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Fair Value Measurements | 9 Months Ended
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Sep. 30, 2020
Fair Value Disclosures [Abstract] |
Fair Value Measurements | Fair Value Measurements We measure certain of our assets and liabilities at fair value. Fair value represents 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. The fair value hierarchy provides transparency regarding the inputs we use to measure fair value. We categorize each fair value measurement in its entirety into the following three levels, based on the lowest level input that is significant to the entire measurement: •Level 1 Inputs - quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date. •Level 2 Inputs - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. •Level 3 Inputs - significant unobservable inputs for the asset or liability.
Recurring Fair Value Measurements |  | As of September 30, 2020
|  | Level 1 |  | Level 2 |  | Level 3 |  | Total
ASSETS: |  |  |  |  |  |  |  |
Cash equivalents |  | $ | 71.2 |  |  | $ | — |  |  | $ | — |  |  | $ | 71.2 |
Trust assets (1) |  | 0.2 |  |  | — |  |  | — |  |  | 0.2 |
Derivative instruments |  | — |  |  | 11.4 |  |  | 6.6 |  |  | 18.0 |
TOTAL |  | $ | 71.4 |  |  | $ | 11.4 |  |  | $ | 6.6 |  |  | $ | 89.4 |
LIABILITIES: |  |  |  |  |  |  |  |
Contingent obligation – net |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Derivative instruments |  | — |  |  | 4.9 |  |  | 0.8 |  |  | 5.7 |
TOTAL |  | $ | — |  |  | $ | 4.9 |  |  | $ | 0.8 |  |  | $ | 5.7 |
(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.
Recurring Fair Value Measurements |  | As of December 31, 2019
|  | Level 1 |  | Level 2 |  | Level 3 |  | Total
ASSETS: |  |  |  |  |  |  |  |
Cash equivalents |  | $ | 23.3 |  |  | $ | — |  |  | $ | — |  |  | $ | 23.3 |
Trust assets (1) |  | 0.2 |  |  | — |  |  | — |  |  | 0.2 |
Surety bonds (2) |  | 1.8 |  |  | — |  |  | — |  |  | 1.8 |
Derivative instruments |  | — |  |  | 9.1 |  |  | 10.6 |  |  | 19.7 |
TOTAL |  | $ | 25.3 |  |  | $ | 9.1 |  |  | $ | 10.6 |  |  | $ | 45.0 |
LIABILITIES: |  |  |  |  |  |  |  |
Contingent obligation – net |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Derivative instruments |  | — |  |  | 1.3 |  |  | 2.9 |  |  | 4.2 |
TOTAL |  | $ | — |  |  | $ | 1.3 |  |  | $ | 2.9 |  |  | $ | 4.2 |
(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. (2) Surety bonds were invested in U.S. treasury bills and represent collateral against our workers' compensation insurance policy. We use the following valuation techniques and inputs for fair value measurements categorized within Level 2 of the fair value hierarchy:
Level 2 Fair Value Measurements:
Asset / Liability |  | Level |  | Valuation Techniques |  | Inputs
LME forward financial sales contracts |  | 2 |  | Discounted cash flows |  | Quoted LME forward market
MWP forward financial sales contracts |  | 2 |  | Discounted cash flows |  | Quoted MWP forward market
Fixed for floating swaps |  | 2 |  | Discounted cash flows |  | Quoted LME forward market, quoted MWP forward market
Nord Pool power price swaps |  | 2 |  | Discounted cash flows |  | Quoted Nord Pool forward market
MISO Indiana Hub power price swaps |  | 2 |  | Discounted cash flows |  | Quoted Indy Hub forward market
FX swaps |  | 2 |  | Discounted cash flows |  | Euro/USD forward exchange rate
When valuing Level 3 assets and liabilities, we use certain significant unobservable inputs. Management incorporates various inputs and assumptions including forward commodity prices, commodity price volatility, and macroeconomic conditions, including interest rates and discount rates. Our estimates of significant unobservable inputs are ultimately based on our estimates of risks that market participants would consider when valuing our assets and liabilities. The following table presents the inputs for fair value measurements categorized within Level 3 of the fair value hierarchy, along with information regarding significant unobservable inputs used to value Level 3 assets and liabilities:
Level 3 Fair Value Measurements: |  |
Asset / Liability |  | Fair Value at September 30, 2020 |  | Valuation Technique |  | Observable Inputs |  | Significant Unobservable Input |  | Value/Range of Unobservable Input
LME forward financial sales contracts |  | $ | 6.6 |  |  | Discounted cash flows |  | Quoted LME forward market prices |  | Discount rate (1) |  | 10.00%
Contingent obligation |  | $ | — |  |  | Discounted cash flows |  | Quoted LME forward market prices |  | Management's estimates of the LME forward market price beyond the quoted periods (2) |  | $1,754/T-$2,312/T
Hawesville L4 power price swaps |  | $ | (0.8) |  |  | Discounted cash flows |  | Quoted Indy Hub forward market prices |  | Estimates of locational margin prices during contract term in megawatt hours (MWh) (3) |  | $0.45/MWh
(1) Represents risk adjusted discount rate. (2) Represents the range of estimated forward LME prices of primary aluminum through the term of the agreement in December 2028. (3) Represents historical average of locational margin prices from January 2017-September 2020 The following table presents the fair value reconciliation of Level 3 assets and liabilities measured at fair value on a recurring basis.
