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Derivatives, Hedging Programs and Other Financial Instruments (Tables) | 9 Months Ended
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Sep. 30, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Summary of material derivative positions | The following table summarizes our derivative positions at September 30, 2017:
Aluminum | Maturity Period (month/year) |  | Notional Amount of contracts (mmlbs)
Purchased put option contracts | 10/17 through 12/17 |  | 13.4 |
Fixed price purchase contracts | 10/17 through 12/21 |  | 151.9 |
Fixed price sales contracts | 10/17 through 11/19 |  | 1.8 |
Midwest premium swap contracts 1 | 10/17 through 12/21 |  | 150.1 |
Alloying Metals | Maturity Period (month/year) |  | Notional Amount of contracts (mmlbs)
Fixed price purchase contracts | 10/17 through 6/18 |  | 4.6 |
Natural Gas 2 | Maturity Period (month/year) |  | Notional Amount of contracts (mmbtu)
Fixed price purchase contracts | 10/17 through 12/20 |  | 3,650,000 |
Euro | Maturity Period (month/year) |  | Notional Amount of contracts (euro)
Fixed price purchase contracts | 10/17 through 4/18 |  | 301,304 |
______________________
1 | Regional premiums represent the premium over the London Metal Exchange price for primary aluminum which is incurred on our purchases of primary aluminum.
2 | As of September 30, 2017, we had derivative and/or physical delivery commitments with energy companies in place to cover exposure to fluctuations in prices for approximately 72% of the expected natural gas purchases for the remainder of 2017, 71% of the expected natural gas purchases for both 2018 and 2019 and 39% of the expected natural gas purchases for 2020.
Summary of realized and unrealized gains and losses | Realized and unrealized (gain) loss included on the Statements of Consolidated Income associated with all derivative contracts consisted of the following for each period presented (in millions of dollars):
| Quarter Ended |  | Nine Months Ended
| September 30, |  | September 30,
| 2017 |  | 2016 |  | 2017 |  | 2016
Realized (gain) loss: |  |  |  |  |  |  |
Aluminum | $ | (4.0 | ) |  | $ | 0.4 |  |  | $ | (13.8 | ) |  | $ | 4.1 |
Natural gas | 0.2 |  |  | 0.9 |  |  | 0.3 |  |  | 4.2 |
Alloy Hedges | (0.3 | ) |  | — |  |  | (0.2 | ) |  | — |
Foreign exchange | (0.1 | ) |  | — |  |  | (0.1 | ) |  | — |
Total realized (gain) loss 1 | $ | (4.2 | ) |  | $ | 1.3 |  |  | $ | (13.8 | ) |  | $ | 8.3 |
Unrealized (gain) loss: |  |  |  |  |  |  |
Aluminum | $ | (10.6 | ) |  | $ | (1.7 | ) |  | $ | (15.3 | ) |  | $ | (11.7 | )
Natural gas | (0.2 | ) |  | (0.3 | ) |  | 1.3 |  |  | (5.2 | )
Total unrealized gain 2 | $ | (10.8 | ) |  | $ | (2.0 | ) |  | $ | (14.0 | ) |  | $ | (16.9 | )
______________________
1 | Recorded within Cost of products sold, excluding depreciation, amortization and other items within the Fabricated Products segment.
2 | Recorded within Unrealized gain on derivative instruments within the Fabricated Products segment.
