XML 39 R28.htm IDEA: XBRL DOCUMENT v3.10.0.1
Derivatives, Hedging Programs and Other Financial Instruments (Tables)
 9 Months Ended
Sep. 30, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Summary of material derivative positions The following table summarizes our derivative positions at September 30, 2018:
Aluminum
Maturity Period
(month/year)
 
Notional Amount of Contracts (mmlbs)
Fixed price purchase contracts
10/18 through 12/21
 
138.3

Fixed price sales contracts
10/18 through 11/19
 
2.1

Midwest premium swap contracts1
10/18 through 12/21
 
105.9

Alloying Metals
Maturity Period
(month/year)
 
Notional Amount of Contracts (mmlbs)
Fixed price purchase contracts
10/18 through 12/19
 
9.9

Natural Gas2
Maturity Period
(month/year)
 
Notional Amount of Contracts (mmbtu)
Fixed price purchase contracts
10/18 through 12/21
 
4,130,000

Electricity3
Maturity Period
(month/year)
 
Notional Amount of Contracts (Mwh)
Fixed price purchase contracts
1/20 through 12/21
 
219,600

Euro4
Maturity Period
(month/year)
 
Notional Amount of Contracts (euro)
Fixed price purchase contracts
11/18
 
33,064

____________________
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, 2018, we had derivative and/or physical delivery commitments with energy companies for approximately 70% of the expected natural gas purchases for the remainder of 2018, 68% of the expected natural gas purchases for 2019, 67% of the expected natural gas purchases for 2020 and 63% of the expected natural gas purchases for 2021.
3 
As of September 30, 2018, we had derivative and/or physical delivery commitments with energy companies for approximately 53% of our expected electricity purchases for the remainder of 2018, 54% of our expected electricity purchases for both 2019 and 2020 and 9% of our expected electricity purchases for 2021.
4 
We use non-designated foreign currency forward contracts designed to line up with the timing and amounts of scheduled payments to foreign equipment manufacturers to mitigate our exposure to currency exchange rate fluctuations on these purchases.
Summary of realized and unrealized gains and losses The location and amount of (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 September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
Cost of products sold, excluding depreciation and amortization and other items1
 
Cost of products sold, excluding depreciation and amortization and other items1
 
Unrealized gain on derivative instruments
 
Cost of products sold, excluding depreciation and amortization and other items1
 
Cost of products sold, excluding depreciation and amortization and other items1
 
Unrealized (gain) loss on derivative instruments
Total amounts of income and expense line items presented in the statements of consolidated income in which the effects of hedges are recorded
$
323.3

 
$
267.2

 
$
(10.8
)
 
$
983.4

 
$
822.7

 
$
(14.0
)
 
 
 
 
 
 
 
 
 
 
 
 
Loss (gain) recognized in income related to cash flow hedges:
 
 
 
 
 
 
 
 
 
 
 
Aluminum
$
2.1

 
$
—

 
$
—

 
$
(1.2
)
 
$
—

 
$
—

Alloying Metals
1.0

 
(0.3
)
 
—

 
0.4

 
(0.2
)
 
—

Natural gas
—

 
—

 
—

 
(0.1
)
 
—

 
—

Total loss (gain) recognized in income
$
3.1

 
$
(0.3
)
 
$
—

 
$
(0.9
)
 
$
(0.2
)
 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Gain) loss recognized in income related to non-designated hedges:
 
 
 
 
 
 
 
 
 
 
 
Aluminum
$
—

 
$
(4.0
)
 
$
(10.6
)
 
$
—

 
$
(13.8
)
 
$
(15.3
)
Natural gas
—

 
0.2

 
(0.2
)
 
—

 
0.3

 
1.3

Foreign exchange
—

 
(0.1
)
 
—

 
—

 
(0.1
)
 
—

Total gain recognized in income
$
—

 
$
(3.9
)
 
$
(10.8
)
 
$
—

 
$
(13.6
)
 
$
(14.0
)

