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Fair value measurements
 12 Months Ended
Dec. 31, 2011
Fair value measurements [Abstract]  
Fair Value Measurements
4.
Fair value measurements
 
ASC 820 “Fair Value Measurements and Disclosures” defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.  This pronouncement applies to a broad range of other existing accounting pronouncements that require or permit fair value measurements.  ASC 820 defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.”  Fair value is an exit price and that exit price should reflect all the assumptions that market participants would use in pricing the asset or liability.
 
ASC 820 recognizes three valuation techniques; the market approach, income approach, and/or cost approach.  Valuation techniques used for fair value measurements are based upon observable and unobservable inputs.  Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our internal market assumptions.  These two types of inputs create the following fair value hierarchy:
 
 
·
Level 1 – Valuations are based on quoted prices for identical assets or liabilities in an active market.
 
 
·
Level 2 – Valuations are based on quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations for which all significant inputs are observable or can be corroborated by observable market data.
 
 
·
Level 3 – Assets or liabilities whose significant inputs are unobservable.  Valuations are determined using pricing models and discounted cash flow models and include management judgment and estimation which may be significant.

Our fair value measurements include the consideration of market risks that other market participants might consider in pricing the particular asset or liability, specifically non-performance risk and counterparty credit risk.  Consideration of the non-performance risk and counterparty credit risk are used to establish the appropriate risk-adjusted discount rates used in our fair value measurements.
 
The following section describes the valuation methodology used to measure our financial assets and liabilities that were accounted for at fair value.
 

Overview of Century's valuation methodology
 
Level
Significant inputs
Money market funds
1
Quoted market prices
Trust assets (1)
1
Quoted market prices
Surety bonds
1
Quoted market prices
Primary aluminum put/call option contracts
2
Quoted LME forward market prices, historical volatility measurements and risk-adjusted discount rates
Natural gas forward financial purchase contracts
2
Quoted natural gas forward market prices and risk-adjusted discount rates
Power contracts
3
Quoted LME forward market prices, power tariff prices, management's estimate of future power usage and risk-adjusted discount rates
E.ON contingent obligation
3
Quoted LME forward market, management's estimates of the LME forward market prices for periods beyond the quoted periods and management's estimate of future level of operations at CAKY.
Primary aluminum sales premium contracts
3
Management's estimates of future U.S. Midwest premium and risk-adjusted discount rates

(1)
Trust assets are currently invested in money market funds.  The trust has sole authority to invest the funds in secure interest producing investments consisting of short-term securities issued or guaranteed by the United States government or cash and cash equivalents.
 
 
Fair Value Measurements
 
The following table sets forth our financial assets and liabilities that were accounted for at fair value on a recurring basis by the level of input within the ASC 820 fair value hierarchy.  As required by GAAP for fair value measurements and disclosures, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.  Our assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and the placement within the fair value hierarchy levels.
 
 
Recurring Fair Value Measurements
 
As of December 31, 2011
 
   
Level 1
  
Level 2
  
Level 3
  
Total
 
ASSETS:
            
Cash equivalents
 $176,284  $-  $-  $176,284 
Trust assets
  15,889   -   -   15,889 
Surety bonds – workers comp insurance
  2,391   -   -   2,391 
Primary aluminum put option contracts
  -   9,331   -   9,331 
Power contract
  -   -   106   106 
TOTAL
 $194,564  $9,331  $106  $204,001 
                  
LIABILITIES:
                
Natural gas forward financial purchase contracts
 $-  $281  $-  $281 
E.ON contingent obligation – net
  -   -   13,958   13,958 
Primary aluminum sales contract – premium collar
  -   -   908   908 
TOTAL
 $-  $281  $14,866  $15,147 

 
Recurring Fair Value Measurements
 
As of December 31, 2010
 
   
Level 1
  
Level 2
  
Level 3
  
Total
 
ASSETS:
            
Cash equivalents
 $294,269  $-  $-  $294,269 
Primary aluminum put option contracts
  -   4,691   -   4,691 
Natural gas forward financial purchase contracts
  -   79   -   79 
Power contract
  -   -   72   72 
TOTAL
 $294,269  $4,770  $72  $299,111 
                  
LIABILITIES:
                
E.ON contingent obligation
 $-  $-  $13,091  $13,091 
Primary aluminum sales contract – premium collar
  -   -   783   783 
TOTAL
 $-  $-  $13,874  $13,874 


Change in Level 3 Fair Value Measurements during the years ended December 31,
 
   
Derivative liabilities/assets
 
   
2011
  
2010
 
Beginning balance January 1,
 $(13,802) $(1,632)
Total gain (loss) (realized/unrealized) included in earnings
  (1,382)  23 
Purchases, issuances and settlements
  424   (12,193)
Ending balance, December 31,
 $(14,760) $(13,802)
          
Amount of total loss (gain) included in earnings attributable to the change in unrealized gains/losses relating to assets and liabilities held at December 31,
 $(1,382) $23 
 
The net loss on our derivative liabilities are recorded in our statement of operations under net gain (loss) on forward contracts.  In 2011 and 2010, our Level 3 derivative liabilities are included in accrued and other liabilities and other liabilities of our consolidated balance sheet