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Fair Value Measurements (Tables) | 6 Months Ended
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Jun. 30, 2012
Fair Value Disclosures [Abstract] |
Assumptions used in determining fair value of the Call Option | The significant assumptions used in the determining the fair value of the Call Options at June 30, 2012 were as follows:
Stock price at June 30, 2012 | $ | 51.84 |
Quarterly dividend yield (per share) upon purchase of the Call Option1 | $ | 0.24 |
Risk-free interest rate2 | 0.39 | %
Credit spread (basis points)3 | 337 |
Expected volatility rate4 | 29 | %
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1 | The Company used a discrete quarterly dividend payment of $0.24 per share based on historical quarterly dividend payments. Although the quarterly dividend has been increased to $0.25 per share in 2012, the increased dividend does not affect the value of the Call Option as a result of anti-dilution adjustments.
2 | The risk-free rate was based on the two-year Constant Maturity Treasury rate and the three-year Constant Maturity Treasury rate on June 30, 2012, compounded semi-annually.
3 | The credit spread is based on the Company's long-term credit rating of BB- issued by Standard & Poor’s and a senior unsecured credit rating of Ba3 issued by Moody’s.
4 | The volatility rate was based on both observed volatility, which is based on the Company’s historical stock price, and implied volatility from the Company’s traded options. Such volatility was further adjusted to take into consideration market participant risk tolerance. While the stock price of the Company generally has the greatest influence on the fair values of both the Call Options and Bifurcated Conversion Feature, between December 31, 2011 and June 30, 2012, during which time the Company's stock price did not change materially, the change in the expected volatility rate had a greater impact on the values of these derivatives.
Summary of assets and liabilities measured and recognized at fair value on a recurring basis | The following table presents the Company's financial instruments, classified under the appropriate level of the fair value hierarchy, as of June 30, 2012:
| Level 1 |  | Level 2 |  | Level 3 |  | Total
FINANCIAL ASSETS: |  |  |  |  |  |  |
Derivative instruments: |  |  |  |  |  |  |
Aluminum - |  |  |  |  |  |  |
Fixed priced purchase contracts | $ | — |  |  | $ | 0.1 |  |  | $ | — |  |  | $ | 0.1 |
Fixed priced sales contracts | — |  |  | 0.1 |  |  | — |  |  | 0.1 |
Midwest premium swap contracts | — |  |  | — |  |  | 1.5 |  |  | 1.5 |
Natural Gas - |  |  |  |  |  |  |
Fixed priced purchase contracts | — |  |  | 0.1 |  |  | — |  |  | 0.1 |
Electricity - |  |  |  |  |  |  |
Fixed priced purchase contracts | — |  |  | 0.1 |  |  | — |  |  | 0.1 |
Hedges Relating to the Convertible Notes - |  |  |  |  |  |  |
Call Options | — |  |  | 41.9 |  |  | — |  |  | 41.9 |
All Other Financial Assets |  |  |  |  |  |  |
Cash and cash equivalents | 317.8 |  |  | — |  |  | — |  |  | 317.8 |
Available for sale securities | — |  |  | 5.5 |  |  | — |  |  | 5.5 |
Total | $ | 317.8 |  |  | $ | 47.8 |  |  | $ | 1.5 |  |  | $ | 367.1 |
FINANCIAL LIABILITIES: |  |  |  |  |  |  |
Derivative instruments: |  |  |  |  |  |  |
Aluminum - |  |  |  |  |  |  |
Fixed priced purchase contracts | $ | — |  |  | $ | (8.7 | ) |  | $ | — |  |  | $ | (8.7 | )
Natural Gas - |  |  |  |  |  |  |
Put option sales contracts | — |  |  | (3.6 | ) |  | — |  |  | (3.6 | )
Fixed priced purchase contracts | — |  |  | (1.8 | ) |  | — |  |  | (1.8 | )
Electricity - |  |  |  |  |  |  |
Fixed priced purchase contracts | — |  |  | (1.2 | ) |  | — |  |  | (1.2 | )
Hedges Relating to the Convertible Notes - |  |  |  |  |  |  |
Bifurcated Conversion Feature | — |  |  | (48.3 | ) |  | — |  |  | (48.3 | )
All Other Financial Liabilities |  |  |  |  |  |  |
Senior Notes | (229.8 | ) |  | — |  |  | — |  |  | (229.8 | )
Convertible Notes | (221.2 | ) |  | — |  |  | — |  |  | (221.2 | )
Total | $ | (451.0 | ) |  | $ | (63.6 | ) |  | $ | — |  |  | $ | (514.6 | )
The following table presents the Company's financial instruments, classified under the appropriate level of the fair value hierarchy, as of December 31, 2011:
| Level 1 |  | Level 2 |  | Level 3 |  | Total
FINANCIAL ASSETS: |  |  |  |  |  |  |
Derivative instruments: |  |  |  |  |  |  |
Aluminum - |  |  |  |  |  |  |
Fixed priced purchase contracts | $ | — |  |  | $ | 0.3 |  |  | $ | — |  |  | $ | 0.3 |
Midwest premium swap contracts | — |  |  | — |  |  | 0.1 |  |  | 0.1 |
Hedges Relating to the Convertible Notes - |  |  |  |  |  |  |
Call Options | — |  |  | 46.3 |  |  | — |  |  | 46.3 |
All Other Financial Assets: |  |  |  |  |  |  |
Cash and cash equivalents | 49.8 |  |  | — |  |  | — |  |  | 49.8 |
Available for sale securities | — |  |  | 4.9 |  |  | — |  |  | 4.9 |
Total | $ | 49.8 |  |  | $ | 51.5 |  |  | $ | 0.1 |  |  | $ | 101.4 |
FINANCIAL LIABILITIES: |  |  |  |  |  |  |
Derivative instruments: |  |  |  |  |  |  |
Aluminum - |  |  |  |  |  |  |