____________________
1 
Beginning with our adoption of ASU 2017-12 effective January 1, 2018, we no longer have Unrealized (gain) loss on derivative instruments on the Statements of Consolidated Income as all of our commodity hedges are designated as cash flow hedges. As such, all Unrealized (gain) loss on derivative instruments is reported in AOCI. For the quarter and nine months ended September 30, 2017, Unrealized (gain) loss on derivative instruments was reclassified to Cost of products sold, excluding depreciation and amortization and other items in the Statements of Consolidated Income to conform to the current period's presentation, for a combined total of $256.4 million and $808.7 million, respectively. The amounts comprising both line items are presented separately here for comparative purposes.
Fair Value of Derivative Assets and Liabilities Measured on Recurring Basis The following table presents the fair value of our derivative financial instruments as of the periods presented (in millions of dollars):
 
September 30, 2018
 
December 31, 2017
 
Derivative Assets
 
Derivative Liabilities
 
Net Amount
 
Derivative Assets
 
Derivative Liabilities
 
Net Amount
Cash Flow Hedges:
 
 
 
 
 
 
 
 
 
 
 
Aluminum –
 
 
 
 
 
 
 
 
 
 
 
Fixed price purchase contracts
$
3.0

 
$
(4.8
)
 
$
(1.8
)
 
$
—

 
$
—

 
$
—

Fixed price sales contracts
—

 
(0.1
)
 
(0.1
)
 
—

 
—

 
—

Midwest premium swap contracts
5.9

 
(0.1
)
 
5.8

 
—

 
—

 
—

Alloying Metals – Fixed price purchase contracts
0.1

 
(1.4
)
 
(1.3
)
 
0.9

 
—

 
0.9

Natural gas – Fixed price purchase contracts
0.2

 
(0.6
)
 
(0.4
)
 
—

 
—

 
—

Electricity – Fixed price purchase contracts
—

 
(0.1
)
 
(0.1
)
 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Non-Designated Hedges:
 
 
 
 
 
 
 
 
 
 
 
Aluminum –
 
 
 
 
 
 
 
 
 
 
 
Fixed price purchase contracts
—

 
—

 
—

 
22.5

 
—

 
22.5

Fixed price sales contracts
—

 
—

 
—

 
—

 
(0.1
)
 
(0.1
)
Midwest premium swap contracts
—

 
—

 
—

 
1.7

 
(0.1
)
 
1.6

Natural gas – Fixed price purchase contracts
—

 
—

 
—

 
0.2

 
(0.5
)
 
(0.3
)
Electricity – Fixed price purchase contracts
—

 
—

 
—

 
—

 
(0.1
)
 
(0.1
)
 
 
 
 
 
 
 
 
 
 
 
 
Total
$
9.2

 
$
(7.1
)
 
$
2.1

 
$
25.3

 
$
(0.8
)
 
$
24.5


The following table presents the balance sheet location of derivative assets and liabilities as of the periods presented (in millions of dollars):
 
September 30, 2018
 
December 31, 2017
Assets:
 
 
 
Prepaid expenses and other current assets
$
8.1

 
$
18.9

Other assets
1.1

 
6.4

Total assets
$
9.2

 
$
25.3

 
 
 
 
Liabilities:
 
 
 
Other accrued liabilities
$
(4.6
)
 
$
(0.3
)
Long-term liabilities
(2.5
)
 
(0.5
)
Total Liabilities
$
(7.1
)
 
$
(0.8
)
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, 2018 (in millions of dollars):
 
Level 1
 
Level 2
 
Level 3
 
Total
Cash and cash equivalents
$
23.2

 
$
71.1

 
$
—

 
$
94.3

Short-term investments
—

 
88.4

 
—

 
88.4

Total
$
23.2

 
$
159.5

 
$
—

 
$
182.7

The following table presents our other financial assets, classified under the appropriate level of the fair value hierarchy, as of December 31, 2017 (in millions of dollars):
 
Level 1
 
Level 2
 
Level 3
 
Total
Cash and cash equivalents
$
23.5

 
$
27.6

 
$
—

 
$
51.1

Short-term investments
—

 
183.7

 
—

 
183.7

Total
$
23.5

 
$
211.3

 
$
—

 
$
234.8


All Other Financial Assets and Liabilities. We believe that the fair values of our accounts receivable, contract assets, accounts payable and accrued liabilities approximate their respective carrying values due to their short maturities and nominal credit risk.