Derivatives, Hedging Programs and Other Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Summary of material derivative positions

The following table summarizes our derivative positions at March 31, 2017:



Aluminum	Maturity Period (month/year)	Notional Amount of contracts (mmlbs)
Purchased put option contracts	7/17 through 12/17	26.8
Fixed price purchase contracts	4/17 through 12/21	205.8
Fixed price sales contracts	4/17 through 6/18	1.4
Midwest premium swap contracts¹	4/17 through 12/21	203.5



Alloying Metals	Maturity Period (month/year)	Notional Amount of contracts (mmlbs)
Fixed price purchase contracts	4/17 through 12/17	5.7



Natural Gas²	Maturity Period (month/year)	Notional Amount of contracts (mmbtu)
Fixed price purchase contracts	4/17 through 12/19	4,640,000



Euro	Maturity Period (month/year)	Notional Amount of contracts (euro)
Fixed price purchase contracts	8/17	105,600

______________________


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 March 31, 2017, we had derivative and/or physical delivery commitments with energy companies in place to cover exposure to fluctuations in prices for approximately 74%, 72% and 61% of the expected natural gas purchases for the remainder of 2017, 2018 and 2019 respectively.

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
	March 31,
	2017			2016
Realized gain (loss):
Aluminum	$	4.6		$	(2.7	)
Natural gas	—			(1.7		)
Alloy Hedges	0.1			—
Total realized gain (loss)¹	$	4.7		$	(4.4	)

Unrealized gain (loss):
Aluminum	$	16.3		$	3.2
Natural gas	(1.2		)	0.8
Total unrealized gain²	$	15.1		$	4.0

______________________


¹	Recorded within Cost of products sold, excluding depreciation, amortization and other items.


²	Recorded within Unrealized gain on derivative instruments.

Schedule of Offsetting Derivative Instruments by Counterparty

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



	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	)

The following tables present offsetting information regarding our derivatives by type of counterparty as of March 31, 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)	$	21.2	$	—	$	21.2	$	1.8	$	19.4
Total	$	21.2	$	—	$	21.2	$	1.8	$	19.4



	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)	$	(1.8	)	$	—	$	(1.8	)	$	(1.8	)	$	—
Total	$	(1.8	)	$	—	$	(1.8	)	$	(1.8	)	$	—

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):



	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 assets¹	$	—	$	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 liabilities²	$	—	$	(1.8	)	$	—	$	(1.8	)

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¹	Of the $5.8 million in total derivative assets, $5.0 million and $0.8 million was 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 was 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):



	March 31, 2017
	Level 1		Level 2		Level 3		Total
DERIVATIVE ASSETS:
Non-Designated Hedges:
Aluminum –
Put option purchase contracts	$	—	$	0.1	$	—	$	0.1
Fixed price purchase contracts	—		18.4		—		18.4
Midwest premium swap contracts	—		1.8		—		1.8
Natural gas – Fixed price purchase contracts	—		0.7		—		0.7

Designated Hedges:
Alloying metals – Fixed price purchase contracts	—		0.2		—		0.2
Total derivative assets¹	$	—	$	21.2	$	—	$	21.2



	March 31, 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	—		(0.9		)	—		(0.9		)
Natural gas – Fixed price purchase contracts	—		(0.7		)	—		(0.7		)

Designated Hedges:
Alloying metals – Fixed price purchase contracts	—		(0.1		)	—		(0.1		)
Total derivative liabilities²	$	—	$	(1.8	)	$	—	$	(1.8	)

____________


¹	Of the $21.2 million in total derivative assets, $17.2 million and $4.0 million was recorded within Prepaid expenses and other current assets and Other assets, respectively.


²	Of the $1.8 million in total derivative liabilities, $1.1 million and $0.7 million was recorded within Other accrued liabilities and Long-term liabilities, respectively.

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 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

The following table presents our other financial assets, classified under the appropriate level of the fair value hierarchy, as of March 31, 2017 (in millions of dollars):



	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	23.5	$	10.9	$	—	$	34.4
Short-term investments	—		195.5		—		195.5
Total	$	23.5	$	206.4	$	—	$	229.9