Fair Value of Derivative Assets and Liabilities Measured on Recurring Basis | The following table presents our financial instruments, classified under the appropriate level of the fair value hierarchy, as of the period presented (in millions of dollars):
| September 30, 2017
| Level 1 |  | Level 2 |  | Level 3 |  | Total
DERIVATIVE ASSETS: |  |  |  |  |  |  |
Non-Designated Hedges: |  |  |  |  |  |  |
Aluminum – |  |  |  |  |  |  |
Fixed price purchase contracts | $ | — |  |  | $ | 18.4 |  |  | $ | — |  |  | $ | 18.4 |
Midwest premium swap contracts | — |  |  | 0.8 |  |  | — |  |  | 0.8 |
Natural gas – Fixed price purchase contracts | — |  |  | 0.4 |  |  | — |  |  | 0.4 |
Designated Hedges: |  |  |  |  |  |  |
Alloying metals – Fixed price purchase contracts | — |  |  | 0.9 |  |  | — |  |  | 0.9 |
Total derivative assets 1 | $ | — |  |  | $ | 20.5 |  |  | $ | — |  |  | $ | 20.5 |
| September 30, 2017
| Level 1 |  | Level 2 |  | Level 3 |  | Total
DERIVATIVE LIABILITIES: |  |  |  |  |  |  |
Non-Designated Hedges: |  |  |  |  |  |  |
Aluminum – |  |  |  |  |  |  |
Fixed price sales contracts | $ | — |  |  | $ | (0.1 | ) |  | $ | — |  |  | $ | (0.1 | )
Midwest premium swap contracts | — |  |  | (0.8 | ) |  | — |  |  | (0.8 | )
Natural gas – Fixed price purchase contracts | — |  |  | (0.5 | ) |  | — |  |  | (0.5 | )
Total derivative liabilities 2 | $ | — |  |  | $ | (1.4 | ) |  | $ | — |  |  | $ | (1.4 | )
____________
1 | Of the $20.5 million in total derivative assets, $15.8 million and $4.7 million were recorded within Prepaid expenses and other current assets and Other assets, respectively.
2 | Of the $1.4 million in total derivative liabilities, $0.9 million and $0.5 million were recorded within Other accrued liabilities and Long-term liabilities, respectively.
The following table presents our financial instruments, classified under the appropriate level of the fair value hierarchy, as of the period presented (in millions of dollars):
| December 31, 2016
| Level 1 |  | Level 2 |  | Level 3 |  | Total
DERIVATIVE ASSETS: |  |  |  |  |  |  |
Non-Designated Hedges: |  |  |  |  |  |  |
Aluminum – |  |  |  |  |  |  |
Fixed price purchase contracts | $ | — |  |  | $ | 3.3 |  |  | $ | — |  |  | $ | 3.3 |
Midwest premium swap contracts | — |  |  | 0.9 |  |  | — |  |  | 0.9 |
Natural gas – Fixed price purchase contracts | — |  |  | 1.6 |  |  | — |  |  | 1.6 |
Total derivative assets 1 | $ | — |  |  | $ | 5.8 |  |  | $ | — |  |  | $ | 5.8 |
DERIVATIVE LIABILITIES: |  |  |  |  |  |  |
Non-Designated Hedges: |  |  |  |  |  |  |
Aluminum – |  |  |  |  |  |  |
Fixed price purchase contracts | $ | — |  |  | $ | (1.1 | ) |  | $ | — |  |  | $ | (1.1 | )
Midwest premium swap contracts | — |  |  | (0.2 | ) |  | — |  |  | (0.2 | )
Natural gas – Fixed price purchase contracts | — |  |  | (0.4 | ) |  | — |  |  | (0.4 | )
Designated Hedges: |  |  |  |  |  |  |
Alloying metals – Fixed price purchase contracts | — |  |  | (0.1 | ) |  | — |  |  | (0.1 | )
Total derivative liabilities 2 | $ | — |  |  | $ | (1.8 | ) |  | $ | — |  |  | $ | (1.8 | )
____________
1 | Of the $5.8 million in total derivative assets, $5.0 million and $0.8 million were recorded within Prepaid expenses and other current assets and Other assets, respectively.
2 | Of the $1.8 million in total derivative liabilities, $0.8 million and $1.0 million were recorded within Other accrued liabilities and Long-term liabilities, respectively.
