NOTE H — DERIVATIVE FINANCIAL INSTRUMENTS

June 2020,

the Company implemented its

first

commodity price risk management activities by transacting hot-rolled coil futures. From time to time, we expect to use derivative financial instruments to minimize our exposure to commodity price risk that is inherent in our business. At the time derivative contracts are entered into, we assess whether the nature of the instrument qualifies for hedge accounting treatment according to the requirements of ASC

815

– Derivatives and Hedging (“ASC

815”

). By using derivatives, the Company is exposed to credit and market risk. The Company's exposure to credit risk includes the counterparty's failure to fulfill its performance obligations under the terms of the derivative contract. The Company minimizes its credit risk by entering into transactions with high quality counterparties, and uses exchange-traded derivatives when available. Market risk is the risk that the value of the financial instrument might be adversely affected by a change in commodity prices. The Company manages market risk by continually monitoring exposure within its risk management strategy and portfolio. For those transactions designated as hedging instruments, we document all relationships between hedging instruments and hedged items, as well as our risk-management objective and strategy for undertaking the various hedge transactions. We also assess, both at the hedge's inception and on an ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting changes in cash flows or fair value of hedged items.

During the

three

months ended

December 31, 2020,

the Company entered into hot-rolled coil futures contracts which were designated as hedging instruments and classified as cash flow hedges, either as hedges of variable purchase prices or as hedges of variable sales prices. Accordingly, realized and unrealized gains and losses associated with the instruments are reported as a component of other comprehensive income and reclassified into earnings during the period in which the hedged transaction affects earnings. At

December 31, 2020,

the Company had a

$1,215,300

cash margin requirement to collateralize our open hedging positions. This margin requirement is included in "Other current assets" on the Company's consolidated balance sheet at

December 31, 2020.

The Company recorded a receivable of

$1,227,940

related to closed positions whose cash settlement occurred subsequent to quarter end with this amount included in "Other current assets" on the Company's consolidated balance sheet at

December 31, 2020.

For the

three

months and

nine

months ended

December 31, 2020,

the Company did

not

have any derivative instruments

not

designated as cash flow or fair value hedges.

The following table summarizes the fair value of the Company's derivative financial instruments and the respective line in which they were recorded in the Consolidated Balance Sheet as of

December 31, 2020

	Asset Derivatives			Liability Derivatives
	Balance Sheet			Balance Sheet
Derivatives designated as cash flow hedges:	Location	Fair Value		Location	Fair Value
Hot-rolled coil steel contracts hedging purchases	Other current assets	$	2,862,580
Hot-rolled coil steel contracts hedging sales				Other current assets	$	1,422,460

The notional amounts (quantities) of our cash flow hedges outstanding at

December 31, 2020

consisted of

16,080

tons hedging purchases and

32,120

tons hedging sales.

The following table summarizes the gain recognized in other comprehensive income and the gain reclassified from accumulated other comprehensive income into earnings for derivative financial instruments designated as cash flow hedges for both the

three

months and

nine

months ended

December 31, 2020

	Gain Recognized		Location of Gain Reclassified from	Gain Reclassified from
	in OCI		AOCI into Net Earnings	AOCI into Net Earnings
Hot-rolled coil steel contracts	$	3,364,460	Costs of goods sold	$	396,720

The estimated amount of gains recognized in AOCI at

December 31, 2020

expected to be reclassified into net earnings (loss) within the succeeding

twelve

months is

$3,533,120.

This amount was computed using the fair value of the cash flow hedges as of

December 31, 2020,

and will change before actual reclassification from OCI to net earnings (loss). The maximum derivative contract duration for contracts hedging purchases is

months. The maximum derivative contract duration for contracts hedging sales is

months. Contracts with settlement dates beyond

one

year are

not

material.

The Company did

not

have any derivative financial instruments for the

three

months or

nine

months ended

December 31, 2019.