Fixed priced purchase contracts | $ | — |  |  | $ | (7.8 | ) |  | $ | — |  |  | $ | (7.8 | )
Midwest premium swap contracts | — |  |  | — |  |  | (0.1 | ) |  | (0.1 | )
Natural Gas - |  |  |  |  |  |  |
Put option sales contracts | — |  |  | (5.6 | ) |  | — |  |  | (5.6 | )
Fixed priced purchase contracts | — |  |  | (1.3 | ) |  | — |  |  | (1.3 | )
Electricity - |  |  |  |  |  |  |
Fixed priced purchase contracts | — |  |  | (1.8 | ) |  | — |  |  | (1.8 | )
Hedges Relating to the Convertible Notes - |  |  |  |  |  |  |
Bifurcated Conversion Feature | — |  |  | (53.9 | ) |  | — |  |  | (53.9 | )
All Other Financial Liabilities: |  |  |  |  |  |  |
Nichols Promissory Note | — |  |  | (4.7 | ) |  | — |  |  | (4.7 | )
Convertible Notes | (203.0 | ) |  | — |  |  | — |  |  | (203.0 | )
Total | $ | (203.0 | ) |  | $ | (75.1 | ) |  | $ | (0.1 | ) |  | $ | (278.2 | )
Reconciliation of activity for financial instruments classified as Level 3 | The following table presents a reconciliation of activity for the Midwest premium derivative contracts on a net basis:
| Level 3
Balance at December 31, 2011 | $ | — |
Total realized/unrealized gains included in: |
Cost of products sold, excluding depreciation and amortization | 1.8 |
Transactions involving Level 3 derivative contracts: |
Purchases | 0.4 |
Sales | — |
Issuances | — |
Settlements | (0.7 | )
Transactions involving Level 3 derivatives — net | (0.3 | )
Transfers in and (or) out of Level 3 valuation hierarchy | — |
Balance at June 30, 2012 | $ | 1.5 |
Total gain included in Cost of products sold, excluding depreciation, amortization and other items, attributable to the change in unrealized gains/losses relating to derivative contracts held at June 30, 2012: | $ | 1.1 |

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- Definition Assumptions used in determining fair value of call option. + References No definition available. + Details
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- Definition Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income, and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issuances, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 157 -Paragraph 32 -Subparagraph c -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19279-110258 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (c) -URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19207-110258 + Details
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- Definition Tabular disclosure of the fair value measurement of assets and liabilities which includes [financial] instruments measured at fair value that are classified in stockholders' equity. Such assets and liabilities may be measured on a recurring or nonrecurring basis. The disclosures which may be required or desired include: (1) for assets and liabilities measured on a recurring basis, disclosure may include: (a) the fair value measurements at the reporting date; (b) 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 or liabilities (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3); (c) for fair value measurements using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (ii) purchases, sales, issuances, and settlements (net); (iii) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs); (d) the amount of the total gains or losses for the period in subparagraph (c) (i) above included in earnings (or changes in net assets) that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date and a description of where those unrealized gains or losses are reported in the statement of income (or activities); (e) the valuation technique(s) used to measure fair value and a discussion of changes in valuation techniques, if any, during the period and (2) for assets and liabilities that are measured at fair value on a nonrecurring basis (for example, impaired assets) disclosure may include, in addition to (a) above: (a) the reasons for the fair value measurements recorded; (b) the same as (b) above; (c) for fair value measurements using significant unobservable inputs (Level 3), a description of the inputs and the information used to develop the inputs; and (d) the valuation technique(s) used to measure fair value and a discussion of changes, if any, in the valuation technique(s) used to measure similar assets and/or liabilities in prior periods. Where the quoted price in an active market for the identical liability is not available, the Level 1 input is the quoted price of an identical liability when traded as an asset. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19279-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 157 -Paragraph 32 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 157 -Paragraph 33 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 10 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19296-110258 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19207-110258 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 157 -Paragraph 6 -Footnote 4 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19190-110258 + Details
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