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Derivative Instruments and Hedging Activities | 3 Months Ended
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Mar. 31, 2020
Derivative Instruments and Hedging Activities |
Derivative Instruments and Hedging Activities | 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 market rates. Typically, the most significant component of the Company’s interest rate risk relates to amounts outstanding under the 2019 Credit Agreement and the 2019 Term Loan. ​ 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 March 31, 2020 and December 31, 2019, the Company had fixed price commodity contracts with notional amounts aggregating $7.2 million and $5.6 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). ​ Foreign Exchange Rate Risk Management ​ The Company generates a substantial portion of its revenues and expenses in international markets, principally Germany, 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. The Company had the following notional amounts outstanding under foreign exchange contracts and cross-currency interest rate swap agreements at March 31, 2020 and December 31, 2019 (in millions): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | March 31, 2020 | ​ | December 31, 2019
​ | ​ | Notional | ​ | ​ | ​ | ​ | Notional | ​ | ​ | ​
​ | ​ | Amount in U.S. | ​ | ​ | ​ | ​ | Amount in U.S. | ​ | ​
​ |  | Dollars |  | Fair Value |  | Dollars |  | Fair Value
Forward Currency Contracts (1): | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Assets | ​ | $ | 37.5 | ​ | $ | 0.8 | ​ | $ | 66.7 | ​ | $ | 0.9
Liabilities | ​ | ​ | 61.6 | ​ | ​ | (0.8) | ​ | ​ | 7.7 | ​ | ​ | (0.4)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cross-Currency and Interest Rate Swap Agreements (2): | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Assets | ​ | ​ | 205.0 | ​ | ​ | 7.5 | ​ | ​ | — | ​ | ​ | —
Liabilities | ​ | ​ | 300.0 | ​ | ​ | (3.4) | ​ | ​ | 505.0 | ​ | ​ | (6.8)
​ | ​ | $ | 604.1 | ​ | $ | 4.1 | ​ | $ | 579.4 | ​ | $ | (6.3)
(1) | Derivatives not designated as accounting hedges.
(2) | Derivatives designated as accounting hedges.
​ 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 $11.5 million for the delivery of products and $6.1 million for the purchase of products at March 31, 2020 and $12.3 million for the delivery of products and $6.1 million for the purchase of products at December 31, 2019. 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). ​ The derivative instruments described above are recorded in the unaudited condensed consolidated balance sheets for the periods as follows (dollars in millions): ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | March 31, 2020 |  | December 31, 2019
Derivatives designated as hedging instruments |  | ​ |  |  | ​ |
Interest rate cross-currency swap agreements |  | ​ |  |  | ​ |
Other current assets |  | $ | 9.3 |  | $ | 10.1
Other current liabilities |  | ​ | (3.4) |  | ​ | —
Other long-term assets |  | ​ | 11.8 |  | ​ | —
Other long-term liabilties |  | ​ | (13.6) |  | ​ | (16.9)
Total derivatives designated as hedging instruments |  | ​ | 4.1 |  | ​ | (6.8)
​ | ​ | ​ | ​ | ​ | ​ | ​
Derivatives not designated as hedging instruments |  | ​ |  |  | ​ |
Foreign exchange contracts |  | ​ |  |  | ​ |
Other current assets | ​ | $ | 0.8 | ​ | $ | 0.9
Other current liabilities | ​ |  | (0.8) | ​ |  | (0.4)
Embedded derivatives in purchase and delivery contracts | ​ |  |  | ​ |  |
Other current assets | ​ |  | 0.1 | ​ |  | 0.1
Other current liabilities | ​ |  | — | ​ |  | (0.6)
Fixed price commodity contracts | ​ |  |  | ​ |  |
Other current assets | ​ |  | — | ​ |  | 0.3
Other current liabilities | ​ |  | (0.8) | ​ |  | —
Total derivatives not designated as hedging instruments | ​ |  | 0.9 | ​ |  | 0.3
​ | ​ | ​ | ​ | ​ | ​ | ​
Total derivatives | ​ | $ | 5.0 | ​ | $ | (6.5)
​ | ​ | ​ | ​ | ​ | ​ | ​
​ The following is a summary of the activity included in the unaudited condensed consolidated statements of income and comprehensive income related to the above described derivative instruments (in millions): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ |  | Three Months Ended March 31,
​ |  | Financial Statement Classification |  | 2020 |  | 2019
Derivatives not designated as hedging instruments | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Foreign exchange contracts |  | Interest and other income (expense), net | ​ | $ | (0.5) | ​ | $ | 1.7
Embedded derivatives in purchase and delivery contracts | ​ | Interest and other income (expense), net | ​ | ​ | 0.6 | ​ | ​ | (0.1)
Fixed price commodity contracts | ​ | Interest and other income (expense), net | ​ | ​ | (1.1) | ​ | ​ | 0.5
​ | ​ | ​ | ​ | $ | (1.0) | ​ | $ | 2.1
Derivatives designated as Cash Flow hedging instruments | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest rate cross-currency swap agreements | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest earned in 2020 | ​ | Interest and other income (expense), net | ​ | $ | — | ​ | $ | —
Unrealized gains on contracts | ​ | Accumulated other comprehensive income | ​ | ​ | (19.0) | ​ | ​ | —
​ | ​ | ​ | ​ | $ | (19.0) | ​ | $ | —
Derivatives designated as Net Investment hedging instruments | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest rate cross-currency swap agreements | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest earned in 2020 | ​ | Interest and other income (expense), net | ​ | $ | (2.6) | ​ | $ | —
Unrealized losses on contracts | ​ | Accumulated other comprehensive income | ​ | ​ | 29.9 | ​ | ​ | —
​ | ​ | ​ | ​ | $ | 27.3 | ​ | $ | —
​

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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