Derivative Instruments and Hedging Activities

12 Months Ended

Dec. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

Interest Rate Risk

The Company’s exposure to interest rate risk relates primarily to outstanding variable rate debt and adverse movements in the related market rates. Typically, the most significant component of the Company’s interest rate risk relates to amounts outstanding under the 2019 Revolving Credit Agreement, the 2019 Term Loan and the 2021 Senior Notes.

Commodity Price Risk Management

The Company has arrangements with certain customers under which it has a firm commitment to deliver copper-based superconductors at a fixed price. In order to minimize the volatility that fluctuations in the price of copper have on the Company’s sales of these commodities, the Company enters into commodity hedge contracts. As commodity contracts settle, gains (losses) as a result of changes in fair values are adjusted to the contracts with the customers through revenues.

Foreign Exchange Rate Risk Management

The Company generates a substantial portion of its revenues and expenses in international markets, principally Germany and other countries in the European Union and Switzerland, which subjects its operations to the exposure of exchange rate fluctuations. The impact of currency exchange rate movement can be positive or negative in any period. The Company periodically enters into foreign currency contracts in order to minimize the volatility that fluctuations in currency translation have on its monetary transactions. Under these arrangements, the Company typically agrees to purchase a fixed amount of a foreign currency in exchange

for a fixed amount of U.S. Dollars or other currencies on specified dates with maturities of less than twelve months, with some agreements extending to longer periods. These transactions do not qualify for hedge accounting and, accordingly, the instrument is recorded at fair value with the corresponding gains and losses recorded in the consolidated statements of income and comprehensive income.

In addition, the Company periodically enters into purchase and sales contracts denominated in currencies other than the functional currency of the parties to the transaction. The Company accounts for these transactions separately valuing the “embedded derivative” component of these contracts. The contracts, denominated in currencies other than the functional currency of the transacting parties, amounted to $15.3 million and $8.5 million for the purchase of products as of December 31, 2022 and 2021, respectively. There were no contracts denominated in currencies other than the functional currency of the transacting parties for the delivery of products as of December 31, 2022 and 2021, respectively. The changes in the fair value of these embedded derivatives are recorded in interest and other income (expense), net in the consolidated statements of income and comprehensive income.

The Company had the following notional amounts outstanding under foreign exchange contracts, cross-currency interest rate swap agreements and long-term debt designated as net investment hedges and the respective fair value of the instruments recorded in the consolidated balance sheets as follows (in millions):


	December 31, 2022					December 31, 2021
	Notional (in USD)		Fair Value			Notional (in USD)		Fair Value
Derivatives designated as hedging instruments
Interest rate cross-currency swap agreements
Other current assets			$	14.8				$	6.4
Other assets				23.0					—
Other current liabilities				—					(5.8	)
Other long-term liabilities				(12.2	)				(18.1	)
	$	393.3	$	25.6		$	504.3	$	(17.5	)
Long-term debt
Long-term debt		807.6		(17.0	)		825.8		(35.1	)
Total derivatives designated as hedging instruments	$	1,200.9	$	8.6		$	1,330.1	$	(52.6	)
Derivatives not designated as hedging instruments
Forward currency contracts
Other current assets	$	89.8	$	0.6		$	157.7	$	0.7
Other current liabilities		97.4		(0.3	)		23.0		(0.3	)
Embedded derivatives in purchase and delivery contracts
Other current assets		15.3		0.1			8.5		0.2
Fixed price commodity contracts
Other current assets		8.9		0.6			5.5		0.4
Total derivatives not designated as hedging instruments	$	211.4	$	1.0		$	194.7	$	1.0
Total derivatives	$	1,412.3	$	9.6		$	1,524.8	$	(51.6	)

The following is a summary of the gain (loss) included in the consolidated statements of income and comprehensive income related to the derivative instruments described above (in millions):


		Year Ended December 31,
	Financial Statement Classification	2022			2021			2020
Derivatives not designated as hedging instruments
Forward currency contracts	Interest and other income (expense), net	$	(3.2	)	$	(5.5	)	$	2.1
Embedded derivatives in purchase and delivery contracts	Interest and other income (expense), net		(0.1	)		0.1			0.5
			(3.3	)		(5.4	)		2.6
Derivatives designated as cash flow hedging instruments
Interest rate cross-currency swap agreements	Interest and other income (expense), net		0.1			(4.7	)		(3.0	)
Derivatives designated as net investment hedging instruments
Interest rate cross-currency swap agreements	Interest and other income (expense), net		8.5			10.2			10.1
Total		$	5.3		$	0.1		$	9.7


		Year Ended December 31,
	Financial Statement Classification	2022		2021		2020
Derivatives designated as cash flow hedging instruments
Interest rate cross-currency swap agreements	Accumulated other comprehensive income, net of tax	$	21.2	$	15.0	$	(20.4	)
Derivatives designated as net investment hedging instruments
Interest rate cross-currency swap agreements	Accumulated other comprehensive income, net of tax		9.1		25.6		(26.7	)
Long-term debt	Accumulated other comprehensive income, net of tax		13.9		10.8		(28.7	)
			23.0		36.4		(55.4	)
Total		$	44.2	$	51.4	$	(75.8	)