asset position	$	10.8	$	—	$	10.8
Liability Derivatives:
Accounts payable	$	(0.7)	$	(1.8)	$	(2.5)
Gross derivative liability position		(0.7)		(1.8)		(2.5)
Less: Counterparty netting		0.7		—		0.7
Net derivative liability position	$	—	$	(1.8)	$	(1.8)
Total net derivative position	$	10.8	$	(1.8)	$	9.0


	December 31, 2021
	Foreign
	Exchange		Interest		Cross
Balance Sheet	Forward		Rate		Currency
Classification	Contracts		Swaps		Swaps		Total
Asset Derivatives:
Accounts receivable, net of allowance	$	2.3	$	—	$	—	$	2.3
Gross derivative asset position		2.3		—		—		2.3
Less: Counterparty netting		(0.1)		—		—		(0.1)
Net derivative asset position	$	2.2	$	—	$	—	$	2.2
Liability Derivatives:
Accounts payable	$	(1.3)	$	(2.2)	$	(17.4)	$	(20.9)
Gross derivative liability position		(1.3)		(2.2)		(17.4)		(20.9)
Less: Counterparty netting		0.1		—		—		0.1
Net derivative liability position	$	(1.2)	$	(2.2)	$	(17.4)	$	(20.8)
Total net derivative position	$	1.0	$	(2.2)	$	(17.4)	$	(18.6)

Forward contracts, interest rate swaps, commodity forward contracts, swaps, or options, and cross currency swaps are entered into with a limited number of counterparties, each of which allows for net settlement of all contracts through a single payment in a single currency in the event of a default on or termination of any one contract. As such, in accordance with the Company’s accounting policy, these derivative instruments are recorded on a net basis by counterparty within the condensed consolidated balance sheets.

Refer to Notes 11 and 18 of the condensed consolidated financial statements for further information regarding the fair value of the Company’s derivative instruments and the related changes in AOCI.