Disclosures About Derivative Instruments and Hedging Activities

6 Months Ended

Jun. 30, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Disclosures About Derivative Instruments and Hedging Activities

Disclosures About Derivative Instruments and Hedging Activities

The Company is subject to fluctuations of exchange rates on a portion of intercompany receivables that are denominated in foreign currencies and uses forward currency contracts to manage exposures to certain of these currency price fluctuations. These contracts have not been designated as hedges for accounting purposes and gains or losses are reported in earnings on a current basis in other income (expense).

The Company is exposed to fluctuations in market prices of raw materials and energy sources, as well as to the effect of market prices on the sale of certain commodity steel (hot roll carbon steel coils). The Company may use cash-settled commodity price swaps and options (including collars) to hedge the market risk associated with the purchase of certain of its raw materials and energy requirements and the sale of hot roll carbon steel coils. These derivatives are routinely used with respect to a portion of the Company’s natural gas and nickel requirements and are sometimes used with respect to its iron ore, aluminum, zinc and electricity requirements. The Company’s hedging strategy is designed to mitigate the effect on earnings from the price volatility of these various commodity exposures. Independent of any hedging activities, price changes in any of these commodity markets could negatively affect operating costs or selling prices.

All commodity derivatives are marked to market and recognized as an asset or liability at fair value. The effective gains and losses for commodity derivatives designated as cash flow hedges of forecasted purchases of raw materials and energy sources are recorded in accumulated other comprehensive income (loss) on the Consolidated Balance Sheets and reclassified into cost of products sold in the same period as the earnings recognition of the associated underlying transaction. Gains and losses on these designated derivatives arising from either hedge ineffectiveness or related to components excluded from the assessment of effectiveness are recognized in current earnings under cost of products sold or net sales, as appropriate. All gains or losses from derivatives for which hedge accounting treatment has not been elected are also reported in earnings on a current basis in net sales or cost of products sold.

The Company had the following outstanding commodity price swaps and options and forward foreign exchange contracts:

Commodity	June 30, 2013		December 31, 2012
Nickel (in lbs)	730,100		420,100
Natural gas (in MMBTUs)	6,000,000		9,000,000
Zinc (in lbs)	12,000,000		—
Iron ore (in metric tons)	664,500		1,140,000
Hot roll carbon steel coils (in short tons)	18,900		30,000
Foreign exchange contracts (in euros)	€	22,460,100	€	15,950,000

The following table presents the fair value of derivative instruments in the Condensed Consolidated Balance Sheets:

Asset (liability)	June 30, 2013			December 31, 2012
Derivatives designated as hedging instruments:
Other current assets—commodity contracts	$	4.3		$	25.5
Other noncurrent assets—commodity contracts	0.1			—
Accrued liabilities—commodity contracts	—			(1.2		)
Derivatives not designated as hedging instruments:
Other current assets:
Foreign exchange contracts	0.1			—
Commodity contracts	0.4			—
Accrued liabilities:
Foreign exchange contracts	—			(0.2		)
Commodity contracts	(0.5		)	(0.1		)
Other non-current liabilities—commodity contracts	(0.4		)	—

The following table presents gains (losses) on derivative instruments included in the Condensed Consolidated Statements of Operations:

	Three Months Ended June 30,						Six Months Ended June 30,
Gain (loss)	2013			2012			2013			2012
Derivatives in cash flow hedging relationships—
Commodity contracts:
Reclassified from accumulated other comprehensive income (loss) into net sales (effective portion)	$	—		$	—		$	0.4		$	—
Reclassified from accumulated other comprehensive income (loss) into cost of products sold (effective portion)	10.7			(12.8		)	$	14.2		$	(20.6	)
Recognized in cost of products sold (ineffective portion and amount excluded from effectiveness testing)	0.6			(2.9		)	6.4			—
Derivatives not designated as hedging instruments:
Foreign exchange contracts—recognized in other income (expense)	(0.1		)	0.5			0.5			(0.7		)
Commodity contracts:
Recognized in net sales	(0.3		)	—			0.2			—
Recognized in cost of products sold	(0.2		)	(0.5		)	(0.2		)	(0.9		)

The following table lists the amount of gains (losses) expected to be reclassified into cost of products sold within the next twelve months for the Company’s existing commodity contracts that qualify for hedge accounting, as well as the period of time over which the Company is hedging its exposure to the variability in future cash flows:

Commodity Hedge	Settlement Dates	Gains (losses)
Natural gas	July 2013 to December 2013	$	0.7
Zinc	January 2014 to December 2014	—
Iron ore	July 2013 to December 2013	(0.8		)