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Derivative Instruments and Hedging Activities
 6 Months Ended
Jun. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities
10.
Derivative Instruments and Hedging Activities

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 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 financial instruments recorded in the consolidated balance sheets as follows (in millions):

 

 

 

June 30, 2023

 

 

December 31, 2022

 

 

Notional (in USD)

 

 

Fair Value

 

 

Notional (in USD)

 

 

Fair Value

 

Financial instruments designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate cross-currency swap agreements

 

 

 

 

 

 

 

 

 

 

 

 

Other current assets

 

 

 

 

$

16.9

 

 

 

 

 

$

14.8

 

Other assets

 

 

 

 

 

15.6

 

 

 

 

 

 

23.0

 

Other long-term liabilities

 

 

 

 

 

(18.1

)

 

 

 

 

 

(12.2

)

 

$

385.8

 

 

$

14.4

 

 

$

393.3

 

 

$

25.6

 

Long-term debt

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

 

831.2

 

 

 

(40.5

)

 

 

807.6

 

 

 

(17.0

)

Total financial instruments designated as hedging instruments

 

$

1,217.0

 

 

$

(26.1

)

 

$

1,200.9

 

 

$

8.6

 

Financial instruments not designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

Forward currency contracts

 

 

 

 

 

 

 

 

 

 

 

 

Other current assets

 

$

27.3

 

 

$

0.1

 

 

$

89.8

 

 

$

0.6

 

Other current liabilities

 

 

239.7

 

 

 

(1.1

)

 

 

97.4

 

 

 

(0.3

)

Embedded derivatives in purchase and delivery contracts

 

 

 

 

 

 

 

 

 

 

 

 

Other current assets

 

 

25.9

 

 

 

0.8

 

 

 

15.3

 

 

 

0.1

 

Fixed price commodity contracts

 

 

 

 

 

 

 

 

 

 

 

 

Other current assets

 

 

—

 

 

 

—

 

 

 

8.9

 

 

 

0.6

 

Other current liabilities

 

 

10.5

 

 

 

(0.1

)

 

 

—

 

 

 

—

 

Total financial instruments not designated as hedging instruments

 

$

303.4

 

 

$

(0.3

)

 

$

211.4

 

 

$

1.0

 

Total financial instruments

 

$

1,520.4

 

 

$

(26.4

)

 

$

1,412.3

 

 

$

9.6

 

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 $3.5 million for the delivery of products and $22.4 million for the purchase of products at June 30, 2023 and $15.3 million for the purchase of products at December 31, 2022. The Company records the changes in the fair value of these embedded derivatives in interest and other income (expense), net in the consolidated statements of income and comprehensive income.

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

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

Financial Statement Classification

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Financial instruments not designated as hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forward currency contracts

 

Interest and other income (expense), net

 

$

1.4

 

 

$

(2.6

)

 

$

1.3

 

 

$

(4.1

)

Embedded derivatives in purchase and delivery contracts

 

Interest and other income (expense), net

 

 

0.4

 

 

 

0.1

 

 

 

0.7

 

 

 

—

 

 

 

 

 

1.8

 

 

 

(2.5

)

 

 

2.0

 

 

 

(4.1

)

Financial instruments designated as cash flow hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate cross-currency swap agreements

 

Interest and other income (expense), net

 

$

2.6

 

 

$

(0.6

)

 

$

4.9

 

 

$

(1.6

)

Financial instruments designated as net investment hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate cross-currency swap agreements

 

Interest and other income (expense), net

 

 

2.0

 

 

 

2.2

 

 

 

4.0

 

 

 

4.3

 

 

 

 

 

4.6

 

 

 

1.6

 

 

 

8.9

 

 

 

2.7

 

Total

 

 

 

$

6.4

 

 

$

(0.9

)

 

$

10.9

 

 

$

(1.4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

Financial Statement Classification

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Financial instruments designated as cash flow hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate cross-currency swap agreements

 

Accumulated other comprehensive income, net of tax

 

$

3.0

 

 

$

3.7

 

 

$

(0.4

)

 

$

15.1

 

 

 

 

 

3.0

 

 

 

3.7

 

 

 

(0.4

)

 

 

15.1

 

Financial instruments designated as net investment hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate cross-currency swap agreements

 

Accumulated other comprehensive income, net of tax

 

$

(7.1

)

 

$

14.3

 

 

$

(8.3

)

 

$

15.0

 

Long-term debt

 

Accumulated other comprehensive income, net of tax

 

 

(11.8

)

 

 

23.5

 

 

 

(17.9

)

 

 

32.5

 

 

 

 

 

(18.9

)

 

 

37.8

 

 

 

(26.2

)

 

 

47.5

 

Total

 

 

 

$

(15.9

)

 

$

41.5

 

 

$

(26.6

)

 

$

62.6