Annual report pursuant to Section 13 and 15(d)

Derivative Contracts

v3.10.0.1
Derivative Contracts
12 Months Ended
Dec. 31, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Contracts
13. 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 December 31,
 
2018
 
2017
(in millions)
Net Notional Amount
 
Net Notional Amount
Cash flow hedge:
 
 
 
Interest rate swap
$
150.0

 
$

Commodity and energy derivative contracts:
 
 
 
Metal
27.9

 
12.8

Energy and utilities
3.0

 
3.8

Total
$
180.9

 
$
16.6


 
As of December 31,
 
2018
 
2017
(in millions)
Notional Position
 
Notional Position
Commodity and energy derivative contracts:
 
 
 
Notional amount - long
$
67.4

 
$
46.1

Notional amount - (short)
(36.5
)
 
(29.5
)
Net long / (short)
$
30.9

 
$
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 consolidated balance sheets, and the collateral deposited with counterparties:
 
As of December 31, 2018
(in millions)
Gross Amounts of
Recognized Assets
 
Gross Amounts Offset in
Consolidated Balance
Sheet
 
Net Amounts of Assets
Presented in Consolidated
Balance Sheet
Commodity and energy derivative contracts:
 
 
 
 
 
Metal
$
3.3

 
$
(3.3
)
 
$

Energy and utilities
0.1

 
(0.1
)
 

Collateral on deposit
0.1

 
(0.1
)
 

Total
$
3.5

 
$
(3.5
)
 
$


 
As of December 31, 2018
(in millions)
Gross Amounts of
Recognized Liabilities
 
Gross Amounts Offset in
Consolidated Balance
Sheet
 
Net Amounts of Liabilities
Presented in Consolidated
Balance Sheet
Cash flow hedge:
 
 
 
 
 
Interest rate swap
$
2.0

 
$

 
$
2.0

Commodity and energy derivative contracts:
 
 
 
 
 
Metal
4.2

 
(3.4
)
 
0.8

Energy and utilities
0.3

 
(0.1
)
 
0.2

Total
$
6.5

 
$
(3.5
)
 
$
3.0

Consolidated balance sheet location:
 
 
 
 
 
Accrued liabilities
 
 
 
 
$
0.9

Other noncurrent liabilities
 
 
 
 
$
2.1



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
Commodity and energy derivative contracts:
 
 
 
 
 
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
Commodity and energy derivative contracts:
 
 
 
 
 
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:
 
Year Ended December 31,
(in millions)
2018
 
2017
 
2016
Cash flow hedge gains (losses) in other comprehensive income (loss) for:
 
 
 
 
 
Interest rate swap
$
(2.0
)
 
$

 
$

Commodity and energy derivative contracts (gains) losses in cost of sales for:
 
 
 
 
 
Metal
$
0.3

 
$
(4.0
)
 
$
(3.6
)
Energy and utilities
(0.2
)
 
0.6

 
(0.1
)
Total commodity derivative contract (gains) losses in cost of sales
$
0.1

 
$
(3.4
)
 
$
(3.7
)

As of December 31, 2018, we reported $1.5 million of cash flow hedge losses, net of tax, 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.