Note 7 - Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

7.           Fair Value of Financial Instruments:

The Company’s financial instruments include cash and cash equivalents, short-term trade receivables, derivative instruments, accounts payable and debt instruments. For short-term instruments, other than those required to be reported at fair value on a recurring basis and for which additional disclosures are included below, management concluded the historical carrying value is a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is an exit price concept that assumes an orderly transaction between willing market participants. Valuation techniques must maximize the use of observable inputs and minimize the use of unobservable inputs. To measure fair value, the Company applies a fair value hierarchy that is based on three levels of input, of which the first two are considered observable and the last unobservable, as follows:

Level 1 – Quoted prices in active markets for identical assets and liabilities.

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

During the six months ended June 30, 2014, there were no transfers of financial assets between Levels 1, 2 or 3 fair value measurements. There have been no changes in the methodologies used June 30, 2014 since December 31, 2013. Following is a description of the valuation methodologies used for assets and liabilities measured at fair value as of June 30, 2014 and December 31, 2013:

Metals swaps and embedded customer derivatives – Determined by using Level 2 inputs that include the price of nickel indexed to the LME and the price of Hot Rolled Coil Steel indexed to the NYMEX. The fair value is determined based on quoted market prices and reflects the estimated amounts the Company would pay or receive to terminate the nickel swaps.

Interest rate swaps – Based on the present value of the expected future cash flows, considering the risks involved, and using discount rates appropriate for the maturity date. Market observable Level 2 inputs are used to determine the present value of future cash flows.

The following table presents information about the Company’s assets and liabilities that were measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques utilized by the Company:

	Value of Items Recorded at Fair Value
	As of June 30, 2014
(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Metals swaps	$	-	$	842	$	-	$	842
Total assets at fair value	$	-	$	842	$	-	$	842
Liabilities:
Embedded customer derivative	$	-	$	842	$	-	$	842
Interest rate swap (CTI)		-		232		-		232
Fixed interest rate swap (ABL)		-		586		-		586
Total liabilities recorded at fair value	$	-	$	1,660	$	-	$	1,660

	Value of Items Not Recorded at Fair Value
	As of June 30, 2014
(in thousands)	Level 1		Level 2		Level 3		Total
Liabilities:
IRB	$	3,530	$	-	$	-	$	3,530
ABL Credit Facility		-		233,783		-		233,783
Total liabilities not recorded at fair value	$	3,530	$	233,783	$	-	$	237,313

The value of the items not recorded at fair value represent the carrying value of the liabilities.

	Value of Items Recorded at Fair Value
	As of December 31, 2013
(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Embedded customer derivative	$	-	$	614	$	-	$	614
Total assets at fair value	$	-	$	614	$	-	$	614
Liabilities:
Metals swaps	$	-	$	614	$	-	$	614
Interest rate swap (CTI)		-		279		-		279
Fixed interest rate swap (ABL)		-		710		-		710
Total liabilities recorded at fair value	$	-	$	1,603	$	-	$	1,603

	Value of Items Not Recorded at Fair Value
	As of December 31, 2013
(in thousands)	Level 1		Level 2		Level 3		Total
Liabilities:
IRB	$	4,340	$	-	$	-	$	4,340
Term loan		-		48,854		-		48,854
ABL Credit Facility		-		146,075		-		146,075
Total liabilities not recorded at fair value	$	4,340	$	194,929	$	-	$	199,269

The value of the items not recorded at fair value represent the carrying value of the liabilities.

The fair value of the IRB is determined using Level 1 inputs. The carrying value and the fair value of the IRB that qualify as financial instruments were $3.5 million at June 30, 2014 and $4.3 million at December 31, 2013. 

The fair values of the revolver and term loan are determined using Level 2 inputs. The carrying value of the revolver was $233.8 million at June 30, 2014. The carrying value of the revolver and the term loan were $146.1 million and $48.9 million, respectively, at December 31, 2013. The Level 2 fair value of the Company's long-term debt was estimated using prevailing market interest rates on debt with similar credit worthiness, terms and maturities.