XML 24 R9.htm IDEA: XBRL DOCUMENT v2.4.0.6
Fair value measurements
 3 Months Ended
Mar. 31, 2013
Fair Value Disclosures [Abstract]  
Fair value measurements
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 and are categorized based on the fair value hierarchy described in ASC 820 "Fair Value Measurements."
Overview of Century’s valuation methodology
 
Level
Significant inputs
Cash equivalents/money market funds
1
Quoted market prices
Trust assets (1)
1
Quoted market prices
Surety bonds
1
Quoted market prices
E.ON U.S. (“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 at Century Aluminum of Kentucky, our wholly owned subsidiary (“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. These trust assets are held to fund the non-qualified supplemental executive pension benefit obligations for certain of our officers. 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
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 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. There were no transfers between Level 1 and 2 during the periods presented. There were no transfers into or out of Level 3 during the periods presented below.

Recurring Fair Value Measurements
As of March 31, 2013
 
Level 1
Level 2
Level 3
Total
ASSETS:
 
 
 
 
Cash equivalents
$
182,844

$
—

$
—

$
182,844

Trust assets (1)
13,433

—

—

13,433

Surety bond – workers comp insurance
2,123

—

—

2,123

TOTAL
$
198,400

$
—

$
—

$
198,400

LIABILITIES:
 
 
 
 
E.ON contingent obligation - net (2)
$
—

$
—

$
—

$
—

Primary aluminum sales contract – premium collar
—

—

1,030

1,030

TOTAL
$
—

$
—

$
1,030

$
1,030

(1)
Trust assets are currently invested in money market funds and excludes the cash surrender value of the life insurance policies in the trust.
(2)
Based on the LME forward market prices for primary aluminum at March 31, 2013 and management's estimate of the LME forward market for periods beyond the quoted periods, we will not have any payment obligations for the E.ON contingent obligation through the term of the agreement which expires in 2028. See Note 9 Debt for additional information about the E.ON contingent obligation fair value.

Recurring Fair Value Measurements
As of December 31, 2012
 
Level 1
Level 2
Level 3
Total
ASSETS:
 
 
 
 
Cash equivalents
$
168,309

$
—

$
—

$
168,309

Trust assets (1)
14,254

—

—

14,254

Surety bonds – workers comp insurance
2,123

—

—

2,123

TOTAL
$
184,686

$
—

$
—

$
184,686

LIABILITIES:
 
 
 
 
E.ON contingent obligation- net
$
—

$
—

$
15,369

$
15,369

Primary aluminum sales contract – premium collar
—

—

1,170

1,170

TOTAL
$
—

$
—

$
16,539

$
16,539


(1)
Trust assets are currently invested in money market funds and excludes the cash surrender value of the life insurance policies in the trust.

Change in Level 3 Fair Value Measurements during the three months ended March 31,
 
Derivative liabilities - net
 
2013
2012
Beginning balance, January 1,
$
(16,539
)
$
(14,760
)
Total gain (loss) (realized/unrealized) included in earnings
15,509

(613
)
Settlements
—

(53
)
Ending balance, March 31,
$
(1,030
)
$
(15,426
)
Amount of (gain) loss included in earnings attributable to the change in unrealized losses relating to assets and liabilities held at March 31,
$
(15,509
)
$
613


The net gain (loss) on our derivative assets and liabilities is recorded in our consolidated statement of operations under net gain (loss) on forward and derivative contracts. See Note 4 Derivative and hedging instruments for the location of our Level 3 derivative assets and liabilities within our consolidated balance sheets.