The Company is exposed to market risk, such as fluctuations in foreign currency exchange rates, commodity prices, equity price risk associated with share-based compensation awards, and changes in interest rates, which may result in cash flow risks. For exposures not offset within its operations, the Company may enter into various derivative or other financial instrument transactions pursuant to its risk management policies, which prohibit holding or issuing derivative financial instruments for speculative purposes. In certain cases, the Company may or may not designate certain derivative instruments as hedges for accounting purposes. Designation of derivative instruments is performed on a transaction basis to support hedge accounting. The changes in fair value of these hedging instruments are offset in part or in whole by corresponding changes in the fair value or cash flows of the underlying exposures being hedged. The Company assesses the initial and ongoing effectiveness of its hedging relationships in accordance with its documented policy.

The Company manufactures and sells its products globally. As a result, the Company’s financial results could be significantly affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets in which the Company manufactures and sells its products. The Company generally tries to use natural hedges within its foreign currency activities to minimize foreign currency risk. Where natural hedges are not in place, the Company considers managing certain aspects of its foreign currency activities and larger transactions through the use of foreign currency options or forward contracts.

Financial instruments, including cash equivalents and derivative contracts, expose the Company to counterparty credit risk for non-performance. The Company’s counterparties for cash equivalents and derivative contracts are banks and financial institutions that meet the Company’s requirement of high credit standing. The Company’s concentration of credit risk related to derivative contracts at September 30, 2022 and December 31, 2021 is not considered material to the condensed consolidated financial statements.

The Company has certain cash-settled share-based incentive compensation awards that are dependent upon the Company’s stock price. The related cash payouts increase as the stock price increases and decrease as the stock price decreases. The Company has entered into certain financial instruments that move in the opposite direction of the cash settlement of these awards. Based on the Company’s current position, these financial instruments mitigate the market risk related to the final settlement of the cash-settled share-based incentive compensation awards. Effective in the third quarter of 2021, investment options based on the Company’s stock price no longer exist under the incentive deferral plan and, at both September 30, 2022 and December 31, 2021, there are no deferred compensation balances correlated to the Company’s stock price. Refer to “Other Financial Instruments” section below for additional details on these liabilities and the related financial instruments used to reduce the Company’s equity price risk.

The Company enters into foreign currency forward purchase and sale contracts to mitigate its exposure to changes in exchange rates on certain intercompany and third-party trade receivables and payables and intercompany loans. The Company calculates the fair value of its foreign currency contracts using currency forward rates (level 2), to calculate forward values, and then discounts the forward values. The discount rates for all derivative contracts are based on bank deposit rates. Derivative gains and losses associated with these foreign currency forward contracts are recognized in “Cost of sales (exclusive of depreciation and amortization)” in the condensed consolidated statements of income (loss). The fair value of these derivative instruments at September 30, 2022 and December 31, 2021 is not considered material to the condensed consolidated financial statements.

The Company has certain employee compensation arrangements, including cash-settled share-based units granted under its long-term incentive plan, that are valued based on the Company’s stock price. The share equivalents outstanding related to cash-settled share-based awards are as follows:

The Company entered into financial instruments to mitigate the risk associated with both the vested and unvested portions of its cash-settled share-based incentive compensation awards. During the three and nine months ended September 30, 2022, the Company settled 1,600,000 and 3,100,000 common share equivalents under these agreements and the number of common share equivalents under these agreements was zero and 3,100,000 at September 30, 2022 and December 31, 2021.


	Balance sheet classification	September 30, 2022		December 31, 2021
Other financial instruments in asset positions(a)(b)	Prepayments and other current assets	$	—	$	35
Other financial instruments in liability positions(b)	Accrued expenses and other current liabilities	$	2	$	—

(b) There is a cash premium of $4 million at September 30, 2022 associated with one of these financial instruments, which is included in “Prepayments and other current assets” in the condensed consolidated balance sheets, and none at December 31, 2021.

The Company’s production processes are dependent upon the supply of certain raw materials that are exposed to price fluctuations on the open market. Commodity rate price forward contracts are executed to offset a portion of the exposure to potential change in prices for raw materials. The Company monitors its commodity price risk exposures regularly to maximize the overall effectiveness of its commodity forward contracts.

The Company has designated these contracts as cash flow hedging instruments. The Company records unrecognized gains and losses in other comprehensive income (loss) (“OCI” or “OCL”) and makes reclassifying adjustments into “Cost of sales (exclusive of depreciation and amortization)” within the condensed consolidated statements of income (loss) when the underlying hedged transaction is recognized in earnings. The Company had commodity derivatives outstanding with an equivalent notional amount of $58 million and $34 million at September 30, 2022 and December 31, 2021. Substantially all of the commodity price hedge contracts mature within one year.

The Company calculates the fair value of its commodity contracts using commodity forward rates (level 2), to calculate forward values, and then discounts the forward values. The discount rates for all derivative contracts are based on bank deposit rates. The fair value of these derivative instruments at September 30, 2022 and December 31, 2021 is not considered material to the condensed consolidated financial statements.

On March 17, 2021, all of the outstanding foreign currency borrowings designated as a net investment hedge were discharged, as a result, there were no outstanding foreign currency denominated borrowings designated as a net investment hedge at September 30, 2022 and December 31, 2021. The Company’s debt instruments are discussed further in Note 8, “Debt and Other Financing Arrangements”.

The following table represents the amount of gain (loss) recognized in accumulated other comprehensive income (loss) before any reclassifications into net income (loss) for derivative and non-derivative instruments designated as hedges:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Commodity price hedge contracts designated as cash flow hedges	$	(6)	$	—	$	(13)	$	1
Foreign currency borrowings designated as a net investment hedge	$	—	$	—	$	—	$	11

The Company estimates approximately $12 million included in accumulated OCI or OCL at September 30, 2022 will be reclassified into net income (loss) within the following twelve months. Refer to Note 13, “Shareholders’ Equity” for further information.

Assets may be measured at fair value on a nonrecurring basis. These assets include long-lived assets and intangible assets, which may be written down to fair value as a result of impairment. There were no fair value estimates on a nonrecurring basis during the nine months ended September 30, 2022 and 2021.


		September 30, 2022				December 31, 2021
	Fair value hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt (including current maturities):
Term loans and senior notes	Level 2	$	4,873	$	4,888	$	4,998	$	5,060

The fair value of the Company’s public senior notes and private borrowings under its New Credit Facility, as subsequently defined in Note 8, “Debt and Other Financing Arrangements”, is based on observable inputs, and any borrowings on the revolving credit facility approximate fair value. The Company also had $118 million and $77 million at September 30, 2022 and December 31, 2021 in other debt whose carrying value approximates fair value, which consists primarily of foreign debt with maturities of one year or less.