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Fair Value Measurements (Tables)
 9 Months Ended
Sep. 30, 2012
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 September 30, 2012 were as follows:
The Company's stock price at September 30, 2012
$
58.39

Quarterly dividend yield (per share) upon purchase of the Call Option1
$
0.24

Risk-free interest rate2
0.27
%
Credit spread (basis points)3
266

Expected volatility rate4
25
%
______________________
1 
Recent quarterly dividends have been $0.25 per share, but the model assumes a discrete $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 two-year Constant Maturity Treasury rate and the three-year Constant Maturity Treasury rate on September 30, 2012, compounded semi-annually.
3 
The credit spread is based on the Company's long-term credit rating of BB- issued by Standard & Poor’s and a senior unsecured credit rating of Ba3 issued by Moody’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 September 30, 2012:
 
Level 1
 
Level 2
 
Level 3
 
Total
FINANCIAL ASSETS:
 
 
 
 
 
 
 
Derivative instruments:
 
 
 
 
 
 
 
Aluminum -
 
 
 
 
 
 
 
Fixed priced purchase contracts
$
—

 
$
1.8

 
$
—

 
$
1.8

Midwest premium swap contracts
—

 
—

 
0.9

 
0.9

 
 
 
 
 
 
 
 
Natural Gas -
 
 
 
 
 
 
 
Fixed priced purchase contracts
—

 
0.7

 
—

 
0.7

 
 
 
 
 
 
 
 
Electricity -
 
 
 
 
 
 
 
Fixed priced purchase contracts
—

 
0.2

 
—

 
0.2

 
 
 
 
 
 
 
 
Hedges Relating to the Convertible Notes -
 
 
 
 
 
 
 
Call Options
—

 
52.1

 
—

 
52.1

 
 
 
 
 
 
 
 
All Other Financial Assets
 
 
 
 
 
 
 
Cash and cash equivalents
135.4

 
120.2

 
—

 
255.6

Short-term investments
—

 
79.9

 
—

 
79.9

Long-term available for sale securities
—

 
5.7

 
—

 
5.7

Total
$
135.4

 
$
260.6

 
$
0.9

 
$
396.9

 
 
 
 
 
 
 
 
FINANCIAL LIABILITIES:
 
 
 
 
 
 
 
Derivative instruments:
 
 
 
 
 
 
 
Aluminum -
 
 
 
 
 
 
 
Fixed priced purchase contracts
$
—

 
$
(1.4
)
 
$
—

 
$
(1.4
)
Natural Gas -
 
 
 
 
 
 
 
Put option sales contracts
—

 
(1.6
)
 
—

 
(1.6
)
Fixed priced purchase contracts
—

 
(1.4
)
 
—

 
(1.4
)
Electricity -
 
 
 
 
 
 
 
Fixed priced purchase contracts
—

 
(0.3
)
 
—

 
(0.3
)
Hedges Relating to the Convertible Notes -
 
 
 
 
 
 
 
Bifurcated Conversion Feature
—

 
(58.6
)
 
—

 
(58.6
)
 
 
 
 
 
 
 
 
All Other Financial Liabilities
 
 
 
 
 
 
 
Senior Notes
(243.6
)
 
—

 
—

 
(243.6
)
Convertible Notes
(238.4
)
 
—

 
—

 
(238.4
)
Total
$
(482.0
)
 
$
(63.3
)
 
$
—

 
$
(545.3
)
The following table presents the Company's financial instruments, classified under the appropriate level of the fair value hierarchy, as of December 31, 2011:
 
Level 1
 
Level 2
 
Level 3
 
Total
FINANCIAL ASSETS:
 
 
 
 
 
 
 
Derivative instruments:
 
 
 
 
 
 
 
Aluminum -
 
 
 
 
 
 
 
Fixed priced purchase contracts
$
—

 
$
0.3

 
$
—

 
$
0.3

Midwest premium swap contracts
—

 
—

 
0.1

 
0.1

Hedges Relating to the Convertible Notes -
 
 
 
 
 
 
 
Call Options
—

 
46.3

 
—

 
46.3

 
 
 
 
 
 
 
 
All Other Financial Assets:
 
 
 
 
 
 
 
Cash and cash equivalents
49.8

 
—

 
—

 
49.8

Long-term available for sale securities
—

 
4.9

 
—

 
4.9

Total
$
49.8

 
$
51.5

 
$
0.1

 
$
101.4

 
 
 
 
 
 
 
 
FINANCIAL LIABILITIES:
 
 
 
 
 
 
 
Derivative instruments:
 
 
 
 
 
 
 
Aluminum -
 
 
 
 
 
 
 
Fixed priced purchase contracts
$
—

 
$
(7.8
)
 
$
—

 
$
(7.8
)
Midwest premium swap contracts
—

 
—

 
(0.1
)
 
(0.1
)
Natural Gas -
 
 
 
 
 
 
 
Put option sales contracts
—

 
(5.6
)
 
—

 
(5.6
)
Fixed priced purchase contracts
—

 
(1.3
)
 
—

 
(1.3
)
Electricity -
 
 
 
 
 
 
 
Fixed priced purchase contracts
—

 
(1.8
)
 
—

 
(1.8
)
Hedges Relating to the Convertible Notes -
 
 
 
 
 
 
 
Bifurcated Conversion Feature
—

 
(53.9
)
 
—

 
(53.9
)
 
 
 
 
 
 
 
 
All Other Financial Liabilities:
 
 
 
 
 
 
 
Nichols Promissory Note
—

 
(4.7
)
 
—

 
(4.7
)
Convertible Notes
(203.0
)
 
—

 
—

 
(203.0
)
Total
$
(203.0
)
 
$
(75.1
)
 
$
(0.1
)
 
$
(278.2
)
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, 2011
$
—

Total realized/unrealized gains included in:
 
Cost of products sold, excluding depreciation and amortization
2.2

Transactions involving Level 3 derivative contracts:
 
Purchases
0.2

Sales
—

Issuances
—

Settlements
(1.5
)
Transactions involving Level 3 derivatives — net
(1.3
)
Transfers in and (or) out of Level 3 valuation hierarchy
—

Balance at September 30, 2012
$
0.9

 
 
Total gain included in Cost of products sold, excluding depreciation and amortization, attributable to the change in unrealized gains/losses relating to derivative contracts held at September 30, 2012:
$
0.6