Derivatives, Hedging Programs and Other Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Summary of material derivative positions

The following table summarizes our derivative positions at December 31, 2018:

Aluminum	Maturity Period (month/year)	Notional Amount of contracts (mmlbs)
Fixed price purchase contracts	1/19 through 12/21	139.1
Fixed price sales contracts	1/19 through 11/19	0.9
Midwest premium swap contracts1	1/19 through 12/21	100.1

Alloying Metals	Maturity Period (month/year)	Notional Amount of contracts (mmlbs)
Fixed price purchase contracts	1/19 through 12/19	9.0

Natural Gas2	Maturity Period (month/year)	Notional Amount of contracts (mmbtu)
Fixed price purchase contracts	1/19 through 12/21	4,040,000

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

_________________________

^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 December 31, 2018, we had derivative and/or physical delivery commitments with energy companies in place to cover exposure to fluctuations in prices for approximately 66% of the expected natural gas purchases for each of the years 2019, 2020 and 2021.

^3.  As of December 31, 2018, we had derivative and/or physical delivery commitments with energy companies in place to cover exposure to fluctuations in prices for approximately 54% of the expected electricity purchases for 2019, 55% of the expected electricity purchases for 2020 and 9% of the expected electricity purchases for 2021.

Summary of realized and unrealized gains and losses

The location and amount of loss (gain) included on the Statements of Consolidated Income associated with all derivative contracts consisted of the following for each period presented (in millions of dollars):

	Year Ended December 31,
	2018			2017						2016
	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			Cost of products sold, excluding depreciation and amortization and other items1		Unrealized gain 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	$	1,300.7		$	1,105.3		$	(19.4	)	$	1,019.5	$	(18.7	)
Loss (gain) recognized in income related to cash flow hedges:
Aluminum	$	2.1		$	—		$	—		$	—	$	—
Alloying Metals	1.0			(0.9		)	—			—		—
Natural gas	(0.3		)	—			—			—		—
Total loss (gain) recognized in income	$	2.8		$	(0.9	)	$	—		$	—	$	—
(Gain) loss recognized in income related to non-designated hedges:
Aluminum	$	—		$	(20.4	)	$	(20.9	)	$	2.0	$	(10.8	)
Natural gas	—			0.7			1.4			5.0		(7.9		)
Foreign exchange	—			(0.1		)	—			0.1		—
Electricity	$	—		—			0.1			—		—
Total (gain) loss recognized in income	$	—		$	(19.8	)	$	(19.4	)	$	7.1	$	(18.7	)

____________________

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 years ended December 31, 2017 and December 31, 2016, 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 $1,085.9 million and $1,000.8 million, respectively. The amounts comprising both line items are presented separately here for comparative purposes.

Fair Value, Measurement Inputs, Disclosure

The following table presents the fair value of our derivative financial instruments as of the periods presented (in millions of dollars):

	December 31, 2018								December 31, 2017
	Derivative Assets		Derivative Liabilities			Net Amount			Derivative Assets		Derivative Liabilities			Net Amount
Cash Flow Hedges:
Aluminum –
Fixed price purchase contracts	$	0.1	$	(13.2	)	$	(13.1	)	$	—	$	—		$	—
Fixed price sales contracts	0.1		—			0.1			—		—			—
Midwest premium swap contracts	3.2		(0.5		)	2.7			—		—			—
Alloying Metals – Fixed price purchase contracts	—		(1.7		)	(1.7		)	0.9		—			0.9
Natural gas – Fixed price purchase contracts	0.2		(0.5		)	(0.3		)	—		—			—
Electricity – Fixed price purchase contracts	0.7		—			0.7			—		—			—
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	$	4.3	$	(15.9	)	$	(11.6	)	$	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):

	December 31, 2018			December 31, 2017
Assets:
Prepaid expenses and other current assets	$	3.4		$	18.9
Other assets	0.9			6.4
Total assets	$	4.3		$	25.3
Liabilities:
Other accrued liabilities	$	(13.2	)	$	(0.3	)
Long-term liabilities	(2.7		)	(0.5		)
Total Liabilities	$	(15.9	)	$	(0.8	)

Fair Value, 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, 2018 (in millions of dollars):

	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	22.9	$	102.7	$	—	$	125.6
Short-term investments	—		36.7		—		36.7
Total	$	22.9	$	139.4	$	—	$	162.3

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