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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2020

Fair Value Disclosures [Abstract]

Financial assets and liabilities at fair value on a recurring basis

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.

Schedule of valuation methodology for assets and liabilities at fair value

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

Schedule of fair value reconciliation of Level 3 assets and liabilities measured at fair value

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.

X

- Definition

Tabular disclosure of input and valuation technique used to measure fair value and change in valuation approach and technique for each separate class of asset and liability measured on recurring and nonrecurring basis.

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Tabular disclosure of financial instrument classified as a derivative asset (liability) after deduction of derivative liability (asset) using recurring unobservable inputs that reflect the entity's own assumption about the assumptions market participants would use in pricing.

+ References

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-Name Accounting Standards Codification
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-Publisher FASB
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Tabular disclosure of assets and liabilities, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, that are measured at fair value on a recurring basis. The disclosures contemplated herein include the fair value measurements at the reporting date by the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3).

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 820
-SubTopic 10
-Section 50
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-Name Accounting Standards Codification
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