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Fair Value Measurements (Tables) | 6 Months Ended
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Jun. 30, 2014
Fair Value Disclosures [Abstract] |
Assumptions used in determining fair value of the Call Option | The Company determines the fair value of the Call Options using a binomial lattice valuation model. The inputs to the model at June 30, 2014 were as follows:
The Company’s stock price at June 30, 2014 | $ | 72.87 |
Quarterly dividend yield (per share) upon purchase of the Call Option 1 | $ | 0.24 |
Risk-free interest rate 2 | 0.08 | %
Credit spread (basis points)3 | 130 |
Expected volatility rate 4 | 17.0 | %
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1 | The quarterly dividend in the second quarter of 2014 was $0.35 per share, but the model assumes a $0.24 per share quarterly dividend as was paid at the inception of the Call Options. Quarterly dividends in excess of $0.24 per share do not affect the Call Options’ value due to anti-dilution adjustments.
2 | The risk-free rate was based on the six-month Constant Maturity Treasury rate and one-year Constant Maturity Treasury rate on June 30, 2014.
3 | The credit spread is based on the Company’s long-term credit rating of BB issued by Standard & Poor’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.
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, 2014:
| Level 1 |  | Level 2 |  | Level 3 |  | Total
FINANCIAL ASSETS: |  |  |  |  |  |  |
Derivative Instruments: |  |  |  |  |  |  |
Aluminum - |  |  |  |  |  |  |
Fixed price purchase contracts | $ | — |  |  | $ | 0.8 |  |  | $ | — |  |  | $ | 0.8 |
Midwest premium swap contracts | — |  |  | — |  |  | 1.4 |  |  | 1.4 |
Natural Gas - |  |  |  |  |  |  |
Fixed price purchase contracts | — |  |  | 0.9 |  |  | — |  |  | 0.9 |
Electricity - |  |  |  |  |  |  |
Fixed price purchase contracts | — |  |  | 1.0 |  |  | — |  |  | 1.0 |
Hedges Relating to the Convertible Notes - |  |  |  |  |  |  |
Call Options | — |  |  | 86.5 |  |  | — |  |  | 86.5 |
All Other Financial Assets: |  |  |  |  |  |  |
Cash and cash equivalents | 69.7 |  |  | 104.5 |  |  | — |  |  | 174.2 |
Short-term investments | — |  |  | 127.2 |  |  | — |  |  | 127.2 |
Deferred compensation plan asset | — |  |  | 7.4 |  |  | — |  |  | 7.4 |
Total assets | $ | 69.7 |  |  | $ | 328.3 |  |  | $ | 1.4 |  |  | $ | 399.4 |
FINANCIAL LIABILITIES: |  |  |  |  |  |  |
Derivative Instruments: |  |  |  |  |  |  |
Aluminum - |  |  |  |  |  |  |
Fixed price purchase contracts | $ | — |  |  | $ | (0.5 | ) |  | $ | — |  |  | $ | (0.5 | )
Natural Gas - |  |  |  |  |  |  |
Fixed price purchase contracts | — |  |  | (0.6 | ) |  | — |  |  | (0.6 | )
Electricity - |  |  |  |  |  |  |
Fixed price purchase contracts | — |  |  | (0.2 | ) |  | — |  |  | (0.2 | )
Hedges Relating to the Convertible Notes - |  |  |  |  |  |  |
Bifurcated Conversion Feature | — |  |  | (88.7 | ) |  | — |  |  | (88.7 | )
All Other Financial Liabilities: |  |  |  |  |  |  |
Senior Notes | (253.2 | ) |  | — |  |  | — |  |  | (253.2 | )
Convertible Notes | (269.7 | ) |  | — |  |  | — |  |  | (269.7 | )
Total liabilities | $ | (522.9 | ) |  | $ | (90.0 | ) |  | $ | — |  |  | $ | (612.9 | )
The following table presents the Company’s financial instruments, classified under the appropriate level of the fair value hierarchy, as of December 31, 2013:
| Level 1 |  | Level 2 |  | Level 3 |  | Total
FINANCIAL ASSETS: |  |  |  |  |  |  |
Derivative Instruments: |  |  |  |  |  |  |
Aluminum - |  |  |  |  |  |  |