|  | Level 3 Assets |  | Level 3 Liabilities
For the three months ended September 30, 2020 |  | LME forward financial sales contracts |  | Hawesville L4 power price swaps
Balance as of July 1, 2020 |  | $ | 6.1 |  |  | $ | (1.5) |
Total realized/unrealized gains (losses) |  |  |  |
Included in net income (loss) (1) |  | (4.2) |  |  | (0.2) |
Purchases, sales, settlements |  |  |  |
Purchases |  | — |  |  | — |
Sales |  | — |  |  | — |
Settlements |  | — |  |  | 0.9 |
Transfers into Level 3 (2) |  | 4.7 |  |  | — |
Transfers out of Level 3 |  | — |  |  | — |
Balance as of September 30, 2020 |  | $ | 6.6 |  |  | $ | (0.8) |
Change in unrealized gains (losses) (1) |  | $ | (4.2) |  |  | $ | 0.7 |
(1) Gains and losses are presented in the Consolidated Statement of Operations within the line item "Net gain (loss) on forward and derivative contracts." (2) Transfers into Level 3 due to contracts with applied discount rate during the third quarter of 2020.
For the three months ended September 30, 2019 |  |  | Level 3 Assets |  | Level 3 Liabilities
|  | U.S. LME forward financial sales contracts |  | Hawesville L4 Power Price Swaps |  |  |
Balance as of July 1, 2019 |  |  | $ | 6.9 |  |  | $ | (2.7) |  |  |  |
Total realized/unrealized gains (losses) |  |  |  |  |  |  |  |
Included in Net Income (1) |  |  | 8.8 |  |  | 1.2 |  |  |  |
Purchases, sales, settlements |  |  |  |  |  |  |  |
Purchases |  |  | — |  |  | — |  |  |  |
Sales |  |  | — |  |  | — |  |  |  |
Settlements |  |  | — |  |  | — |  |  |  |
Transfers into Level 3 |  |  | — |  |  | — |  |  |  |
Transfers out of Level 3 |  |  | — |  |  | — |  |  |  |
Balance as of September 30, 2019 |  |  | $ | 15.7 |  |  | $ | (1.5) |  |  |  |
Change in unrealized gains (losses) (1) |  |  | $ | 8.8 |  |  | $ | 1.2 |  |  |  |
(1) Gains and losses are presented in the Consolidated Statement of Operations within the line item "Net gain (loss) on forward and derivative contracts."
|  | Level 3 Assets |  | Level 3 Liabilities
For the nine months ended September 30, 2020 |  | LME forward financial sales contracts |  | Hawesville L4 power price swaps
Balance as of January 1, 2020 |  | $ | 10.6 |  |  | $ | (2.9) |
Total realized/unrealized gains (losses) |  |  |  |
Included in net income (loss) (1) |  | 0.8 |  |  | (1.6) |
Purchases, sales, settlements |  |  |  |
Purchases |  | — |  |  | — |
Sales |  | — |  |  | — |
Settlements |  | — |  |  | 3.7 |
Transfers into Level 3 (2) |  | 4.7 |  |  | — |
Transfers out of Level 3 (3) |  | (9.5) |  |  | — |
Balance as of September 30, 2020 |  | $ | 6.6 |  |  | $ | (0.8) |
Change in unrealized gains (losses) (1) |  | $ | 0.8 |  |  | $ | 2.1 |
(1) Gains and losses are presented in the Consolidated Statement of Operations within the line item "Net gain (loss) on forward and derivative contracts." (2) Transfers into Level 3 due to contracts with applied discount rate during the third quarter of 2020. (3) Transfer out of Level 3 due to period of time remaining in derivative contract.
For the nine months ended September 30, 2019 |  | Level 3 Assets |  | Level 3 Liabilities
| Nord Pool power price swaps | US LME forward financial sales contracts |  | Hawesville L4 Power Price Swaps | Iceland LME forward financial sales contracts | FX Swaps
Balance as of January 1, 2019 |  | $ | 4.7 |  | $ | 0.3 |  |  | $ | — |  | $ | (0.2) |  | $ | (0.3) |
Total realized/unrealized gains (losses) |  |  |  |  |  |  |
Included in Net Income (1) |  | (1.0) |  | 15.6 |  |  | 1.2 |  | (0.1) |  | (0.3) |
Purchases, sales, settlements |  |  |  |  |  |  |
Purchases |  | — |  | — |  |  | — |  | — |  | — |
Sales |  | — |  | — |  |  | — |  | — |  | — |
Settlements |  | — |  | — |  |  | — |  | — |  | — |
Transfers into Level 3 (2) |  | — |  | (0.2) |  |  | (2.7) |  | — |  | — |
Transfers out of Level 3 |  | (3.7) |  | — |  |  | — |  | 0.3 |  | 0.6 |
Balance as of September 30, 2019 |  | $ | — |  | $ | 15.7 |  |  | $ | (1.5) |  | $ | — |  | $ | — |
Change in unrealized gains (losses) (1) |  | $ | (1.0) |  | $ | 15.4 |  |  | $ | (1.5) |  | $ | (0.1) |  | $ | (0.3) |
(1) Gains and losses are presented in the Consolidated Statement of Operations within the line item "Net gain (loss) on forward and derivative contracts." (2) Transfer into Level 3 resulting from derivative contracts entered into during the first nine months of 2019.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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