11.Derivative Instruments and Hedging Activities

Interest Rate Risks

The Company’s exposure to interest rate risk relates primarily to outstanding variable rate debt and adverse movements in the related short-term market rates. The most significant component of the Company’s interest rate risk relates to amounts outstanding under the 2015 Credit Agreement, which did not have an outstanding balance as of June 30, 2018. The Company currently has fixed rate debt, which limits the exposure to adverse movements in interest rates.

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. 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 (loss). The Company had the following notional amounts outstanding under foreign exchange contracts at June 30, 2018 and December 31, 2017 (in millions):

Buy	Notional Amount in Buy Currency	Sell	Maturity	Notional Amount in U.S. Dollars		Fair Value of Assets		Fair Value of Liabilities
June 30, 2018:
Euro	51.7	U.S. Dollars	July 2018 to January 2019	$	64.4	$	—	$	3.7

U.S. Dollars	16.5	Euro	July 2018	16.0		0.5		—

Swiss Francs	12.5	U.S. Dollars	July 2018	13.0		—		0.4

U.S. Dollars	3.1	Swiss Francs	July 2018	3.1		—		—

Swiss Francs	1.1	Japanese Yen	July 2018	1.1		—		—

Japanese Yen	120.9	Swiss Francs	July 2018	1.1		—		—

U.S. Dollars	2.6	Japanese Yen	July 2018	2.5		0.1		—

Japanese Yen	282.0	U.S. Dollars	July 2018	2.6		—		—

Euro	1.7	Japanese Yen	July 2018	2.0		—		0.1

Japanese Yen	219.8	Euro	July 2018	1.4		—		—

Singapore Dollar	3.2	U.S. Dollars	July 2018	2.4		—		0.1

				$	109.6	$	0.6	$	4.3


December 31, 2017:
Euro	59.5	U.S. Dollars	January 2018	$	67.0	$	4.5	$	—

Swiss Francs	11.0	U.S. Dollars	January 2018	11.3		—		—

Singapore Dollar	4.9	U.S. Dollars	January 2018	3.6		—		—

Euro	1.8	Polish Zloty	January 2018	2.3		—		0.1

				$	84.2	$	4.5	$	0.1

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 $110.9 million for the delivery of products and $3.7 million for the purchase of products at June 30, 2018 and $98.3 million for the delivery of products and $3.6 million for the purchase of products at December 31, 2017. 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 (loss).

Commodity Price Risk Management

The Company has arrangements with certain customers under which it has a firm commitment to deliver copper based superconductor wire 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. At June 30, 2018 and December 31, 2017, the Company had fixed price commodity contracts with notional amounts aggregating $6.8 million and $3.0 million, respectively. The changes in the fair value of these commodity contracts are recorded within interest and other income (expense), net in the unaudited condensed consolidated statements of income and comprehensive income (loss).

The fair value of the derivative instruments described above is recorded in the unaudited condensed consolidated balance sheets for the periods as follows (in millions):

		June 30,		December 31,
	Balance Sheet Location	2018		2017
Derivative assets:
Foreign exchange contracts	Other current assets	$	0.6	$	4.5
Embedded derivatives in purchase and delivery contracts	Other current assets	0.6		0.9
Fixed price commodity contracts	Other current assets	—		0.8
Embedded derivatives in purchase and delivery contracts	Other long-term assets	0.1		—

Derivative liabilities:
Foreign exchange contracts	Other current liabilities	$	4.3	$	0.1
Embedded derivatives in purchase and delivery contracts	Other current liabilities	0.6		1.5
Fixed price commodity contracts	Other current liabilities	0.1		—
Embedded derivatives in purchase and delivery contracts	Other long-term liabilities	0.8		1.4

The impact on net income of unrealized gains and losses resulting from changes in the fair value of derivative instruments not designated as hedging instruments are as follows (in millions):

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Foreign exchange contracts	$	(3.8	)	$	6.1		$	(8.1	)	$	7.0
Embedded derivatives in purchase and delivery contracts	1.2			(3.0		)	1.3			(3.7		)
Fixed price commodity contracts	(0.3		)	0.1			(0.9		)	0.2

Net impact to interest and other income (expense)	$	(2.9	)	$	3.2		$	(7.7	)	$	3.5

The amounts related to derivative instruments not designated as hedging instruments are recorded within interest and other income (expense), net in the unaudited condensed consolidated statements of income and comprehensive income (loss).