QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
−Removed: Our major market risk exposure is potential losses arising from changing rates and prices regarding foreign currency exchange rate risk, interest rate risk, commodity price risk and credit risk.
−Removed: The audit committee of our board of directors regularly reviews foreign exchange, interest rate and commodity hedging activity and monitors compliance with our hedging policy.
+Added: Our major market risk exposure is potential losses arising from changing rates and prices regarding foreign currency exchange rate risk, interest rate risk and credit risk.
+Added: The audit committee of our board of directors regularly reviews foreign exchange and interest rate hedging activity, and monitors compliance with our hedging policy.
We do not use financial instruments for speculative purposes, and we limit our hedging activity to the underlying economic exposure.
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Our financial results are subject to the impact of gains and losses on currency translations, which occur when the financial statements of foreign operations are translated into U.S.
−Removed: We operate a geographically diverse business with approximately 6% and 10% of our sales during the years ended December 31, 2021 and 2020, respectively, coming from our international operations in currencies other than the U.S.
+Added: We operate a geographically diverse business with approximately 6% of our sales during the years ended December 31, 2022 and 2021, respectively, coming from our international operations in currencies other than the U.S.
Because consolidated financial results are reported in U.S.
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dollar in recent years have fluctuated significantly and may continue to do so in the future.
−Removed: The foreign currencies to which we have the most significant exchange rate exposure is the British pound.
−Removed: Sales in this currencies represented approximately 4% of our sales during the year ended December 31, 2021.
−Removed: A 10% change would have impacted sales by approximately $2.7 million, or 0.4% of sales assuming product pricing remained constant.
+Added: The foreign currency to which we have the most significant exchange rate exposure is the British pound.
+Added: Sales in this currency represented approximately 5% of our sales during the year ended December 31, 2022.
+Added: A 10% change in the average British pound to U.S.
+Added: dollar exchange rate during the year ended December 31, 2022 would have impacted sales by approximately $3.8 million over the same period, or 0.5% of our total sales, assuming product pricing remained constant.
The effect of translating foreign subsidiaries’ balance sheets into U.S.
−Removed: dollars is included in other comprehensive income.
−Removed: The impact of gains and losses on transactions denominated in currencies other than the functional currency of the relevant operations are included in other non-operating expense.
+Added: dollars is included in other
+Added: comprehensive income.
+Added: The impact of gains and losses on transactions denominated in currencies other than the functional currency of the relevant operations are included in other expense (income), net in the consolidated statements of income.
Income and expense items are translated at average exchange rates during the year.
−Removed: Net foreign exchange included in other expense was a $4.7 million gain for the year ended December 31, 2021.
−Removed: The foreign currency gain realized in the year ended December 31, 2021 was primarily driven by the non-permanent intercompany debt denominated in local currency and translated to U.S.
+Added: Net foreign currency exchange gains and losses included in other expense (income), net was a $1.0 million loss for the year ended December 31, 2022.
+Added: The foreign currency loss realized in the year ended December 31, 2022 was primarily driven by the non-permanent intercompany debt denominated in local currency and translated to U.S.
dollars, and was principally non-cash in nature.
−Removed: In February 2018, we refinanced our existing senior secured term loan facility whereby the 2018 Term Loan Facility was used to repay the then-existing U.S.
−Removed: dollar denominated and Euro denominated Term Loan Facilities, thus reducing our exposure to fluctuations in the euro.
−Removed: Concurrent with the term loan refinancing, we entered into multiple cross currency swap arrangements to hedge foreign currency risk.
−Removed: The swaps are intended to enable us to effectively hedge our exposure on the net investments of certain of our Euro denominated subsidiaries.
−Removed: In October 2019, the Company settled all of its February 2018 swaps and concurrently entered into the October 2019 swaps with the same notional amount of €280,000 ($317,173 as of December 31, 2021) and same maturity date of February 2023, which resulted in cash proceeds to the Company of $38,070.
−Removed: Consistent with the February 2018 swaps, the October 2019 swaps were designed to enable the Company to effectively convert a portion of its fixed-rate U.S.
−Removed: dollar-denominated debt obligations under the Senior Secured Term Loan Facility into a Euro-denominated equivalent.
−Removed: In March 2021, as a result of the Performance Materials and Performance Chemicals divestitures, the Company settled its October 2019 cross-currency swaps.
−Removed: At the date of settlement, the total notional value of the cross-currency swaps was $311,380.
−Removed: The Company paid $13,170 in cash to settle the swaps, as the underlying subsidiary subject to the net investment hedging relationship was part of the Performance Chemicals business.
Interest Rate Risk
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In July 2020, we entered into additional interest rate cap agreements to mitigate interest rate volatility from August 2020 to August 2023, with a cap rate of 1.00% on $400.0 million of notional variable-rate debt.
−Removed: In August 2021, PQ Corporation novated $900,000 of its interest rate caps to Ecovyst Catalyst Technologies LLC.
+Added: In August 2021, PQ Corporation novated $900.0 million of its interest rate caps to Ecovyst Catalyst Technologies LLC.
+Added: In January 2022, the Company entered into two new interest rate cap agreements, with notional amounts of $250.0 million each and cap rates of 1.00% and paid $4.5 million in premiums.
+Added: The term for one of the interest rate caps is August 2022 through October 2024 and the term for the other is September 2023 through October 2025.
+Added: In November 2022, the Company entered into a new interest rate cap agreement to mitigate interest rate volatility from July 2023 through July 2024, with a cap rate of 1.00% on $150.0 million of notional variable-rate debt and annuitized premium of $5.3 million during the effective period, and mitigate interest rate volatility from July 2024 through July 2026, with a cap rate of 1.00% and 175.0 million notional variable-rate debt and annuitized premium of $6.1 million during the effective period.
We are exposed to credit risk on financial instruments to the extent our counterparty fails to perform certain duties as required under the provisions of an agreement.
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Concentration of credit risk can result primarily from trade receivables, for example, with certain customers operating in the same industry or customer groups located in the same geographic region.
−Removed: Credit risk related to these types of receivables is managed through credit approval and monitoring procedures.
+Added: Credit risk related to these
+Added: types of receivables is managed through credit approval and monitoring procedures.
In the year ended December 31, 2022, we wrote off a nominal amount of bad debt on total sales of $820.2 million.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.