Offsetting Assets | The following tables present offsetting information regarding our derivatives by type of counterparty as of December 31, 2016 (in millions of dollars):
| Gross Amounts of Recognized Assets |  | Gross Amounts Offset in the Consolidated Balance Sheets |  | Net Amounts of Assets Presented in the Consolidated Balance Sheets |  | Gross Amounts Not Offset in the Consolidated Balance Sheets |  | Net Amount
Counterparty (with netting agreements) | $ | 3.3 |  |  | $ | — |  |  | $ | 3.3 |  |  | $ | 1.0 |  |  | $ | 2.3 |
Counterparty (with partial netting agreements) | 2.5 |  |  | — |  |  | 2.5 |  |  | 0.7 |  |  | 1.8 |
Total | $ | 5.8 |  |  | $ | — |  |  | $ | 5.8 |  |  | $ | 1.7 |  |  | $ | 4.1 |
The following tables present offsetting information regarding our derivatives by type of counterparty as of September 30, 2017 (in millions of dollars):
| Gross Amounts of Recognized Assets |  | Gross Amounts Offset in the Consolidated Balance Sheets |  | Net Amounts of Assets Presented in the Consolidated Balance Sheets |  | Gross Amounts Not Offset in the Consolidated Balance Sheets |  | Net Amount
Counterparty (with netting agreements) | $ | 20.5 |  |  | $ | — |  |  | $ | 20.5 |  |  | $ | 1.4 |  |  | $ | 19.1 |
Total | $ | 20.5 |  |  | $ | — |  |  | $ | 20.5 |  |  | $ | 1.4 |  |  | $ | 19.1 |
Offseting Liabilities |
| Gross Amounts of Recognized Liabilities |  | Gross Amounts Offset in the Consolidated Balance Sheets |  | Net Amounts of Liabilities Presented in the Consolidated Balance Sheets |  | Gross Amounts Not Offset in the Consolidated Balance Sheets |  | Net Amount
Counterparty (with netting agreements) | $ | (1.0 | ) |  | $ | — |  |  | $ | (1.0 | ) |  | $ | (1.0 | ) |  | $ | — |
Counterparty (with partial netting agreements) | (0.8 | ) |  | — |  |  | (0.8 | ) |  | (0.7 | ) |  | (0.1 | )
Total | $ | (1.8 | ) |  | $ | — |  |  | $ | (1.8 | ) |  | $ | (1.7 | ) |  | $ | (0.1 | )
| Gross Amounts of Recognized Liabilities |  | Gross Amounts Offset in the Consolidated Balance Sheets |  | Net Amounts of Liabilities Presented in the Consolidated Balance Sheets |  | Gross Amounts Not Offset in the Consolidated Balance Sheets |  | Net Amount
Counterparty (with netting agreements) | $ | (1.4 | ) |  | $ | — |  |  | $ | (1.4 | ) |  | $ | (1.4 | ) |  | $ | — |
Total | $ | (1.4 | ) |  | $ | — |  |  | $ | (1.4 | ) |  | $ | (1.4 | ) |  | $ | — |
Fair Value, Non-Derivative Assets Measured on Recurring Basis | The following table presents our other financial assets, classified under the appropriate level of the fair value hierarchy, as of September 30, 2017 (in millions of dollars):
| Level 1 |  | Level 2 |  | Level 3 |  | Total
Cash and cash equivalents | $ | 17.3 |  |  | $ | 56.6 |  |  | $ | — |  |  | $ | 73.9 |
Short-term investments | — |  |  | 191.4 |  |  | — |  |  | 191.4 |
Total | $ | 17.3 |  |  | $ | 248.0 |  |  | $ | — |  |  | $ | 265.3 |
The following table presents our other financial assets, classified under the appropriate level of the fair value hierarchy, as of December 31, 2016 (in millions of dollars):
| Level 1 |  | Level 2 |  | Level 3 |  | Total
Cash and cash equivalents | $ | 37.9 |  |  | $ | 17.3 |  |  | $ | — |  |  | $ | 55.2 |
Short-term investments | — |  |  | 231.0 |  |  | — |  |  | 231.0 |
Total | $ | 37.9 |  |  | $ | 248.3 |  |  | $ | — |  |  | $ | 286.2 |

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