Quarterly report pursuant to Section 13 or 15(d)

Derivative Contracts

v3.10.0.1
Derivative Contracts
9 Months Ended
Sep. 30, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Contracts
Derivative Contracts
We maintain a risk-management strategy that uses commodity derivative contracts to minimize significant, unanticipated gains or losses arising from fluctuations in certain commodity prices.
We are also exposed to credit risk and market risk through our use of derivative contracts. Credit risk is the risk that the counterparty might fail to fulfill its performance obligations under the terms of the derivative contract. Market risk is the risk that the value of a derivative instrument might be adversely affected by a change in market prices and rates. We manage the market risk associated with derivative contracts by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.
We use a cash flow hedge to minimize the variability in cash flows caused by fluctuations in market interest rates. This derivative, which is a designated cash flow hedge, is carried at fair value. The change in fair value is recorded to accumulated other comprehensive income (loss) and reclassified to current earnings if hedge accounting cannot be applied because the hedge contract is not highly effective.
We manage credit risk associated with derivative contracts by executing derivative instruments with counterparties that we believe are credit-worthy. The amount of such credit risk is limited to the fair value of the derivative contract plus the unpaid portion of amounts due to us pursuant to terms of the derivative contracts, if any. If the credit-worthiness of these counterparties deteriorates, we believe the exposure is mitigated by provisions in the derivative arrangements which allow for the legal right of offset of amounts due to us from the counterparties, if any, with any amounts payable to the counterparties.
The following tables provide a summary of our outstanding derivative contracts:
 
As of
 
September 30, 2018
 
December 31, 2017
(in millions)
Net
Notional
Amount
 
Net
Notional
Amount
Cash flow hedge:
 
 
 
Interest rate swap
$
150.0

 
$

Commodity derivative contracts:
 
 
 
Metal
1.5

 
12.8

Energy and utilities
2.4

 
3.8

Total
$
153.9

 
$
16.6

 
As of
 
September 30, 2018
 
December 31, 2017
(in millions)
Notional
Position
 
Notional
Position
Commodity derivative contracts:
 
 
 
Notional amount - long
$
42.4

 
$
46.1

Notional amount - (short)
(38.5
)
 
(29.5
)
Net long / (short)
$
3.9

 
$
16.6


The fair values of derivative contracts in the consolidated balance sheets include the impact of netting derivative assets and liabilities when a legally enforceable master netting arrangement exists. The following tables summarize the gross amounts of open derivative contracts, the net amounts presented in the unaudited consolidated balance sheets, and the collateral deposited with counterparties:
 
As of September 30, 2018
(in millions)
Gross Amounts of
Recognized Assets
 
Gross Amounts Offset in
Consolidated Balance
Sheet
 
Net Amounts of Assets
Presented in Consolidated
Balance Sheet
Cash flow hedge:
 
 
 
 
 
Interest rate swap
$
1.0

 
$

 
$
1.0

Commodity derivative contracts:
 
 
 
 
 
Metal
2.7

 
(2.5
)
 
0.2

Energy and utilities

 

 

Collateral on deposit
0.2

 

 
0.2

Total
$
3.9

 
$
(2.5
)
 
$
1.4

Consolidated balance sheet location:
 
 
 
 
 
Prepaid expenses and other current assets
 
 
 
 
$
0.4

Other noncurrent assets
 
 
 
 
$
1.0

 
As of September 30, 2018
(in millions)
Gross Amounts of
Recognized Liabilities
 
Gross Amounts Offset in
Consolidated Balance
Sheet
 
Net Amounts of Liabilities
Presented in Consolidated
Balance Sheet
Commodity derivative contracts:
 
 
 
 
 
Metal
$
2.5

 
$
(2.5
)
 
$

Energy and utilities
0.2

 

 
0.2

Total
$
2.7

 
$
(2.5
)
 
$
0.2

Consolidated balance sheet location:
 
 
 
 
 
Accrued liabilities
 
 
 
 
$
0.1

Other noncurrent liabilities
 
 
 
 
$
0.1

 
As of December 31, 2017
(in millions)
Gross Amounts of
Recognized Assets
 
Gross Amounts Offset in
Consolidated Balance
Sheet
 
Net Amounts of Assets
Presented in Consolidated
Balance Sheet
Metal
$
5.3

 
$
(3.2
)
 
$
2.1

Energy and utilities

 

 

Total
$
5.3

 
$
(3.2
)
 
$
2.1

Consolidated balance sheet location:
 
 
 
 
 
Prepaid expenses and other current assets
 
 
 
 
$
2.0

Other noncurrent assets
 
 
 
 
$
0.1

 
As of December 31, 2017
(in millions)
Gross Amounts of
Recognized Liabilities
 
Gross Amounts Offset in
Consolidated Balance
Sheet
 
Net Amounts of Liabilities
Presented in Consolidated
Balance Sheet
Metal
$
3.3

 
$
(3.2
)
 
$
0.1

Energy and utilities
0.3

 

 
0.3

Total
$
3.6

 
$
(3.2
)
 
$
0.4

Consolidated balance sheet location:
 
 
 
 
 
Accrued liabilities
 
 
 
 
$
0.2

Other noncurrent liabilities
 
 
 
 
$
0.2

The following table summarizes the effects of derivative contracts in the consolidated statements of comprehensive income and the consolidated statements of operations:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
(in millions)
2018
 
2017
 
2018
 
2017
Cash flow hedge gains (losses) in other comprehensive income (loss) for:
 
 
 
 
 
 
 
Interest rate swap
$
1.2

 
$

 
$
1.0

 
$

Commodity derivative contracts (gains) losses in cost of sales for:
 
 
 
 
 
 
 
Metal
$
(1.1
)
 
$
(2.2
)
 
$
(0.9
)
 
$
(2.4
)
Energy and utilities

 
(0.2
)
 
(0.1
)
 
0.3

Total commodity derivative contract (gains) losses in cost of sales
$
(1.1
)
 
$
(2.4
)
 
$
(1.0
)
 
$
(2.1
)

As of September 30, 2018, we reported $0.7 million of cash flow hedge gains, net of tax, reported in accumulated other comprehensive income (loss) on the consolidated balance sheet. There were no cash flow hedge gains or losses reported in accumulated other comprehensive income (loss) on the consolidated balance sheet as of December 31, 2017.