Basis of Presentation and Recent Accounting Pronouncements (Policies)

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Principles of Consolidation and Basis of Presentation

Principles of Consolidation and Basis of Presentation. The accompanying unaudited consolidated financial statements include the accounts of our wholly owned subsidiaries and are prepared in accordance with United States generally accepted accounting principles (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable for interim periods and, therefore, do not include all information and footnotes required by GAAP for complete financial statements. In management’s opinion, all adjustments (which include normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for our interim periods are not necessarily indicative of the results of operations that may be achieved for the entire 2022 fiscal year. The financial information as of December 31, 2021 is derived from our audited consolidated financial statements and footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Use of Estimates in the Preparation of Financial Statements

Use of Estimates in the Preparation of Financial Statements. The preparation of financial statements in accordance with GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of our consolidated financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions, which could have a material effect on the reported amounts of our consolidated financial position and results of operations.

Supply Chain Financing

Supply Chain Financing. We are party to several supply chain financing arrangements, in which we may sell certain of our customers’ trade accounts receivable to such customers’ financial institutions without recourse. We sell our undivided interests in certain of these receivables at our discretion when we determine that the cost of these arrangements is less than the cost of servicing our receivables with existing debt. Under the terms of the agreements, we retain no rights or interest, have no obligations with respect to the sold receivables and do not service the receivables after the sale. As such, these transactions are being accounted for as a sale. During the quarters ended September 30, 2022 and September 30, 2021 and the nine months ended September 30, 2022 and September 30, 2021, we sold trade accounts receivable totaling $359.2 million, $390.2 million, $1,248.6 million and $706.2 million, respectively, related to these supply chain financing arrangements, of which our customers’ financial institutions applied discount fees totaling $6.2 million, $2.1 million, $15.4 million and $4.0 million, respectively. To the extent discount fees related to the sale of trade accounts receivable under supply chain financing arrangements are not reimbursed by our customers, they are included in Other income (expense), net. As of September 30, 2022, we had been and/or expected to be fully reimbursed by our customers for the majority of these discount fees.

Government Grants

Government Grants. From time-to-time, we receive grants from certain governmental agencies such as states and municipalities. We recognize government grants when we have reasonable assurance that we will comply with any conditions attached to the grant and the grant will be received. Government grants related to property, plant and equipment are presented as a reduction to the related asset’s carrying amount. Grants related to compensation for expenses already incurred or for immediate financial support with no future related costs are recognized as income in the period in which it is receivable. The following table presents the total government assistance recognized during the nine months ended September 30, 2022 (in millions of dollars):

Grantor	Grant	Amount		Duration	Classification
Tennessee Department of Economic and Community Development	TN Fast Track	$	1.1	2021 - 2028	Property, plant and equipment, net
Tennessee Department of Economic and Community Development	TN Fast Track		0.2	2021 - 2028	Selling, general, administrative, research and development
Tennessee Valley Authority	Performance		0.3	2021 - 2026	Property, plant and equipment, net
Indiana Economic Development Corporation	IN EDGE Tax Credit		1.6	2021 - 2030	Cost of products sold, excluding depreciation and amortization and other items
Total		$	3.2

To be eligible to receive and keep the full amount of the TN Fast Track and Performance grants, we must achieve: (i) minimum cumulative expenditures towards developmental and/or capital expenditures; (ii) a minimum number of new full-time employees; and

(iii) a minimum average annual wage, all within seven years of our execution of the grant agreement. To be eligible to receive and keep the full amount of the IN EDGE Tax Credit, we must achieve: (i) minimum cumulative expenditures towards capital expenditures and (ii) a minimum number of full-time employees.

Favorable Commodity Contract Intangible Asset Impairment

Favorable Commodity Contract Intangible Asset Impairment. During the quarter ended June 30, 2022, we impaired the remaining book value of our favorable commodity contract intangible asset as the supplier associated with the intangible asset ceased all deliveries of magnesium to us and provided no indication of when or if deliveries would resume over the remaining six months of the contract. The impairment charge of $3.1 million was included within Other operating charges, net, in our Statements of Consolidated Income (Loss).

New Accounting Pronouncements

Adoption of New Accounting Pronouncements

Accounting Standard Update (“ASU”) No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance (“ASU 2021-10”) was issued in November 2021. Under ASU 2021-10, the accounting entities with transactions with a government that are accounted for by analogy to a grant or contribution accounting model are required to annually disclose certain information regarding the transaction including: (i) nature and related accounting policy used; (ii) line items on the balance sheet and income statement affected by the transactions; (iii) amounts applicable to each line item; and (iv) significant terms and conditions. Our adoption of ASU 2021-10 during the quarter ended March 31, 2022 using a prospective approach did not have a material impact on our consolidated financial statements.

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”) and also issued subsequent amendments to the initial guidance (collectively, “Topic 848”). Topic 848 is effective for all entities as of March 12, 2020 through December 31, 2022 and provides optional guidance for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. As of June 30, 2022, our customers’ supply chain financing contracts have transitioned to the Secured Overnight Financing Rate (“SOFR”) to replace the London Interbank Offered Rate (“LIBOR”). Our adoption of Topic 848 did not have a material impact on our consolidated financial statements.