Note 8 - Derivative Financial Instruments

3 Months Ended

Jun. 30, 2025

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

NOTE 8 — DERIVATIVE FINANCIAL INSTRUMENTS

From time to time, we expect to utilize hot-rolled coil futures or options to reduce our exposure to commodity price risk that is inherent in our business. For the three months ended June 30, 2025 and 2024, all of the Company's hedging activities were classified as economic hedges of risk with mark-to-market ("MTM") accounting treatment. 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 attempts to minimize 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 any transactions designated as hedging instruments for accounting purposes, 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.

The Company has forward physical purchase supply agreements in place with some of its suppliers for a portion of its monthly physical steel needs. These supply agreements are not subject to mark-to-market accounting due to the Company electing the normal purchase normal sale exclusion provided in ASC 815. 

At June 30, 2025 and  March 31, 2025, the Company did not have any hot-rolled coil futures contracts designated as hedging instruments and classified 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 June 30, 2025 (in thousands):

	Asset Derivatives			Liability Derivatives
	Balance Sheet			Balance Sheet
Derivatives not designated as hedging instruments:	Location	Fair Value		Location	Fair Value
Hot-rolled coil steel contracts	Current portion of derivative assets	$	328	Current portion of derivative liability	$	82

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 March 31, 2025 (in thousands):

	Asset Derivatives			Liability Derivatives
	Balance Sheet			Balance Sheet
Derivatives not designated as hedging instruments:	Location	Fair Value		Location	Fair Value
Hot-rolled coil steel contracts	Current portion of derivative assets	$	636	Current portion of derivative liability	$	287

All derivatives are presented on a gross basis on the Consolidated Balance Sheets.

During the three months ended June 30, 2025 and 2024, the Company entered into hot-rolled coil futures contracts that were not designated as hedging instruments for accounting purposes. Accordingly, the change in fair value related to these instruments was immediately recognized in earnings for these periods. During the three months ended June 30, 2025 and 2024, the Company did not designate any transactions as hedging instruments for accounting purposes.

The following table summarizes the gain recognized in earnings for derivative instruments not designated as hedging instruments during the three months ended June 30, 2025 (in thousands):

		Gain Recognized in Earnings
	Location of Gain	for the Three Months Ended
	Recognized in Earnings	June 30, 2025
Hot-rolled coil steel contracts	Gain on economic hedges of risk	$	276

The following table summarizes the gain recognized in earnings for derivative instruments not designated as hedging instruments during the three months ended June 30, 2024 (in thousands):

		Gain Recognized in Earnings
	Location of Gain	for the Three Months Ended
	Recognized in Earnings	June 30, 2024
Hot-rolled coil steel contracts	Gain on economic hedges of risk	$	5,375

The following table summarizes the Company's economic (non-designated) derivative instruments outstanding at  June 30, 2025 (in thousands):

	Notional Amount			Maturity Date
Hot-rolled coil steel contracts	$	(12,484	)	July 2025 - June 2026

The following table summarizes the Company's economic (non-designated) derivative instruments outstanding at  March 31, 2025  (in  thousands):

	Notional Amount			Maturity Date
Hot-rolled coil steel contracts	$	(9,522	)	April 2025 - December 2025

At June 30, 2025 and  March 31, 2025, cash of approximately $0.8 million and $0.5 million, respectively, was held by our clearing agent to collateralize our open derivative positions. These cash requirements are included in "Other current assets" on the Company's Consolidated Balance Sheets at June 30, 2025 and  March 31, 2025.