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Derivative Instruments and Hedging Activities | 9 Months Ended
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Sep. 30, 2016
Derivative Instruments and Hedging Activities |
Derivative Instruments and Hedging Activities | 8.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 totaled $124.0 million at September 30, 2016. The Company currently has a higher level of fixed rate debt than variable 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, Switzerland and Japan, which subjects its operations to the impact 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 exchange contracts in order to minimize the volatility that fluctuations in foreign currency 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 unaudited condensed consolidated statements of income and comprehensive income. The Company had the following notional amounts outstanding under foreign exchange contracts at September 30, 2016 and December 31, 2015 (in millions):
Buy |  | Notional Amount in Buy Currency |  | Sell |  | Maturity |  | Notional Amount in U.S. Dollars |  | Fair Value of Assets |  | Fair Value of Liabilities |
September 30, 2016: |  |  |  |  |  |  |  |  |  |  |  |  |
Euro |  | 19.9 |  | U.S. Dollars |  | October 2016 |  | $ | 22.2 |  | $ | 0.2 |  | $ | — |
Swiss Francs |  | 6.4 |  | U.S. Dollars |  | October 2016 |  | 6.6 |  | — |  | — |
U.S. Dollars |  | 6.0 |  | Israel Shekel |  | October 2016 |  | 6.0 |  | — |  | 0.2 |
Israel Shekel |  | 7.5 |  | U.S. Dollars |  | October 2016 |  | 2.0 |  | — |  | — |
Euro |  | 1.4 |  | Polish Zloty |  | January 2017 |  | 1.5 |  | — |  | — |
|  |  |  |  |  |  |  | $ | 38.3 |  | $ | 0.2 |  | $ | 0.2 |
December 31, 2015: |  |  |  |  |  |  |  |  |  |  |  |  |
Euro |  | 21.1 |  | U.S. Dollars |  | January 2016 |  | $ | 24.2 |  | $ | — |  | $ | 1.2 |
Swiss Francs |  | 5.9 |  | U.S. Dollars |  | April 2016 |  | 6.0 |  | — |  | 0.1 |
U.S. Dollars |  | 6.0 |  | Israel Shekel |  | April 2016 |  | 6.0 |  | — |  | — |
|  |  |  |  |  |  |  | $ | 36.2 |  | $ | — |  | $ | 1.3 |
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 by separately valuing the “embedded derivative” component of these contracts. Contracts denominated in currencies other than the functional currency of the transacting parties amounted to $59.8 million for the delivery of products and $2.8 million for the purchase of products at September 30, 2016 and $59.0 million for the delivery of products and $4.1 million for the purchase of products at December 31, 2015. The changes in the fair value of these embedded derivatives are recorded as foreign currency exchange gains/losses within interest and other income (expense), net in the unaudited condensed consolidated statements of income and comprehensive income. Commodity Price Risk Management The Company has an arrangement with a customer 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 superconductors, the Company enters into commodity hedge contracts. At September 30, 2016 and December 31, 2015, the Company had fixed price commodity contracts with notional amounts aggregating $3.3 million and $2.0 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. 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):
|  |  |  | September 30, |  | December 31, |
|  | Balance Sheet Location |  | 2016 |  | 2015 |
Derivative assets: |  |  |  |  |  |  |
Foreign exchange contracts |  | Other current assets |  | $ | 0.2 |  | $ | — |
Embedded derivatives in purchase and delivery contracts |  | Other current assets |  | 0.1 |  | 0.5 |
Derivative liabilities: |  |  |  |  |  |  |
Foreign exchange contracts |  | Other current liabilities |  | $ | 0.2 |  | $ | 1.3 |
Embedded derivatives in purchase and delivery contracts |  | Other current liabilities |  | 0.1 |  | 0.5 |
Fixed price commodity contracts |  | Other current liabilities |  | 0.2 |  | 0.4 |
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 September 30, |  | Nine Months Ended September 30, |
|  | 2016 |  | 2015 |  | 2016 |  | 2015 |
Foreign exchange contracts |  | $ | 0.7 |  | $ | (2.2 | ) | $ | 1.3 |  | $ | 5.8 |
Embedded derivatives in purchase and delivery contracts |  | 0.3 |  | (0.4 | ) | — |  | (0.2 | )
Fixed price commodity contracts |  | — |  | (0.1 | ) | 0.2 |  | (0.2 | )
Other income (expense), net |  | $ | 1.0 |  | $ | (2.7 | ) | $ | 1.5 |  | $ | 5.4 |
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.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624171-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=64837297&loc=d3e41620-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624163-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5579240-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624177-113959 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80784-113994 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=64837297&loc=d3e41641-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5579245-113959 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624258-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80748-113994 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5708775-113959 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5708773-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5618551-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5580258-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624181-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=64837297&loc=d3e41638-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 + Details
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