Derivative Financial Instruments

9 Months Ended

Sep. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments:

The Company is subject to various types of market risks including interest rate risk, foreign currency exchange rate transaction and translation risk, and commodity pricing risk.  Management may take actions to mitigate the exposure to these types of risks, including entering into forward purchase contracts and other financial instruments.  Currently, the Company manages a portion of its commodity pricing risk by using derivative instruments.  The Company does not seek to engage in trading activities or take speculative positions with any financial instrument arrangements. The Company has entered into natural gas derivative instruments with counterparties it views as creditworthy.  However, management does attempt to mitigate its counterparty credit risk exposures by, among other things, entering into master netting agreements with these counterparties.

Cash Flow Hedges

As of September 30, 2015, the Company has entered into natural gas derivative instruments. The Company records derivative financial instruments as either assets or liabilities at fair value in the consolidated statements of financial position.  Derivatives qualify for treatment as hedges when there is a high correlation between the change in fair value of the derivative instrument and the related change in value of the underlying hedged item. Depending on the exposure being hedged, the Company must designate the hedging instrument as a fair value hedge, a cash flow hedge or a net investment in foreign operations hedge.  All derivative instruments held by the Company as of September 30, 2015 and December 31, 2014 qualified as cash flow hedges. For these qualifying hedges, the effective portion of the change in fair value is recognized through earnings when the underlying transaction being hedged affects earnings, allowing a derivative’s gains and losses to offset related results from the hedged item in the statements of operations (see Note 10). For derivative instruments that are not accounted for as hedges, or for the ineffective portions of qualifying hedges, the change in fair value is recorded through earnings in the period of change. The Company formally documents, designates, and assesses the effectiveness of transactions that receive hedge accounting treatment initially and on an ongoing basis.  Any ineffectiveness related to these hedges was not material for any of the periods presented.

Natural gas is consumed at several of the Company’s production facilities, and a change in natural gas prices impacts the Company’s operating margin.  As of September 30, 2015, the Company had entered into natural gas derivative instruments to hedge a portion of its natural gas purchase requirements through December 2016.  The Company’s objective is to reduce the earnings and cash flow impacts of changes in market prices of natural gas by fixing the purchase price of up to 90% of its forecasted natural gas usage.  It is the Company’s policy to consider hedging portions of its natural gas usage up to 36 months in advance of the forecasted purchase. As of September 30, 2015 and December 31, 2014, the Company had agreements in place to hedge forecasted natural gas purchases of 1.9 million and 3.4 million MMBtus, respectively.

As of September 30, 2015, the Company expects to reclassify from accumulated other comprehensive loss to earnings during the next twelve months approximately $2.1 million of net losses on derivative instruments related to its natural gas hedges.

The following tables present the fair value of the Company’s hedged items as of September 30, 2015 and December 31, 2014, (in millions):

	Asset Derivatives			Liability Derivatives
Derivatives designated as hedging instruments(a) (b)	Balance Sheet Location	September 30, 2015		Balance Sheet Location	September 30, 2015
Commodity contracts	Other current assets	$	0.1	Accrued expenses	$	2.2
Commodity contracts	Other assets	—		Other noncurrent liabilities	0.5
Total derivatives designated as hedging instruments		$	0.1		$	2.7

(a) As of September 30, 2015, the Company has commodity hedge agreements with four counterparties.  Three of the counterparties are in payable positions.

(b) The Company has master netting agreements with its counterparties and accordingly has netted in its consolidated balance sheets immaterial amounts that are in receivable and payable positions with larger amounts that are in payable and receivable positions, respectively.

	Asset Derivatives			Liability Derivatives
Derivatives designated as hedging instruments(a) (b)	Balance Sheet Location	December 31, 2014		Balance Sheet Location	December 31, 2014
Commodity contracts	Other current assets	$	0.1	Accrued expenses	$	2.5
Commodity contracts	Other assets	—		Other noncurrent liabilities	1.0
Total derivatives designated as hedging instruments		$	0.1		$	3.5

(a) The Company has commodity hedge agreements with four counterparties.  Amounts recorded as liabilities for the Company’s commodity contracts are payable to all counterparties.  The amount recorded as an asset is due from two counterparties.

(b) The Company has master netting agreements with its counterparties and accordingly has netted in its consolidated balance sheets approximately $0.1 million of its commodity contracts that are in a receivable position against its contracts in payable positions.