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Derivative Instruments and Hedging Activities
12 Months Ended
Dec. 31, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities

14. 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 Company's subsidiaries in 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 $25.7 million and $15.3 million for the purchase of products as of December 31, 2023, and 2022, 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, 2023, and 2022, respectively. 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 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, 2023

 

 

December 31, 2022

 

 

 

Notional
(in USD)

 

 

Fair Value

 

 

Notional
(in USD)

 

 

Fair Value

 

Derivatives designated as hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate cross-currency swap agreements

 

 

 

 

 

 

 

 

 

 

 

 

Other current assets

 

 

 

 

$

12.0

 

 

 

 

 

$

14.8

 

Other assets

 

 

 

 

 

8.3

 

 

 

 

 

 

23.0

 

Other long-term liabilities

 

 

 

 

 

(26.8

)

 

 

 

 

 

(12.2

)

 

$

378.3

 

 

$

(6.5

)

 

$

393.3

 

 

$

25.6

 

Long-term debt

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

 

876.0

 

 

 

(85.3

)

 

 

807.6

 

 

 

(17.0

)

Total derivatives designated as hedging instruments

 

$

1,254.3

 

 

$

(91.8

)

 

$

1,200.9

 

 

$

8.6

 

Derivatives not designated as hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

Forward currency contracts

 

 

 

 

 

 

 

 

 

 

 

 

Other current assets

 

$

177.8

 

 

$

1.3

 

 

$

89.8

 

 

$

0.6

 

Other current liabilities

 

 

311.7

 

 

 

(0.6

)

 

 

97.4

 

 

 

(0.3

)

Embedded derivatives in purchase and delivery contracts

 

 

 

 

 

 

 

 

 

 

 

 

Other current assets

 

 

25.6

 

 

 

1.2

 

 

 

15.3

 

 

 

0.1

 

Other current liabilities

 

 

0.1

 

 

 

 

 

 

 

 

 

 

Fixed price commodity contracts

 

 

 

 

 

 

 

 

 

 

 

 

Other current assets

 

 

8.4

 

 

 

0.3

 

 

 

8.9

 

 

 

0.6

 

Total derivatives not designated as hedging instruments

 

$

523.6

 

 

$

2.2

 

 

$

211.4

 

 

$

1.0

 

Total derivatives

 

$

1,777.9

 

 

$

(89.6

)

 

$

1,412.3

 

 

$

9.6

 

 

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

 

2023

 

 

2022

 

 

2021

 

Derivatives not designated as
   hedging instruments

 

 

 

 

 

 

 

 

 

 

 

Forward currency contracts

 

Interest and other income (expense), net

 

$

12.4

 

 

$

(3.2

)

 

$

(5.5

)

Embedded derivatives in purchase and
delivery contracts

 

Interest and other income (expense), net

 

 

1.1

 

 

 

(0.1

)

 

 

0.1

 

 

 

 

 

13.5

 

 

 

(3.3

)

 

 

(5.4

)

Derivatives designated as cash flow
   hedging instruments

 

 

 

 

 

 

 

 

 

 

 

Interest rate cross-currency swap agreements

 

Interest and other income (expense), net

 

 

10.4

 

 

 

0.1

 

 

 

(4.7

)

Derivatives designated as net
   investment hedging instruments

 

 

 

 

 

 

 

 

 

 

 

Interest rate cross-currency swap agreements

 

Interest and other income (expense), net

 

 

7.9

 

 

 

8.5

 

 

 

10.2

 

Total

 

 

 

$

31.8

 

 

$

5.3

 

 

$

0.1

 

 

 

 

 

 

Year Ended December 31,

 

 

 

Financial Statement Classification

 

2023

 

 

2022

 

 

2021

 

Derivatives designated as cash flow hedging instruments

 

 

 

 

 

 

 

 

 

 

 

Interest rate cross-currency swap agreements

 

Accumulated other comprehensive income, net of tax

 

$

(5.5

)

 

$

21.2

 

 

$

15.0

 

Derivatives designated as net investment hedging instruments

 

 

 

 

 

 

 

 

 

 

 

Interest rate cross-currency swap agreements

 

Accumulated other comprehensive income, net of tax

 

 

(19.5

)

 

 

9.1

 

 

 

25.6

 

Long-term debt

 

Accumulated other comprehensive income, net of tax

 

 

(52.1

)

 

 

13.9

 

 

 

10.8

 

 

 

 

 

(71.6

)

 

 

23.0

 

 

 

36.4

 

Total

 

 

 

$

(77.1

)

 

$

44.2

 

 

$

51.4