Fixed price purchase contracts | $ | — |  |  | $ | 0.1 |  |  | $ | — |  |  | $ | 0.1 |
Midwest premium swap contracts | — |  |  | — |  |  | 1.1 |  |  | 1.1 |
Natural Gas - |  |  |  |  |  |  |
Fixed price purchase contracts | — |  |  | 0.5 |  |  | — |  |  | 0.5 |
Electricity - |  |  |  |  |  |  |
Fixed price purchase contracts | — |  |  | 0.5 |  |  | — |  |  | 0.5 |
Foreign Currency - |  |  |  |  |  |  |
Euro | — |  |  | 0.1 |  |  | — |  |  | 0.1 |
Hedges Relating to the Convertible Notes - |  |  |  |  |  |  |
Call Options | — |  |  | 79.5 |  |  | — |  |  | 79.5 |
All Other Financial Assets: |  |  |  |  |  |  |
Cash and cash equivalents | 57.7 |  |  | 111.8 |  |  | — |  |  | 169.5 |
Short-term investments | — |  |  | 129.5 |  |  | — |  |  | 129.5 |
Deferred compensation plan asset | — |  |  | 6.5 |  |  | — |  |  | 6.5 |
Total assets | $ | 57.7 |  |  | $ | 328.5 |  |  | $ | 1.1 |  |  | $ | 387.3 |
FINANCIAL LIABILITIES: |  |  |  |  |  |  |
Derivative Instruments: |  |  |  |  |  |  |
Aluminum - |  |  |  |  |  |  |
Fixed price purchase contracts | $ | — |  |  | $ | (1.8 | ) |  | $ | — |  |  | $ | (1.8 | )
Natural Gas - |  |  |  |  |  |  |
Fixed price purchase contracts | — |  |  | (0.8 | ) |  | — |  |  | (0.8 | )
Electricity - |  |  |  |  |  |  |
Fixed price purchase contracts | — |  |  | (0.4 | ) |  | — |  |  | (0.4 | )
Hedges Relating to the Convertible Notes - |  |  |  |  |  |  |
Bifurcated Conversion Feature | — |  |  | (83.1 | ) |  | — |  |  | (83.1 | )
All Other Financial Liabilities: |  |  |  |  |  |  |
Senior Notes | (255.4 | ) |  | — |  |  | — |  |  | (255.4 | )
Convertible Notes | (260.0 | ) |  | — |  |  | — |  |  | (260.0 | )
Total liabilities | $ | (515.4 | ) |  | $ | (86.1 | ) |  | $ | — |  |  | $ | (601.5 | )
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, 2013 | $ | 1.1 |
Total realized/unrealized gains included in: |
Cost of goods sold excluding depreciation and amortization and other items and Unrealized (gains) losses on derivative instruments | 4.1 |
Transactions involving Level 3 derivative contracts: |
Purchases | 0.6 |
Sales | — |
Issuances | — |
Settlements | (4.4 | )
Transactions involving Level 3 derivatives — net | (3.8 | )
Transfers in and (or) out of Level 3 valuation hierarchy | — |
Balance at June 30, 2014 | $ | 1.4 |
Total gains included in Unrealized (gains) losses on derivative instruments, attributable to the change in unrealized gains/losses relating to derivative contracts held at June 30, 2014: | $ | 1.1 |

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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 (loss), 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, issues, 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 Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=25499696&loc=d3e19279-110258 Reference 2: 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=25499696&loc=d3e19207-110258 + Details
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- Definition The entire disclosure of the fair value measurement of assets and liabilities, which includes financial instruments measured at fair value that are classified in shareholders' equity, which may be measured on a recurring or nonrecurring basis. + 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=25499696&loc=d3e19279-110258 Reference 2: 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=25499696&loc=d3e19190-110258 Reference 3: 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=25499696&loc=d3e19207-110258 + Details
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